Superannuation funds have reported rare losses amid inflation-fuelled market turmoil. But investors are being urged to resist fleeing to cash.
, despite a recent pickup in performance. The Australian government bond index has dropped 11 per cent, and house prices are tipped to dip by between 15 per cent and 20 per cent.
Despite increased asset diversification, the rolling 20-year correlation between the Australian Securities Exchange and MySuper, which is a default account for those who don’t choose their own super when they start a new fund, is around 0.95 per cent, which means equities remain the chief asset for returns.
Oliver says: “This time round, inflation has been much higher, and it has been even more severe for bond rates that have increased from even lower levels. In fact, Australian bonds look to have had their worst 12 months since the 1930s.”He says apart from allocating more to cash, there are “few alternatives” for investors looking for safe havens.
Ashley Owen, chief investment officer for Stanford Brown Private Wealth, says retirees will need to rethink the “textbook” recommendation that bonds offer a less volatile alternative to equities for retirement income planning. The best performing asset class has been US shares, which would have returned $347,000, or more than 10 per cent a year.
“We also have very little traditional fixed bonds, with more than 80 per cent of our defensive allocation in floating-rate bonds. These have delivered positive returns, as the yields increase with interest rate rises.”Chris Brycki, chief executive of online investment adviser Stockspot, says investors could consider gold, commodities and cash.
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