An Industry Super Fund Returned 9.5%. My Portfolio Only Returned 7.25%. Should I Be Worried?

This article was prompted by a real question from a client. Personal details have been omitted, but the figures and the question are genuine.

A client recently sent me a screenshot.

It said that the median Australian superannuation Growth fund had returned 9.5% for the 2025-26 financial year. Her portfolio had returned approximately 7.25% (after all fees).

The question is entirely reasonable:

"Why is my return so much lower?"

It is exactly the sort of question investors should ask but answering it properly requires us to look beyond two percentages on a page.

Because the real question isn't simply:

"Which number is bigger?"

It is:

"What was invested in, what risks were taken to achieve the return, how were those investments valued, and is the portfolio doing the job it was designed to do?"

Those are much more important questions.

First, 9.5% Doesn't Mean Every Growth Portfolio Earned 9.5%

The first thing to understand is that there is no single investment portfolio called a "Growth fund". Chant West defines its Growth category as funds with between 61% and 80% invested in growth assets. The median fund in that category returned 9.5% for the year to 30 June 2026.

That's a very good result but within that broad category, funds can have quite different investments.

Some will have more Australian shares.

Some will have more international shares.

Some will hedge their international currency exposure.

Some will own significant amounts of infrastructure, property, private equity or private credit.

Others will hold more defensive assets such as bonds and cash.

So comparing two portfolios simply because both might broadly be described as "Growth" doesn't necessarily mean we are comparing like with like.

What Actually Drove the Strong Returns?

This is where FY2026 becomes particularly interesting. The biggest contributor to the strong returns wasn't unlisted property or private equity. It was international shares.

According to Chant West, international shares returned approximately 25.5% in hedged Australian dollar terms and about 17% unhedged. Australian shares, by comparison, returned about 6.2%. Chant West says the better-performing Growth funds generally had higher allocations to international shares, particularly where their currency exposure was hedged.

That is an enormous difference between asset classes in a single year.

At the other end of the spectrum, Australian bonds returned about 1.5%, international bonds around 2.9% and cash around 3.9%.

So imagine two perfectly sensible portfolios. One happens to have considerably more money invested in international shares. The other has more diversification across cash, fixed interest, Australian shares and other investments.

In a year when international shares rise dramatically, the first portfolio is almost certainly going to win. That doesn't automatically make it the better portfolio. It means its asset allocation happened to be particularly well suited to the market conditions of that year. Next year may be completely different.

AustralianSuper Is a Good Example

The screenshot my client sent also referred to AustralianSuper.

AustralianSuper's Balanced option returned 9.77% for FY2026, while its High Growth option returned 11.58%. Again, excellent results but look a little deeper.

AustralianSuper's own Australian Shares option returned 10.22%, while its International Shares option returned 14.46%. Its Diversified Fixed Interest option returned only 2.12% and Cash returned 3.74%.

The lesson isn't that everyone should have owned more international shares.

The lesson is that asset allocation matters enormously over short periods and we only know which allocation was "best" after the year has finished.

Unfortunately, investing would be remarkably easy if we could invest last year's money using this year's results.

Then There Is Another Issue: How Do We Know What Something Is Worth?

This brings us to something I think investors should understand much better.

Not every investment is valued in the same way.

If you own shares listed on the Australian Securities Exchange, thousands of buyers and sellers are constantly establishing their price.

If markets fall sharply today, your investment statement will show it.

There is nowhere for the fall to hide.

The opposite is also true. If markets rise sharply, you see that immediately as well.

A large unlisted asset is different. Think of an airport, toll road, commercial property, private company or infrastructure project. There may be no active market establishing its price every day. Its value therefore has to be periodically estimated using accepted valuation methods, assumptions, cashflow forecasts, comparable transactions and professional judgement.

That doesn't make the valuation wrong.

It doesn't make unlisted investments bad investments either.

Many are excellent assets but a valuation and a market price are not quite the same thing.

That distinction matters.

The Illusion of Lower Volatility

This is one of the reasons some unlisted investments can appear remarkably stable.

A listed asset might move 2% today, fall 3% next week and recover 4% the following month.

We see every movement.

An unlisted asset might only be formally revalued periodically.

Consequently, its reported value can appear much smoother.

Sometimes that genuinely reflects the characteristics of the underlying investment.

Sometimes part of the apparent stability simply reflects the fact that nobody is establishing a new market price every few seconds.

This isn't merely a theoretical issue. APRA has been examining valuation and liquidity practices within the superannuation industry. Its review of 23 superannuation trustees found that 12 required material improvement in either or both their valuation governance or liquidity risk frameworks. APRA identified issues including board oversight, conflicts of interest, revaluation frequency, revaluation triggers and valuation controls. Importantly, APRA did not conclude that the resulting asset valuations were wrong. It did not assess individual asset values in that review.

That distinction is important. I don't think it is reasonable to suggest that superannuation funds are simply overstating the value of their unlisted investments but I do think investors should understand that there is a fundamental difference between an asset whose value is continuously tested in an open market and one whose value has to be periodically assessed.

And This Is Where Our Investment Philosophy Comes In

At The Updated Investor, we have deliberately placed considerable importance on liquidity, diversification and transparency.

That means much of what we invest in is market-linked.

There is a price.

We can see it.

And, importantly, we can generally turn the investment into cash relatively quickly if a client's circumstances change.

That can occasionally make our portfolios look more volatile because market movements are visible immediately.

We're comfortable with that.

I would rather know what an investment is worth today than discover what somebody is actually prepared to pay for it on the day we desperately need to sell it.

Our investment philosophy has therefore never been simply: "How do we maximise this year's return?"

We ask a different set of questions.

What does this money need to do?

When might the client need it?

How much income will they require?

How much liquidity should we maintain?

What happens if markets fall at an inconvenient time?

What happens if health, family or retirement plans change unexpectedly?

These considerations form part of what we describe as Financial Certainty. For us, liquidity has a value of its own, even though that value never appears as a percentage on an investment statement.

Does That Mean We Are Happy to Underperform?

No.

Investment performance matters.

Quite obviously we want clients' money to grow.

If a portfolio persistently underperformed comparable investments over an appropriate period without good reason, we would want to understand why but 12 months is not an appropriate period over which to judge an investment strategy designed to fund decades of someone's life.

Chant West makes essentially the same point. After four consecutive financial years in which the median Growth fund returned more than 9%, it cautions investors against treating those returns as normal. Its long-term objective for Growth funds equates to roughly 6% a year, and over the past 20 years the annualised return has been about 6.9%.

Four very good years don't suddenly make 9% or 10% the minimum acceptable annual return.

Markets don't work that way.

So, Should Someone Who Earned 7.25% Be Worried?

Not simply because somebody else earned 9.5%.

I would want to know much more.

Was the portfolio appropriately diversified?

How much risk was being taken?

How much liquidity was maintained?

Were there contributions or withdrawals during the year?

Were the returns being compared on the same basis?

What fees were included?

What was the asset allocation?

Most importantly:

Was the portfolio constructed to win a one-year performance competition, or was it constructed to help fund someone's life?

They are not necessarily the same thing.

There will always be an investment that performed better than yours last year.

There will also always be one that performed worse.

Our job isn't to identify last year's winner after the race has been run.

Our job is to construct portfolios that give clients a reasonable opportunity to achieve appropriate long-term returns while maintaining the diversification, liquidity and flexibility they may need along the way.

Because ultimately, your investment portfolio isn't a scoreboard.

It is there to fund your life.

And that is a very different objective.