The top 10 superannuation fund performers of last year have had a shake-up as a result of the pandemic induced stock market crash, highlighting the danger of selecting funds based on short-term performance.
Balanced superannuation funds returned -9 per cent in March but bounced back in April by 3 per cent, according to the latest research by Frontier Advisors.
Based on SuperRatings’ SR50 Balanced Index performance, Frontier Advisors analysed the effect of the market volatility on superannuation funds and which funds achieved good relative performance both when the markets were strong and in more volatile periods.
The top 10 balanced option performers last year earned over 15 per cent and include UniSuper, AustralianSuper, Australian Ethical, smartMonday, AMP SD Bus, Mercy Super, IOOF, LGIASuper, First State Super and Mercer Super Trust.
David Carruthers principal consultant at Frontier Advisors says: “The performance of the highest returning funds for 2019 was mixed in the March quarter of this year. They averaged a return of -10.4 per cent for the three months, no better than the average fund – highlighting the danger of choosing a fund based on short term performance.”
The funds with higher allocations to growth assets did well during 2019, poorly in the March quarter and then well in April. Only UniSuper and smartMonday remain in the top 10 performers after the correction.
UniSuper ranked first last year returning 18.4 per cent and then dropped to 40th position, returning -12.1 per cent but then jumped back up to first place with 5.7 per cent in April.
smartMonday was in the fourth position in 2019 returning 16.4 per cent then dropped down the ranks to 47, returning -13.9 per cent. It now stands at fourth position again, returning 4.7 per cent in April.
“Similarly, those funds which had less risk will have struggled in 2019, performed well in the March quarter and then lagged again in April,” Carruthers says.
LGIA returned 15.9 per cent in 2019, ranking eighth. In March it returned -8.5 per cent and jumped up a rank to seven but in April slipped down to 45, returning 1.4 per cent.
First State Super returned 15.8 per cent in 2018 and was in the seventh position. It dropped to eighth in March, returning -8.8 per cent and is now at 43rd position returning 2.3 per cent in April.
None of the top 10 funds was above median over all three periods – Cbus was the only fund in SuperRatings SR50 balanced universe which managed to achieve that outcome.
Frontier Advisor data, which does not name the funds, found that most funds, perhaps outperformed in one period and then not the other.
Over a longer-term, 40 per cent of funds outperform in up markets and underperform in down markets whereas 33 per cent of funds underperform in up markets and outperform in down markets.
“Being higher risk or lower risk is neither a sign of a “good” nor a “bad” fund by itself. It may be that the fund has explicitly taken this approach in response to the demographics of its membership.
“Again, it is noteworthy that there are few funds which outperform in both up and down markets. Fortunately, there are no funds which consistently underperform in both market conditions,” Carruthers says.