Australia’s top 10 super funds revealed

James Fernyhough
Jul 20, 2015, updated Jul 21, 2015

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If you’re a mechanic, a bar tender, a university academic, or a Queensland public sector worker, congratulations: your super did better than everyone else’s.

The default superannuation funds for these industries all smashed the average super return of 9.8 per cent, each one returning more than 11 per cent for the 2014-15 financial year, as calculated by Chant West.

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The top-performing fund was Queensland’s public sector scheme QSuper, the second-biggest super fund in the country. It returned 12.3 per cent for its members.

Number two was MTAA Super, the industry fund for the motor trades. MTAA took a famously brutal beating in the global financial crisis, but it looks as though the fund is well and truly back on track, returning 11.7 per cent for its members.

But don’t be too worried if your fund didn’t make the cut – super, after all, is a long-term game. Photo: Shutterstock

Of course, most super funds took a beating in the GFC, but Chant West director Warren Chant said the damage has been more than repaired.

“Since the GFC low point at the end of February 2009, growth funds have now delivered an impressive 88 per cent, putting them 37 per cent above their pre-GFC high of October 2007,” he said.

You can see a full list of the top 10 below.

Industry funds the big winners

Chant West’s top 10 was made up overwhelmingly of industry funds, with just one public sector fund and two retail funds making the list.

Overall, not-for-profit funds – which include industry, public sector and corporate funds (such as Telstra or Qantas) – returned on average 10.2 per cent.

Retail funds, which are generally owned by banks on a for-profit basis, returned 9.6 per cent on average.

This is nothing new – industry funds have consistently outperformed the retail sector. So why have industry funds performed so well?

Mr Chant said: “Over the longer term, industry funds have outperformed retail funds largely because, as a group, they tended to have lower allocations to listed shares during periods when shares underperformed.

“While that historical difference in allocation no longer applies, they have also had higher allocations to unlisted assets such as private equity, unlisted property and unlisted infrastructure which have performed well for them. That difference still applies, with industry funds currently investing 20 per cent in these sectors against four per cent for retail funds.

“Over the longer term, the asset allocation policies of industry funds have served them very well. Those allocations to unlisted assets do mean slightly higher investment costs, but those extra costs have been more than justified by the better performance and lower volatility.”

However, he said retail funds’ appetite for ‘alternative assets’ like infrastructure has increased. This, along with a push to lower fees, has seen retail funds become increasingly competitive.

So what’s the secret?

When it comes to investing, there is only so far cleverness will get you. As has been shown time after time, ‘active’ investing in shares – that is, actively selecting companies you think are going to grow faster than average – rarely delivers significantly better returns than simply sticking your money in an index fund, aka ‘passive’ investing.

Passive investment involves buying up all the stocks on a market according to their weighting on an index like the ASX 200. So if you had $100 to invest, and BHP Billiton made up eight per cent of the value of the sharemarket, then you’d buy $8 worth of BHP Billiton stock.

Investment in infrastructure acted as a buffer for industry funds during the June shocker on sharemarkets. Photo: Shutterstock

This is a cheeky, cheap way of investing in shares. And by and large, it is as effective as any other method. Retail funds have recently overwhelmingly favoured this approach in a move to get fees down. The trouble is, when sharemarkets take a beating, you are guaranteed to take a beating too, which is why retail funds did so badly in June.

Industry funds did better for a number of reasons. Funds like AustralianSuper, Cbus and HOSTPLUS have very high allocation to infrastructure, which acts as a buffer when sharemarkets are down. REST Industry Super – the top-performing fund over the past 10 years – favours an active investment strategy over a passive one.

And QSuper, according to Chant West, did so well this year thanks in part to its investment in long-duration bonds, as well as its allocation to alternative assets (infrastructure, property and private equity).

Here are the top 10 super funds for the last financial year and, below that, the last 10 years.