Australia’s superannuation industry is growing on the world stage, with 17 of the country’s not-for-profit super funds now in the top 300 globally.

That news comes from the Thinking Ahead Institute’s Global Top 300 Pension Fund report published on September 9.

Industry heavyweight AustralianSuper with $US204.63 billion ($305.78 billion) under management is the country’s global star, rising two rungs on the ladder to be No.16 in the world.

Improvement was experienced by all but one of the seven Australian funds in the top 100.

The fund losing ground was Australian Retirement Trust, which dropped one rung to No.22.

Another two that made ground, Rest and HESTA, now sit just outside the top 100 group.

Australia’s industry funds performed better than their government-dominated counterparts, according to Ellie Boston-Clark, co-head of Thinking Ahead’s Australian investments and governance.

“We also see a significant growth differential and rankings move between the industry funds from 2022 to 2023 (up three positions on average) and the government-related funds (down eight positions on average),” Boston-Clark said.

State Super, Super SA and Commonwealth Super Corp were among the government-dominated funds that lost ground.

Meanwhile in August the Australian super sector maintained a positive performance with balanced funds featuring between 60 and 76 per cent invested in growth assets returning a positive 0.4 per cent for the month, SuperRatings reported.

Returns are up 2.4 per cent for the financial year to date and an impressive 10 per cent over 12 months.

“The first two months of the new financial year have seen greater volatility returning,” SuperRatings executive director Kirby Rappell said.

How superannuation funds have performed

“Sharemarkets have had a strong impact on fund returns. However, the need to focus on long-term outcomes rather than getting caught up in daily movements is as important as ever,” Rappell said.

Interestingly, the median growth option with between 77 and 90 per cent growth assets increased by 0.3 per cent in August, while the median capital stable option – protected by a lower exposure to shares – rose an estimated 0.5 per cent.

Good growth in 2023

Overall global pension funds performed well over 2023 with the  top 300 pension funds’ assets under management (AUM) growing 10 per cent to $US22.6 trillion.

A year earlier at the end of 2022 the figure stood at $US20.6 trillion after falling 13 per cent that year.

On average, the top 20 largest pension funds globally invested about 43 per cent of their assets in equities, 35 per cent in fixed income and 22 per cent in alternative investments like private equity and infrastructure along with cash.

Unique Australia

However Australia is an outlier where pension funds overall have 54.8 per cent of their money in shares, both local and international.

It is well above the 45 per cent average for the Asia Pacific and North America.

Europe has the lowest exposure to equities, with only 31 per cent in the category.

Those differences are accounted for by the fact that the vast majority of Australian superannuation money is in defined contribution schemes.

Those schemes involve mandated member contributions, like the Australian super guarantee that now sits at 11.5 per cent of salaries.

However, in Europe and north Asia schemes are often defined benefit where the employer promises a certain amount of money to the employee on retirement.

As a result those schemes are more conservative, relying on more bonds and less shares to ensure promised cash is available as members retirement.

Globally, defined benefit funds account for 60.8 per cent of pension assets while defined contribution funds account for only 26.4 per cent.

Globally the top 20 fund list is dominated by national schemes like those of Japan, Korea, Canada and Norway where national pension commitments are held in one fund rather than a number of competitors under the Australian system.

North American vocational schemes are also big players.

Growth down under

Australia, while a small player globally with only 5.1 per cent of pension assets under management, is growing strongly.

A year earlier the country’s superannuation assets accounted for only 4.1 per cent of the global figure.

It appears that size matters in the global pension game with the AUM of the top 20 funds lifting 11.6 per cent in 2023,
compared to the increase of 10.0 per cent for the top 300 funds.

“Looking at the compound annual growth rate  for
the last five years, the top 20 have shown higher growth
rates than the top 300 funds – 5.4 per cent and 4.7 per cent respectively,” the report found.

The New Daily is owned by Industry Super Holdings