Australian superannuation funds are set for a loss in the first half of the financial year, according to research prepared by SuperRatings.
Low interest rates, the slowdown in China and falling commodity prices are the reasons given for the projected 0.5% loss for the six months to December.
While the ASX200 is down 3.92% for the year, several sectors have fared much worse. Energy is down 33.3%, and materials are down 19.9%. Much of the decline has taken place since July.
Meanwhile, major metals and bulk commodities had a horror year with oil down more than 30% and iron is down more than 40%. And this likely won’t improve next year, according to UBS, which is projecting 10 year lows in demand for these commodities.
And the Australian dollar isn’t playing ball either — currently at 73 cents thanks to a December rally.
“Whereas previous months we had a bit of benefit from the Aussie dollar falling, we haven’t seen that happen so much in the last month or so, which has meant that it hasn’t created that buffer that we’ve experienced previously,” Kirby Rappell, the general manager of research at SuperRatings, told the ABC.
Another consultancy firm, Chant West, is also expecting superannuation funds to post a loss, down 0.1% in the first half of the 2015-2016 financial year.
“Super funds may well have a negative six months but over the year they are probably still going to be positive,” says Alex Dunnin, director of research at Rainmaker.
“Super funds are taking a hit right now, absolutely,” Dunnin told the ABC.
Turmoil in commodity and share markets is also hurting a fast growing section of the superannuation with self managed super funds are on the rise. 53,000 new SMSFs were created over the past 12 months, together accounting for $7 billion of capital.
SMSFs own 16% of the Australian equity market, a greater proportion than any other group of superannuation funds.
You can find more at the ABC.