Tuesday, July 09, 2024

Superannuation Returns for the 2023-24 Financial Year

The Australian reports on the performance of superannuation funds for the just completed financial year. This year, retail funds tended to perform better than industry funds because of their higher allocation to public stock markets rather than private assets. How did our SMSF do by comparison? I don't actually compute comparable after-tax performance figures, which are how superannuation returns are reported.* Public offer funds make an allowance for future tax payable, which includes capital gains tax if the assets are sold. This means that members who withdraw funds don't push tax liabilities onto those that stay. This is unlike a regular unlisted managed fund where tax is at the investor level and attached to distributions... 

So, instead I estimate what the performance of our employer funds might be pre-tax. This probably over-estimates the performance of the employer funds, but reconciling tax expected with tax actually paid on our SMSF would be hard work. On that basis, the SMSF returned 9.54%. Unisuper returned 10.89% and PSS(AP) 10.55%. Both the latter are balanced funds. Even though we underperformed for the year, we are still ahead overall since inception:

PSS(AP) has, however, inched ahead in risk-adjusted performance. It now has an information ratio (Sharpe ratio with zero risk free rate) of 1.02, versus 0.96 for the SMSF. Unisuper is on 0.83. 

Since inception, the SMSF has returned an annualized 7.9% pre-tax versus 6.44% for Unisuper and 6.63% for PSS(AP).

* Reported performance does deduct administration, audit, ASIC fees etc. As an example, for the year to 31 December 2023, Unisuper report a return of 10.3%, while I estimate a pretax return of 11.15% for the fund.

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