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Fund members' patience has been rewarded at last with the typical balanced investment option returning 11.7 per cent in 2012 - the first double-digit return in a calendar year since 2009.

''Australian shares and international shares were the largest drivers of the result with returns of 17.9 per cent and 13.6 per cent respectively,'' Jeff Bresnahan, the founder of researcher SuperRatings, says.

Australian super funds have the highest exposure to shares in the world, and most members are in a ''balanced'' option - defined by SuperRatings as having between 60 per cent and 76 per cent in riskier assets such as shares and property.

<i>Illustration: Jamie Brown</i>

Risky business … members who do not check their funds' performance may end up with a lower income in retirement. Illustration: Jamie Brown

Critics say the dominance of shares in super leaves members nearing retirement vulnerable to sharemarket crashes. But with 90 per cent of balanced options returning more than 10 per cent last year, most fund members have had strong returns. The strong result in 2012 means balances now sit 3.4 per cent above the previous peak recorded in October 2007, just before the GFC. And the recent rebound in share prices has lifted the average annual return of the typical balanced option to 6.4 per cent for the 10 years to December 31, 2012.

Most superannuation funds target a long-term average annual return of between 3 percentage points and 3.5-percentage points above inflation. In the past five years, the funds have fallen short of their return objectives because of the GFC. But good share returns in the past year have meant most funds met their long-term performance objectives. SuperRatings' data shows $100,000 invested in the typical balanced option 10 years ago would have risen to $183,527 towards the end of last year. The typical balanced option bottomed in February 2009 at $132,791, from which it has now rebounded by 37.9 per cent.

TOP PERFORMERS

The best-performing balanced option for calendar 2012 is UniSuper Accumulation (1) Balanced, with a return of 15 per cent. UniSuper is the non-profit fund for workers in the higher education and research sectors. John Pearce, the chief investment officer of UniSuper, says the fund has a bias to Australian shares that pay tax-effective dividends. Pearce says the result is a vindication of sticking to its strategy when some called for a massive re-allocation from shares to bonds.

Second spot in the balanced category is shared by industry fund REST Core Strategy, and StatewideSuper Marketlink Growth Option, with 14.1 per cent each. Super Directions (SD) Business Multi-Manager Balanced takes out third spot, with 13.8 per cent. REST Core Strategy has a good performance, relative to other funds, over most time periods. For the seven years to December 31 last year, it produced an average annual return of 5.7 per cent, compared with the median for the balanced category of 3.7 per cent. Over five years it returned 3.2 per cent, compared with a median return for the category of 0.8 per cent. Over three years it returned 5.9 per cent, compared with 4.9 per cent.

The only balanced option to do better over seven years is the Commonwealth Bank Group Super Mix 70, a fund limited to bank employees, with an average annual return of 5.9 per cent. The 2 million member REST industry fund, mainly for those working in the retail sector, is open to the public.

''We think that producing consistent long-term performance is more important than trying to outperform on a short-term basis,'' Jo Townsend, general manager of investments at REST, says. ''The central tenet of our investment approach is one of active management,'' she says. ''We will change our asset allocations to reflect opportunities and risks in the market.''

LONG-TERM RESULTS

Not too much attention should be given to short-term performance when most members are saving for their retirement over decades. Kirby Rappell, research manager at SuperRatings, says fund members should instead take note of how well the returns compare with the long-term return objectives of the fund.

The performance quoted in the media is the typical, or median-performing balanced option. SuperRatings' data shows a big gap between the best and worst-performing funds. While the best-performing balanced option returned 15 per cent in 2012, the bottom-dweller produced 7 per cent.

Members who do not check their funds' performance risk being left with a lower income in retirement.

The table of top-20 performing balanced options over 2012 shows an almost even split between retail or ''for profit'' funds and non-profit funds such as industry funds, government funds and corporate funds.

Rappell says the typical retail fund balanced option returned 0.9 percentage points more than not-for-profits in 2012. ''That is mainly because most retail funds have higher exposures to listed equities, and listed equities have had a good run,'' he says. However, over the past 10 years non-profits have a return advantage over retail funds of about 1.7 percentage points, Rappell says.

The non-profits tend to be more active in asset allocation as market conditions change. They also tend to have bigger exposures to ''alternative'' assets, such as infrastructure and private equity. Their fees have also been lower than their for-profits counterparts, Rappell says.

What's next for super

While most people have their money in their funds' balanced options, funds offer a range of diversified options where the money is spread between asset classes. Some, such as ''capital stable'', have higher exposures to cash and fixed income than balanced options, while the ''growth'' category has higher exposures to shares and property than balanced options. Capital stable is the best-performing diversified option over seven years, with an annual return of 4.6 per cent, compared with balanced, which has 3.7 per cent. When fear overtakes greed, investors switch from shares to fixed interest and cash, and that benefits the performance of the more conservative options, such as capital stable.

During the GFC, some fund members switched to their funds' cash option. Cash produces a steady return, but it fails to keep up over the long term. Over the past decade, the typical balanced option has outperformed the typical cash option by almost 20 per cent, or by an extra $30,000 from an original investment of $100,000, SuperRatings' data shows.

Investors are less fearful now than at any time since the onset of the GFC. If this continues, balanced options can be expected to continue to outperform both capital stable and cash options.

Capital stable options did well again in 2012, in part because of their exposure to bonds. The StatewideSuper Marketlink Conservative option is the best-performing capital stable option for 2012, with a return of 11.7 per cent, followed by Aon MT Capital Stable Active (10.6 per cent) and Russell SuperSolution Employer Conservative Portfolio (10.2 per cent).

But the outlook for bond prices is weaker this year because investors are switching from bonds to shares. If that continues, bond prices may fall during the year.

Of the higher risk ''growth'' options, the best performer for 2012 is UniSuper Accumulation (1) Growth, with 16.8 per cent growth. In second place comes Virgin Super Life Stage Balanced Under 40s Mix (15.4 per cent) and State Super Retirement Fund (SSRF) Personal Growth Fund (15.3 per cent). The good performance is mostly due to the solid performance of shares. But over five years, the typical growth option produced an average annual return of minus 0.4 per cent as share prices fell during the worst of the GFC.