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Market volatility and your super
If you don’t, it doesn’t matter how Retirement is not a one-year For Core Pool, we predict a
much money you put in over time, prospect. Your nest egg has to last, negative return once every ten
you’ll be losing. and you’ve got to make sure you years. We have gone far better
think hard about how you invest. than that by delivering a positive
Previous years have been unusually The share market had a chance to Markets will always go up and However, if you’d been watching
But if you remain an investor, you annual return in the 20 years from
strong for super returns. HESTA is bounce back in 2001/2002 as the down. The fact share markets are your balance over the years,
should be positioned to benefit 1987 to 2007.
proud to have delivered 20 years fall happened earlier in the financial down is not an unusual event. It you’ll see your balance has most
from a rebounding market in
of positive returns in its default year. The current fall has also happened in 2002 and 1987 – in likely gone up by more than just So is it safe to assume HESTA
future years.
fund, Core Pool, including double- been exacerbated by fixed interest fact, Core Pool’s above-average ten- your 9% Super Guarantee (SG) won’t deliver another negative
digit returns for the four years to markets (affected by the US credit year return includes the 2002 result. contributions. Even though you are no longer return for 21 years?
2006/2007. crisis). Core Pool’s main defensive The difficulty is in predicting when contributing to it, your super could
investment is its fixed interest it will happen next. So while Core Pool’s return was Impossible to promise, but we
be invested so you can aim to earn
After much share market volatility -5.4% this year, its return was can tell you HESTA’s investment
portfolio, which has not performed above the inflation rate, rather
in the 2007/2008 financial year, It still seems risky. I’d prefer to 16.7% last year. On average over team will be striving to achieve it.
as well as it did in 2002. than just draw down on a sum of
HESTA’s Core Pool (in which 90% take my money out and put it in the two years, that’s 1.7% above
money until it runs out. I don’t think of myself as an
of members are invested) has So this year we had the “triple- the bank. inflation. Over five years, our
posted its only negative annual whammy” of a share market fall, investor, but I guess I am. Where
annualised return was 10.5% – If you look at how much better
Well, superannuation can I get help figuring out my
return in its 21-year history. the US credit crisis, and less time that’s 7.4% above inflation. your investment has done
legislation won’t let you – unless super investment strategy?
to bounce back. compared to inflation since
Like all super funds, HESTA’s you retire or meet conditions of My balance has gone
you started, you may be less Through one of HESTA’s
investments are impacted by what Isn’t it too risky then for release. Even if you could, it may backwards. I don’t understand. I
disappointed. Superannuation Services Advisers.
is happening in the share market superannuation money to be not be a sensible approach to haven’t taken any money out.
and the wider world economy. invested in the share market? building your retirement dollars. Free call 1800 813 327 or visit
I’ve read HESTA won’t always
Sometimes people think www.hesta.com.au
be top of the charts when markets
HESTA’s Executive Manager – The graph below shows History shows that, over the long- super is like a bank savings Investments go up and down. Past
are strong, but that you expect to
Investments and Governance, $10,000 invested in Core Pool term, shares have had a much account. It’s not. Your money is performance is not always indicative of
do well in the rough times. future performance.
Robert Fowler, answers some of ten years ago and how it’s grown better chance of delivering returns actually invested according to the
the questions you may have about compared to the ASX cumulative above the inflation rate. You have investment option you’ve chosen Our measure is whether Core
the negative return. index and the cash rate. It is a to earn more than the inflation or in Core Pool as the default. Pool is still in the top third of
strong result and is mainly due to rate over the long term so the funds in Australia over the long-
Why did HESTA’s default How it’s invested affects the return
Core Pool’s long-term investment value of your dollar does not go term – which it is. We invite you
option, Core Pool, have a negative it earns and the risk of negative
in share markets. backwards. to compare our results to those of
return this year? returns. This year the negative
the commercial/retail super funds.
return may have been greater than
There was a sizeable fall in $40,000
your contributions and any positive
share markets this year. As 60% of
returns from other options, which
Core Pool is invested in shares, this $35,000
ASX means your balance goes down.
had a significant impact on the
return. HESTA’s strategy, however, $30,000 Core Pool You haven’t actually lost money
has always been to focus on the unless you need to access it right
long-term nature of super. HESTA Cash
$25,000 away. If you don't change your
Core Pool has returned 8.0% over current investment option then
three years, 10.5% over five years $20,000
your balance may recover, along
and 8.3% over ten years to 30 with the markets.
June 2008.
$15,000 I just turned 60 and I can’t
Why didn’t HESTA have a afford to retire this year as
negative return last time share $10,000 planned. I was counting on
markets fell? double-digit returns again.
Robert Fowler
It was a combination of timing $5,000
A downturn in the market can Executive Manager –
and our defensive investments have a big impact on people who Investments and Governance
delivering more strongly. are looking to retire soon.
June June June June June June June June June June June
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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