COVID-19 shaves $290bn off super

COVID-19 and the accompanying market correction has temporarily wiped out nearly $290 billion from Australia's superannuation system since the ASX's February 20 peak, according to new analysis from Rainmaker Research.

Many superannuation funds lost between 10% and 14% as the equity markets plunged, as at March 12.

"Of Australia's $2.9 trillion overall in superannuation, about $2.2 trillion is non-self-managed. If we apply a 13% fall to this, it implies a loss in the order of magnitude of $290 billion," Rainmaker executive director of research and compliance Alex Dunnin said.

The country's largest superannuation fund AustralianSuper, for example, lost about 13.3% in the three-week period. The fund has since revised down its returns further, as it revalues unlisted assets.

In the three-week period ending March 12, while superannuation funds fell about 13%, the stock markets were down much more, to the tune of 20%.

"It shows that diversification did pay off," Dunnin said.

"The interesting conundrum is that [even though funds have continued to diversify], they still show a 94% correlation to equities."

While the $290 billion seems high for now, members will benefit from the upside in the recovery, Dunnin said.

"As difficult as this recent period is, we should take solace that it takes us back just to where many of us were two years ago," he said.

"It is very wrong to say super has or is being wiped out. And we've learned from previous crises that super has this uncanny habit of surprising on the upside. It's done so in the past and it will do so again."

ASX this morning opened 6% higher, while the Dow climbed up 11% in Tuesday's trading as the United States moved closer to a US $2 trillion coronavirus rescue package, even though it remains to be seen if the gains can be sustained.

During the trough of the GFC super funds averaged -8% in 2008-09 and -13% in 2009-10.

"Since then super funds have had a 10-year run of positive returns, six of which were around 10% or more. This delivered members 8.5% p.a. on average in this period," Dunnin said.

Read more: Rainmaker ResearchAlex Dunnin
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