Direct property’s delayed reaction

Jeff Bresnahan

With exposure to listed property having been identified as the key differentiator in superannuation returns for 2007-08, attention is now being focused on how the eventual re-valuation of direct property investments will ultimately impact the performance of the superannuation funds currently deemed best performers.

Sydney-based ratings house SuperRatings this week released is year-end results for 2007-08 declaring an average decline across the balanced investment option universe of 6.4 per cent with the best performing fund, Vision SuperSaver — Balanced Growth, declining by just 1.70 per cent.

But at the same time, SuperRatings joined Chant West in acknowledging that the key differentiator had been exposure to listed property, which had brought with it losses of more than 30 per cent.

As well, specialist property research house Property Investment Research (PIR) suggested that super funds and other investors with heavy exposure to direct property risked taking a hit when the value of those investments was reviewed.

This, in turn, has raised questions about how often superannuation funds are reviewing the value of their unlisted investments and what impact those revaluations will ultimately have on members’ investment returns and the league tables being generated by ratings houses.

According to the SuperRatings data, the best performing fund in the balanced investment option category for the 12 months to June 30 was Vision SuperSaver - Balanced Growth, which declined by just 1.70 per cent, followed by big public service fund PSSap — Trustee Choice, which declined by 2.07 per cent and MTAA Super Balanced, which declined by 2.14 per cent.

Commenting on his company’s results, SuperRatings managing director Jeff Bresnahan said that listed markets were incredibly volatile at the moment.

As well, he said the gap between the best and worst balanced option over a 10-year period now stood at 5.56 per cent.

The Industry Super Network sought to use the SuperRatings data to prosecute its continuing campaign against adviser commissions by pointing out that industry funds had dominated the top 10 performance positions over one, three and five years.