How the tanking dollar is saving your super

The annual Tomatina festival in Bunol, Spain. David Ramos/Getty Images

The falling value of the Australian dollar against the US dollar is cushioning superannuation funds from the local Australian market crunch.

Industry analysts SuperRatings say a 5.9% fall in the Australian dollar against the US dollar has helped offset some of the more than 7% fall in Australian shares since the start of 2016.

When the local dollar falls, those US dollars earned by super funds from offshore investments turn into more Australian dollars. Essentially, a fund gets more Australian dollars for the same US dollar returns.

The median balanced option in a super fund — the one held by most — is estimated to have dropped by 3.8% during the month of January to date.

This still means much of the estimated super fund account gains in calendar 2015, about 5.6%, have been wiped out in just two weeks.

“While balanced options have experienced reasonable losses in January, which have wiped out most of the 2015 calendar year return, these declines remain well below those experienced across share markets, once again highlighting the benefits of diversification,” says SuperRatings founder Jeff Bresnahan.

“In spite of short-term losses across many asset classes, super fund members are encouraged to take a long-term view of their superannuation investments.”

The median balanced option gained 0.2% in December, taking the 2015 calendar year return to 5.6%. This is well below the 16.3% and 8.1% returns seen in 2013 and 2014 but is a solid result against volatile markets.

Again, the return was boosted by the fall in the Australian dollar which dropped about 16% against the US dollar over the last 12 months, as this chart shows:

“Subdued levels of growth across most major economies and volatile investment markets have made 2015 a challenging year for super funds, with returns across the main growth asset classes sitting well below what we have experienced in previous years,” says Bresnahan.

“Despite tough market conditions, diversification and a falling Australian Dollar have helped superannuation funds cushion the bumpy ride for members and produce a fourth consecutive positive calendar year return.”

A lot depended on which fund with top the performing fund, MTAA Super, returning 9.5%. Here are the top ten performing Balanced Options over the year to December:

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