In-house funds yield happiest returns
The Telstra Super Balanced fund, the fund for Telstra employees, produced an average annual return over the same period of 7.8 per cent. That puts the fund in equal-second place with QSuper Balanced, the fund for current and former Queensland government workers, and ESSS Growth, a fund for Victorian state government employees. Giant industry fund AustralianSuper is in the top 10, with its Balanced option producing a return of 7.6 per cent.
Employers have outsourced most of the small corporate funds because they do not have the economies of scale to keep fees down. These winning corporate- and public-sector funds have scale. They also have good in-house investment management and good outside consultants.
Non-profit industry funds, which include industry funds, corporate funds and public-sector funds, occupy six of the top-10 places over 10 years. Not a single "for profit" fund makes the top 10. One of the reasons for the good performance of corporate- and public-sector funds is their low costs. Membership is limited to their large number of existing and former employees. That means they spend less on marketing than those funds trying to grow their membership by reaching the public.
The hazards of putting too much store on the one-year performance are shown by the fact that eight of the top-10 long-term performers do not figure in the top 10 for the year to June 30. According to Chant West numbers, the median-performing fund produced a return of more than 15 per cent for the year. That was the best one-year return for 16 years. But fund members have to be careful if they are tempted to switch to one of the better performers based on the one-year numbers. There are almost always factors about the way a fund invests that help explain why it is at the top of performance league tables for the year.
Sharemarkets have performed particularly strongly over the past year. Australian shares have produced a total return (including dividends) of more than 20 per cent. Global shares have produced a total return of more than 30 per cent.
Most people are invested in their super fund's "balanced" investment option. These spread the money between the asset classes but some invest more in shares than in other classes such as fixed interest. At any time of the market cycle some funds will be favoured over others. Over the long term, those swings and roundabouts tend to even out.
Return ticket
Frequently Asked Questions about this Article…
Chant West data shows CBA Group Super Mix 70 and REST Core led 10-year returns at about 8.0% pa. Telstra Super Balanced returned about 7.8% pa (equal second with QSuper Balanced and ESSS Growth) and AustralianSuper’s Balanced option returned about 7.6% pa, placing it inside the top 10.
The article explains these winning corporate- and public-sector funds tend to have scale, low costs, good in‑house investment management and access to quality outside consultants. Limited membership also reduces marketing expenses, helping keep fees down and supporting better net returns.
No — the article warns that one‑year results can be misleading. Eight of the top 10 long‑term performers didn’t feature in the top 10 for the year to June 30, and short‑term outperformance often reflects specific investment positioning rather than sustainable advantage.
A balanced option spreads money across asset classes (shares, fixed interest and others) to manage risk. Most members are in balanced options, though different funds vary how much they allocate to shares versus fixed income — and those allocation differences can affect short‑term performance.
Sharemarkets were particularly strong: Australian shares produced more than a 20% total return (including dividends) and global shares produced more than a 30% total return for the year, which lifted many funds’ short‑term results.
No — according to the Chant West data cited, none of the top 10 long‑term performers were “for profit” funds; six of the top 10 were non‑profit industry, corporate or public‑sector funds.
The article notes small corporate funds often lack the economies of scale needed to keep fees low, so employers have outsourced those services to larger providers to benefit from lower costs and stronger investment capability.
Based on the article, everyday investors should prioritise long‑term returns, fees and how a fund invests (including its in‑house capability and use of consultants) rather than chasing short‑term one‑year performance, which can be volatile and strategy‑driven.
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