Superannuation funds are in for a choppy ride this year, with returns down 3.8 per cent in January amid turmoil in Chinese markets.
Superannuation returns shrank to 5.6 per cent in 2015 and experts predict another choppy year ahead amid turmoil on global financial markets.
So far in January, returns are down by 3.8 per cent due to volatility in Chinese markets, new industry figures show.
Returns are closely linked to local and international share markets, and Australia's benchmark ASX 200 index is already down 7.4 per cent so far this month, according to superannuation research company SuperRatings.
That compares with around a 8.5 per cent fall in international markets over the same period.
Still, the drop by the Australian dollar to under 70 US cents has helped offset some of the losses, SuperRatings founder and chairman Jeff Bresnahan said.
Mr Bresnahan expects the average balanced option superannuation fund - which is mostly made up of local and international equities, property and infrastructure, and a mix of fixed interest and cash - to come in around the low to mid single digits in 2016.
That compares to 5.6 per cent returns last year.
"The funds have a long term target of CPI plus about three per cent so the funds targets are somewhere between five and six per cent per annum," he said.
"Now obviously they're not going to hit them year in, year out."
Returns have already started to slow over the past few years. The last time returns fell was in 2011, down 1.9 per cent, according to SuperRatings.
Prior to that it was in 2008, dropping 19.7 per cent, after major losses on international stock markets because of the financial crisis.
"That was the worst super fund year on record," Mr Bresnahan said.
"As a rough rule of thumb, whatever the markets are down, the balanced super funds will be down by about half of that because of the diversification benefits," he said.
The main returns driver in 2015 were international shares, up 8.8 per cent last year.
Chief executive Adam Gee said it was "quite possible that we could have a negative return" in 2016, given heightened volatility about China's growth, and the knock on affect of Australia's export prospects to the region.
Australian listed property was the best performing asset class, rising by 14.4 per cent in 2015.
The top performing superannuation fund in 2015 was MTAA Super, booking a 9.5 per cent return for its 244,000 members.