To The Moon

Amid persistent concerns over Middle East conflicts and ongoing inflation, the surge in global equity markets has delivered another year of strong performance for Australia's $4.4 trillion (approximately $3.1 trillion USD) superannuation industry. According to estimates from research firm Chant West, the median return for growth-oriented funds over the financial year ending June 30 was 9.5%. International equities were the primary driver of these gains, with nearly all major asset classes contributing positive returns.

Chant West's Head of Investment Research, Mano Mohankumar, stated in a release, "International equities, measured on a currency-hedged basis, surged 25.5%, supported by sustained enthusiasm for artificial intelligence (AI) and robust corporate earnings." Even with the Australian dollar strengthening against most major currencies, the unhedged return for international equities still reached 17%.

In the performance rankings, UniSuper led the growth funds with a 12.3% return, followed by NGS Super and Colonial First State, both achieving 11.5%. Greg Clark, Deputy Chief Investment Officer at Hostplus, noted in an interview last week, "This has been a generally favorable year for equity returns overall, but we prefer a diversified portfolio approach rather than a singular focus on listed equities." Hostplus's balanced fund ranked fourth with a 10.8% return.

The industry's performance data underscores the Australian superannuation sector's increasing reliance on global stocks. According to Chant West, a typical growth fund allocates approximately 31% of its assets to international equities. In contrast, the average allocation to Australian shares is 24%, which delivered a modest return of just 6.2% for the full year.

Australia's superannuation system, one of the world's fastest-growing retirement savings pools, invests roughly half its assets overseas, with about one-fifth allocated to private markets. Chant West is still finalizing full-year return data for unlisted property, infrastructure, and private equity. Mohankumar anticipates infrastructure returns to be in the range of 7% to 9%, with private equity returns estimated between 8% and 11%. He added that unlisted property is showing signs of continued recovery, with potential returns likely between 5% and 7%.