Super returns post strong year on international share gains

International equities powered Australia’s biggest superannuation funds to another year of strong returns, as exposure to the US-led artificial intelligence boom offset a volatile backdrop of higher interest rates, conflict in the Middle East and a soft domestic share market.

Preliminary estimates from SuperRatings indicate the median Growth Fund option returned about 10.6 per cent in the year to June 30, comfortably outperforming Medium Balanced Fund options at 9.1 per cent and Low Risk Funds at 5.9 per cent.

The results also extend a years-long trend in which super funds with larger allocations to offshore equities have outperformed peers more heavily exposed to Australian assets.

“For the third year in a row the real driver for outperformance has been global equity markets,” said Joshua Owen an Insights Manager at SuperRatings.

“Hostplus and Raiz have probably done well. CFS has put out some strong returns on relatively high exposure to international assets.”

The performance gap between the top funds and the rest reflects another exceptional financial year for global equity markets outside Australia.

The MSCI All Country World Index returned about 19 per cent over the period, while the S&P/ASX 200 gained just 2.8 per cent before the benefit of dividends. Elsewhere, Wall Street’s Nasdaq 100 Index rose 24 per cent, and the S&P/500 added 19 per cent.

“Some of the super funds have just got so big that they need to look at global shares more now as a function of their size,” said Mr Owen. “The growth really had been in big US tech stocks like the Magnificent 7 (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), but it’s also starting to broaden out globally now with AI.”

Industry funds, AustralianSuper deliver

Early results in July also suggest several industry funds again ranked among the year’s strongest performers.

Hostplus’ High Growth option is expected to return more than 12 per cent after delivering 13.6 per cent in FY25. The fund currently allocates about 43 per cent of assets to international shares and 36 per cent to Australian equities.

Growth Fund options offered by rival industry funds UniSuper and HESTA are also expected to deliver double-digit returns for the year.

On Friday, AustralianSuper, the nation’s largest superannuation fund with 3.6 million members, reported an 11.6 per cent return for its High Growth option and 9.8 per cent for its Balanced Fund option. AustralianSuper’s Balanced Fund’s result exceeded its 15-year annual average return of 8.2 per cent.

Chant West estimates the median Growth Fund across Australia returned about 9.5 per cent over FY26, marking a fourth consecutive year of above-average returns.

“The more exposure your fund had to international shares, the better you would have performed,” said Chant West’s Head of Investments, Mano Mohankumar.

“We’ve now had four very strong years in succession, with this year’s gains driven by enthusiasm for artificial intelligence, resilient economic growth and robust corporate earnings, particularly in the US and parts of Asia.”

In Asia, South Korean and Taiwanese share markets were also among the world’s strongest performers after more than doubling over the financial year as their semiconductor manufacturers benefited from surging demand for AI infrastructure.

Growth funds, typically holding between 61 per cent and 80 per cent of assets in growth investments such as shares, have now produced only two negative calendar years since 2010, based on Chant West data.

“Historically these funds have returned about 8 per cent a year since compulsory super began in 1992, comfortably exceeding their long-term objective of inflation plus 3.5 per cent,” Mr Mohankumar said.

“So, in FY26 the Growth Fund returns were even higher than that and ahead of a long term objective of about 6 per cent to 7 per cent per annum.”

The two negative years of returns since 2010 were in 2020 and 2022. The two years of drawdowns in balances were the result of rises in inflation and interest rates due to the economic shock from COVID-19 policies.

The best year on record for Growth Fund super returns was 1997 with a 19.4 per cent return, according to Chant West.

The standout result was slightly ahead of the 18 per cent median advance in 2021 based on money printing policies in response to the pandemic-era’s lockdowns.

Super reforms could boost retirement kitties

The strong investment performance coincides with the introduction of the Federal Government’s Payday Super reforms from July 1.

Employers must now pay superannuation contributions within seven business days of paying wages rather than making quarterly payments under the new rules. The Superannuation Guarantee or minimum employer contribution will also remains at 12 per cent.

Research by the University of New South Wales estimates a median-income 25-year-old could retire with about $6500 or 1.5 per cent more in superannuation as a result of contributions reaching accounts earlier.

“Every super contribution has the potential to generate investment returns,” said UNSW Associate Professor Katja Hanewald. “And By reaching a person’s super account sooner, those contributions have more time to compound over a working life. Businesses will also no longer be able to hold super contributions until the end of the quarter.”

Self-managed super funds expected to underperform

The divergence between Australian and international markets is also expected to weigh on the relative performance of SMSFs.

They generally maintain larger allocations to domestic shares and property than APRA-regulated funds, which favour overseas share investments to a greater extent.

This means many SMSFs were underrepresented in the strongest-performing segment of global markets during FY26, although returns vary significantly between individual SMSF portfolios.

Australia has about 672,000 SMSFs managing retirement savings for roughly 1.2 million members, many of whom are in retirement or approaching it and prioritise dividend income from Australian shares over capital growth.

On Friday afternoon, the S&P/ASX 200 rose 1.3 per cent to to 8841 points to head for its first daily gain in financial year 2027.

Gold miners did much of the heavy lifting and analysts expect the top 200 companies to deliver double-digit earnings per share growth over the next 12 months.

Most large super funds obtain international equity exposure through low-cost index strategies tracking benchmarks such as the MSCI All Country World Index, the S&P 500 and the Nasdaq 100.