Superannuation is one of the most important vehicles for Australians to grow and protect their retirement savings. Within the super system, most Australians will invest through either an industry super fund or a retail super fund.
Industry super funds are run by not-for-profit entities, often with a heritage linked to trade unions or specific employment sectors. They typically operate a pooled investment model where all members are invested in standardised diversified portfolios. These portfolios commonly include large allocations to unlisted (or private) assets such as infrastructure, direct property, and private equity. These assets are not traded on public markets and are typically valued only quarterly, or even less frequently.
Retail super funds, often accessed on wrap platforms via financial advisers, are typically managed by financial institutions. They offer greater transparency, investment flexibility, and tailored portfolio construction. Retail fund portfolios tend to invest heavily in publicly listed assets such as shares, ETFs, and managed funds, which are priced daily and provide better liquidity and visibility.
The comparison between these two fund types is often framed around performance, but this misses important differences in investment philosophy, risk, and liquidity management.
| Option Name | 1 Year % |
|---|---|
| SR50 Balanced (60-76) Index^ | 10.5 |
| AMP Future Directions Balanced (Retail) | 11 |
| CFS FirstChoice Employer Super Balanced Fund (MySuper Lifestage 1965-69) (Retail) | 11.4 |
| AustralianSuper - Balanced | 9.5 |
| Hostplus - Balanced | 10.8 |
| Australian Retirement Trust - Super Savings - Balanced | 11.2 |
Source:SuperRatings, AMP Investments, CFS ^indicates interim result. Returns are after investment fees and taxes and are rounded to one decimal place; however, rankings are determined using unrounded data held by SuperRatings. Based on SR50 Balanced Index options with SAA of 60-76% growth assets tracked by SuperRatings.
Over the past decade, industry super funds have regularly topped performance tables when compared against broader retail super options. A key driver of this outperformance has been their large exposure to unlisted assets which has consistently been either revalued upwards or posted stable carrying values. Importantly, their valuations tend to be smoother because they are not repriced daily like public equities. This has created the perception of lower volatility and higher risk-adjusted returns.
For example, during periods of market stress such as March 2020 (COVID onset), listed asset values fell sharply. However, the valuations of private assets in industry funds did not adjust immediately. Some funds may even delay revaluations, which helps to cushion reported performance. This effect can work well during periods of high inflows to investment vehicles but raises concerns about transparency and fair value, especially for new contributions which may buy units at inflated prices. This is something we have written about extensively over the past few years.
Additionally, industry funds benefited from large and steady inflows from a growing workforce, allowing them to meet withdrawals and expand allocations to private assets without liquidity strain as they have more money coming into their funds than going out.
The financial year 2025 marked a significant change in performance dynamics between industry and retail super funds. For the first time in several years, many retail funds outperformed their industry peers. Several factors contributed to this reversal:
Private or unlisted assets can offer valuable long-term return potential and diversification. However, large allocations, common in industry funds, introduce risks, which may not be suitable for all investors or all market environments.
While industry funds have served many Australians well, FY25 has shown that no investment model is immune to market cycles or structural pressures. The key takeaway is that strong long-term returns come from disciplined portfolio construction, transparency, and diversification, not simply from picking options with strong historical performance. We encourage all clients to look beyond headline returns and understand what assets they are really invested in and what is driving the current and future returns of their portfolio. This way, they are better able to understand whether their portfolio is suitable for their circumstances and requirements.
Looking ahead, it’s important to recognise that the private asset landscape itself is changing. Institutional investors, including large superannuation funds locally and offshore, are increasingly seeking to reduce their exposure to private markets. After years of rapid growth in allocations to private equity, infrastructure, and unlisted real estate, many institutions are now reassessing their positions due to liquidity concerns, valuation uncertainty, and the need to rebalance portfolios following recent public market rallies.
Some of these unlisted holdings will be listed on stock exchanges such as the ASX, however other exit options are becoming available. Institutions are increasingly turning to the private wealth market, that is, high-net-worth individuals, family offices, and retail investors, where it is increasingly easy to access unlisted assets through financial advisers.
With the proliferation of new private wealth focused investment vehicles, such as evergreen funds (always open to accept new investment applications), institutions have more avenues to sell down their positions. This dynamic effectively transfers the risk of illiquidity and valuation uncertainty from large institutions to individual investors.
While these new investment funds for retail investors can offer attractive long-term opportunities, they also carry the same risks institutions are actively trying to shed, namely, limited liquidity, opaque pricing, and sensitivity to market stress. There is also a risk that retail investors inadvertently invest in companies (buy companies from institutions) that are of low quality, or with weak future growth prospects.
For this reason, it is more important than ever for individual investors to work with advisers who can rigorously assess the quality, valuation methodology, and redemption terms (stated or likely in stressed events) of any private market investments being introduced into their portfolios. Care must also be taken to understand the approach and philosophy of any private market investment fund, to ensure that they avoid the low-quality companies that institutions may be exiting.
While private assets have a valid role in some portfolios, client-specific constraints on liquidity and investment selection are increasingly important in this space, particularly the alignment of investor investment time horizons with those of the underlying assets in question. That is, stated or guided liquidity provisions in private asset investment funds can very quickly evaporate.
The Investment & Research team at PSK are always monitoring market conditions and data points to ensure portfolios align with our overall long-term objectives. If you’d like to discuss any of the points raised, please contact your Adviser or call us on (02) 8365 8300.
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it's appropriate to you, in light of your objectives, financial situation or needs.
