The top Australian super funds of 2023 revealed
Super funds with aggressive growth strategies delivered the strongest returns
3 min
Impressive share market gains in 2023 boosted the performance of Australian superannuation funds last year. All-growth super funds primarily invested in Australian and international shares delivered an outstanding 13.1 percent return, while conservative super funds containing fewer shares and more defensive assets such as bonds and cash booked a respectable 6.2 percent return.
Chant West has released its annual review of superannuation funds and revealed the top 10 performing funds among those with the median growth strategy. Super investors can choose between several types of strategies depending on their risk tolerance and stage of life. Typically, young Australians may prefer higher growth strategies because they have a longer time horizon to grow their super and can therefore tolerate more risk. Older workers closer to retirement tend to prefer balanced or conservative strategies that aim to preserve capital and deliver lower-risk gains.
Chant West revealed the performance of five different fund strategies common among Australian superannuation funds. All–growth super funds, which comprise 96 to 100 percent growth assets such as shares, delivered a median 13.1 return for investors. High-growth super funds with 81 to 95 percent growth assets delivered an 11.4 percent return. Median growth funds with 61 to 80 percent growth assets delivered 9.9 percent. Balanced funds with 41 to 60 percent growth assets returned 8.1 percent and conservative funds with 21 to 40 percent growth assets returned 6.2 percent.
Chant West senior investment research manager Mano Mohankumar said share markets in Australia and overseas performed well in 2023 and this was the biggest factor in super funds’ gains last year.
Mr Mohankumar said: “International shares was the standout asset class with a tremendous 23 percent return over the year, led by the tech sector which benefitted from advancements in AI. While Australian shares didn’t reach the same level, it still delivered a healthy 12.1percent over the same period.”
Share market returns include share price growth or capital gains, as well as dividends. Defensive assets also provided solid returns last year, with Australian bonds delivering 5.1 percent, international bonds 5.3 percent and cash 3.9 percent.
The top 10 median growth super funds are listed below, with the returns shown being net of investment fees and taxes but before administration fees and financial advisor commissions.
Chant West said the 9.9 percent delivered by median growth funds erased their 4.6 percent loss in 2022. That was the first year in 11 years that median growth funds recorded a fall in value. Mr Mohankumar said super funds had proven their resilience and robustness, particularly during recent years amid a once-in-a-century pandemic, rapidly rising interest rates and a global economic slowdown.
He pointed out that over the long term, Australian super funds have delivered above-target outcomes. He said the typical long-term objective for growth funds is to beat inflation by 3.5 percent per annum, which translates to just over 6 percent returns. “Since the introduction of compulsory super, the annualised return is 7.9 percent and the annual CPI increase is 2.7 percent, giving a real return of 5.2 percent per annum – well above that 3.5percent target,” he said.
“Even looking at the past 20 years, which includes three major share market downturns – the GFC in 2007-2009, COVID-19 in 2020 and the high inflation and rising interest rates in 2022 – super funds have returned 7.3 percent per annum, which is still comfortably ahead of the typical objective.”
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Industrial assets offer a simple, low-risk entry into commercial real estate.
3 min
Falling interest rates are sparking a rebound in interest in commercial property. However, for many first-time investors, commercial property can feel very intimidating. With commercial property, there are typically numerous different numbers, complex leases, and unfamiliar terminology.
But once you understand what to look for, the pathway into commercial becomes much clearer and far more achievable than most people realise. So, what does a smart entry point into commercial property actually look like?
If there’s one standout option, it’s typically an industrial property with value-add potential.
Why industrial is the right place to start
Among all the commercial sectors, industrial is currently the most stable and accessible. Demand is being driven by the trades, small manufacturers, logistics operators and e-commerce businesses, many of which are growing rapidly and need practical space to operate from.
Unlike retail and office properties, industrial assets are typically simpler to understand. They’re often lower maintenance, easier to lease and more resilient to changes in the economy. This makes them well-suited to first-time investors who want to enter the market with confidence.
The importance of value-add potential
When looking at entry-level opportunities, many investors make the mistake of prioritising presentation. But it’s generally not the flashiest property that delivers the best returns. It’s the one where you can create the most upside.
That might mean buying a property where the current rent is well below market value. When the lease ends, you have the opportunity to negotiate a new lease at a higher rate, instantly increasing the property’s value.
In other cases, it may be a warehouse with a short-term lease in a high-demand area, providing you the opportunity to renegotiate the terms and secure a better return. Even basic improvements like repainting, improving access, or updating signage can make a big difference to tenant demand.
Don’t chase yield for the sake of it
A common trap for first-time commercial buyers is chasing the highest yield on offer. While yield is an important consideration, it shouldn’t be the only one. A high yield can sometimes signal a risky investment, one with a poor location, limited tenant demand, or low capital growth prospects.
Instead, smart investors focus on balance. A net yield of six to seven per cent in a strong, established area with reliable tenants and good fundamentals is often a far better outcome than a nine per cent yield in a declining market.
Yield is only part of the story. A good commercial investment is one where the income is sustainable, the asset has growth potential, and the risk is well-managed.
The risks of starting with retail or office
Retail and office properties can be suitable for experienced investors, but they’re often more complex and carry higher risk, especially for those just starting out. Retail in particular has faced significant changes in recent years, with e-commerce altering the way consumers shop.
Unless the property is in a high-traffic, local strip with essential services like medical, food or personal care, vacancy risk can be high. Office space is still adapting to the post-COVID shift towards remote work, and in many cases, demand has softened. If you’re entering the commercial market for the first time, it’s better to stick to simple, functional industrial assets in proven locations.
Where to look, and why
For first-time investors, some of the best opportunities can be found in outer-metro industrial precincts or larger regional centres.
Suburbs in places like Geelong, Logan, Toowoomba or Altona North offer a compelling combination of affordability, strong tenant demand and relatively low vacancy risk.
These areas often have diverse local economies that don’t rely on a single industry and offer entry points between $600,000 and $1 million, a sweet spot where competition from institutional investors is limited and owner-occupiers are still active.
What a good entry deal looks like
Imagine purchasing an industrial shed for $750,000 with a tenant in place and a current net yield of 6.5 per cent. The lease has about 18 months left, and you know the current rent is around $10,000 below market.
Once the lease expires, you can renegotiate or re-lease at the correct rate, increasing the income and, by extension, the value of the asset.
That’s a textbook example of a good commercial entry point. The property is tenanted, it generates income from day one, and it has a clear path to growing your equity within 12 to 24 months.
Abdullah Nouh is the founder of Mecca Property Group, a boutique buyer’s agency in Melbourne helping Australians build wealth through strategic property investment.
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