By Nick Hedley
Thanks partly to COVID-19 stimulus measures, Australia’s superannuation funds saw a 9.7% increase in their total asset holdings in the 12 months to end-March, despite a slight dip in the final quarter.
The industry held assets worth A$3.4 trillion (US$2.4 trillion) as of March 31, according to a new statistical report from the Australian Prudential Regulation Authority (APRA).
This reflected strong investment gains – tempered by a sell-off that started in January and was exacerbated by Russia’s invasion of Ukraine – as well as above-average client contributions.
Contributions rose 16.9% to A$141.6 billion, driven mainly by a 61.7% surge in personal contributions.
“The government’s large fiscal stimulus in response to the onset of the COVID-19 pandemic boosted household savings along with a stronger engagement with financial advice,” APRA said.
However, member contribution levels are reverting to longer-term trends as market volatility stokes uncertainty.
Meanwhile, APRA’s data shows that superannuation funds increased their allocations to risk assets in the 12 months to the end of March.
Equities accounted for 56% of superannuation assets at the end of March, from 54% a year before, with greater emphasis on domestic stocks.
Allocations towards property and infrastructure edged slightly higher, to 9% and 7%, respectively.
On the other hand, the proportion of investments in cash decreased from 10% to 9%, while Australian fixed income reduced from 11% to 10% of holdings. Hedge fund and commodities positions were also trimmed.
Unsurprisingly, the market downturn has weighed on returns.
APRA said the industry’s rate of return was -2.4% in the three months to end-March – marking the first negative quarterly return in two years.
As a result, the five-year average annualized rate of return fell to 6.8%, from 7.9% in December.
“Rising inflation concerns prompted expectations for higher interest rates, which weighed on markets,” APRA said. “The Ukraine crisis and the subsequent sanctions against Russia placed upward pressure on energy and commodity prices, driving up costs in the supply of goods and services. The supply-side pressures are exacerbated by supply chain bottlenecks as China pursues a zero-COVID policy amid the emergence of the Omicron strain.”