Risk is the answer as Gen-X super members win better returns
The children of the 70s and 80s are winning the superannuation race with risk-weighted investments in their lifecycle products topping 4 per cent for the financial year to date, according to industry analysts Chant West.
The cohort, who are now in their mid-life, earned a return on their super of about 4 per cent, compared with the younger millennials at 3.9 per cent and baby boomers at 3.2 per cent and below.
The returns related to the lifecycle superannuation products which invest based on where a person is in their working life. A baby boomer, who is nearing or in retirement, has much lower risk than someone who has just started their career and so returns were often lower.
That higher risk has led to stronger returns over longer periods, as well.
“Younger members of retail lifecycle products _ those born in the 1970s, 1980s and 1990s _ have held their own against the MySuper Growth median over the three-year period and longer. However, they have done so by taking on significantly more share market risk,” Chant West senior investment research manager Mano Mohankumar said.
The returns were in Chant West’s report on August returns which showed super funds had dropped back slightly in August with the media growth fund retreating 0.4 per cent. Over the first two months of the financial year the return is still about 2.6 per cent.
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Baby boomers in the cohort born in the 1960s have underperformed.
For the current year, Mohankumar said the Australian share market was up 1.2 per cent for August as mining companies performed well. Bonds had a disappointing month as yields rose.
“If super funds only invested in these traditional assets we’d have seen a more substantial fall over the month but these days they are more diversified with most them having meaningful allocations in unlisted assets such as property, infrastructure and private equity which help provide a smoother ride during periods of market volatility,” he said.
“That diversification helped limit the overall downside to just 0.4 per cent for the month.”
