By Gillian Bullock

While the world might seem to be falling apart in the wake of the latest debacles involving Lehman Brothers and American International Group, super funds are still expected to move back into positive territory before the end of the current financial year.

Shane Oliver, AMP Capital’s chief economist, expects a 10 per cent return on super funds in the 2008-09 year despite some rough times in the next couple of months. The 10 per cent return will be made up of 6 per cent capital growth and 4 per cent yield, according to an optimistic Oliver.

“My best guess is a 10 per cent return as when the market bounces up, it comes up quite quickly,” says Oliver. “Historically the rise after any 20 per cent fall in the market is 30 per cent in the first 12 months. Once it comes through, it comes through with a whoosh.”

Still in positive territory, but slightly less bullish is Macquarie Private Wealth associate director Doug Webber who is looking for a return of “at best 5-6 per cent” in the current financial year. The outlook remains positive and the forecasts for three and five years’ time come in at close to the 10 per cent mark.

The 2007-08 financial year showed the worst super returns ever, with those who aggressively chose an international share option experiencing a 17.3 per cent drop in returns. Those going for Australian shares saw a 12.2 per cent drop while a balanced option delivered a 6.4 per cent fall. Only those in a capital stable or cash option were in positive territory.

But according to figures from SuperRatings, over a five-year period all funds regardless of how growth-oriented were still in the black.

Of course most super funds have a wide exposure to shares – that’s the whole point. Super is a long-term investment so if you conservatively stay in cash for decades it may serve you well in years when equities take a beating but overall you will never be a winner.

The old maxim is that over a 10-year period shares outperform all other asset classes, although AMP’s Oliver makes the observation that if you’d bought shares just before the 1987 crash then cash would have outperformed over the subsequent 10 years.

But that is probably more of an anomaly than the norm and having your super fund buying into shares right now is not such a bad thing.

Indeed, given that shares are now 30 per cent below the level they were last November, it makes for a good argument to buy now while they are cheap.