Superannuation returns turned negative in February, with the median balanced option falling by 0.8 per cent, according to research house SuperRatings.
February marked only the second negative monthly return for the financial year, as markets grappled with concerns over the potential impact of tariffs and broader global economic risks.
Despite the Reserve Bank of Australia lowering interest rates in February, both Australian and international share markets declined over the month.
The focus shifted to President Donald Trump’s agenda, with concerns over the impact of tariffs on China and the potential flow-on effects to the Australian economy, which dampened Australian share expectations and offset any benefits from the rate reduction.
The median growth option fell by an estimated 1.2 per cent over February, while the median capital stable option is estimated to deliver a small but positive 0.1 per cent return to members.
Pension returns mirrored accumulation return trends in February, with the median balanced pension option falling by an estimated -0.9 per cent. The median capital stable pension option saw a modest gain of 0.1 per cent, matching accumulation returns, while the median growth pension option experienced a larger decline, estimated at 1.4 per cent for the month.
Commenting on the results, executive director of SuperRatings, Kirby Rappell, said despite the setback in February, funds have delivered around a 7 per cent return so far this financial year.
“Provided funds can navigate the next few months well, members are currently on track for a positive return for FY2025,” Rappell said.
“When markets are more turbulent, it is important to remember that for most of us, superannuation is about long-term outcomes and to focus on maintaining a long-term strategy.”
Elaborating on February’s results, Rappell told InvestorDaily he doesn’t expect funds to move away from the US but anticipates a refocusing on sectors that can thrive under the new regime, with funds eyeing more attractive sectors and strategising to protect against heightened exposure in others.
“Volatility is returning and likely to be higher than in recent times. This is a challenge and opportunity for funds, and funds have the opportunity to showcase their value of outperforming during periods of volatility,” he said.
Rappell acknowledged that finding overseas opportunities is a tightrope act for funds, given their members are everyday Australians, but pointed out that to sustain growth and deploy assets, large funds are becoming more global.
“[They] need to find opportunities that can sustain long-term outcomes,” he said.
Moreover, Rappell highlighted that the shift away from Australian shares has been ongoing for some time and is expected to intensify as capacity limits are reached.
Last week, InvestorDaily reported that the “ongoing back and forth” over Trump’s tariffs, with more developments expected on 2 April, is making it difficult to predict the motivations behind the moves or where the situation will ultimately lead, fuelling increased uncertainty in the markets.
With the growing confusion expected to persist as Trump both imposes and lifts tariffs, AMP’s Shane Oliver said “it’s likely to remain a rough ride for a while yet”.
“Trying to make sense of all this and work out the end point for the tariffs is guesswork as Trump’s motivation seems to vary wildly,” Oliver said.
