Top 10 Balanced super funds ranked by risk and return

While super is a long-term investment, short-term fluctuations in the value of your super account can set the pulse racing, and not in a good way. This is especially so for members close to or recently retired and those with a large account balance.

According to super fund ratings and analysis group SuperRatings, the market has behaved differently over the past year or two, with stronger than anticipated returns but more volatility along the way.

The year to June 2024 was a year of three parts. Concerns over inflation caused a slow start to the year with multiple negative returns until October 2023. Markets then rallied, led by US technology stocks and local banks as inflation eased and optimism over developments in artificial intelligence surged. After a blip in inflation caused markets to stumble in April, it was full steam ahead to finish the year on a strong note.

“For members nearing, or in, retirement, minimising these fluctuations can be a key factor in their retirement planning,” says SuperRatings executive director, Kirby Rappell. And super funds have responded.

“Managing volatility is a key function of superannuation funds, with the need to consider downside risk increasingly evident over recent years,” say Rappell. “While this has meant some funds that were more defensively positioned didn’t benefit as much from this year’s share rally, having strong diversification supports smoother returns over the long term.”

While younger investors can afford to take a long-term view, it’s still important to understand the risk and return trade-off along the way.

Taking account of volatility

For this reason, along with the usual lists of top funds rated by their investment returns over various time periods, SuperRatings also publishes the top 10 Balanced options over seven years, ranked by returns adjusted for risk (volatility).

Why does this matter?

In volatile markets a super fund that provides a smoother investment journey is likely to be attractive for people who want to earn a decent return and still be able to sleep at night.

Top 10 funds based on volatility-adjusted performance over seven years to 30 June 2024

Risk-adjusted ranking	Super fund	Investment option	Return (% per yr)
1	Australian Retirement Trust	QSuper Accumulation – Balanced	5.3%
2	BUSSQ	Balanced Growth	6.1%
3	CareSuper	Balanced	7.1%
4	CSC PSSap	MySuper Balanced	6.7%
5	ADF Super	MySuper Balanced	6.7%
6	NGS Super	Diversified (MySuper)	6.6%
7	IOOF	Employer Super – MLC MultiActive Balanced	7.2%
8	Rest	Core Strategy	6.5%
9	Active Super	Balanced	6.6%
10	Spirit Super	Balanced (MySuper)	6.7%

Source: SuperRatings. Returns to end June 2024, after fees and taxes. Volatility and return ranking based on Sharpe Ratio.

The risk-return trade-off

Australian Retirement Trust returned to the top of the table in 2024, after dropping to second place previously, with an average annual return of 5.3%.

Last year’s winner CareSuper slipped into third place after BUSSQ, which was new to the top 10. In fact, only three of the 2023 top 10 remained on the list.

What pops out of the table above is that although Australian Retirement Trust topped the list, its 5.3% average annual return over seven years was not the highest. All nine lower-ranked funds in the top 10 delivered higher returns over this period, but they did so by taking on a slightly higher level of risk.

As a mark of the increased volatility in investment markets, the top 10 Balanced funds (not adjusted for risk) in the year to June 2024 all achieved an average annual return of 9.6% or more.

Even so, it’s pleasing to see that funds can deliver a somewhat smoother investment journey as well as good long-term returns. The typical long-term return objective for Balanced super funds is to beat inflation by 3.5% per year. This has been achieved comfortably by most of the top 10, with inflation averaging around 2.5% a year over the past seven years despite the recent uptick.

Australian Retirement Trust strategy delivers a smooth ride

Although super funds may have similar looking investment options – in this case they are all Balanced options (60–76% growth assets) – there is wide variation in how they invest members’ money. The funds with the highest absolute returns over seven years tend to hold a higher proportion of members’ savings in shares.

For many years, Australian Retirement Trust’s QSuper product has been a leader in its focus on delivering a smooth ride for members, by reining in risk to deliver strong consistent returns. Rappell says it has done this by allocating around half of its equity exposure to long duration bonds, even if returns have been lower in absolute terms during periods of high share market returns such as we’ve experienced lately. However, the QSuper fund closed as of 30 June following the merger of Australian Retirement Trust and QSuper and QSuper members will access the same options as other members from now on.

One of the new entrants to the top 10, CSC PSSap won SuperRatings latest Smooth Ride award, for its focus on diversification and consistency. CSC (Commonwealth Super Corporation) is the fund covering most Commonwealth employees. In his acceptance of the award, CSC Chief Customer Officer Adam Nettheim said: “In times of uncertainty, we all know it’s easy for our customers to panic. Our commitment to maintaining a steady hand in the storm has yielded remarkable results.”

Speaking at CSC’s 2023 Annual Member Meeting, Chief Investment Officer Alison Tarditi said: “We cannot predict the future, but your portfolios do need to be prepared for it. Portfolios structured with balance and diversification in the way they source growth can limit the impact from unexpected adverse events. This means that your savings are less dependent on any one particular prediction of the future.

“I won’t pretend that negative returns can be completely avoided, they will still be experienced under some scenarios, like a recession, because building wealth requires you to take calculated financial risks. But resilience does mean that your overall portfolio retains its capacity to recover and grow to meet your long-term objectives,” she said.

Retirees lose appetite for risk

Rappell says investors should prepare for more volatility over the coming year. Given the challenging outlook for investment markets and people’s lack of appetite for volatility as they approach retirement and deal with cost of living pressure, providing a smooth ride is likely to remain a big consideration for super funds and their members.

“Funds have done an excellent job of both managing risk and educating their members on these issues, but more can be done in this space,” says Rappell.

Top 10 funds based on volatility-adjusted performance for previous years

For your reference we have included below the top 10 based on volatility-adjusted performance for previous years.