A new academic study of Australia’s largest superannuation funds has found that diversified default strategies outperformed public market benchmarks over the past two decades.
The paper, which was put together by researchers at Australia’s Monash Centre for Financial Studies, stated that outperformance had been driven by active investment strategies and allocations to private markets.
The findings come as Australia’s superannuation system has been held up by many policymakers and industry experts as a template for the UK’s defined contribution (DC) market.
The researchers examined the default MySuper products of Australia’s biggest funds and found that most delivered positive and statistically significant excess returns relative to listed market benchmarks. The outperformance held across a range of measures, with most funds generating additional returns of between 0.6% and 1.5% above passive listed benchmarks.
The researchers also said the persistence of positive alpha over rolling 10-year periods suggests the results were not simply a product of short-term market moves, but instead reflect “enduring value creation through active management and portfolio design”.
They added: “Our findings stand in contrast to the growing literature, particularly in the US, that has questioned the net value of alternative investments and active management in institutional portfolios.”
The paper said the difference may reflect features of the Australian system itself, including scale, internal management capabilities, not-for-profit governance models, and long-term investment horizons, all of which may have helped funds use alternatives more effectively.
UK policymakers have repeatedly pointed to Australia as a model for a more consolidated DC market, with larger schemes expected to be more able to invest in infrastructure, private markets, and other less liquid assets.
However, the study also warned that the picture has become less clear-cut in recent years. It found that alpha has been declining across all funds since around 2021, while cumulative return ratios have started to level off.
The authors said this could suggest that the early benefits of diversification into alternatives and active strategies are becoming harder to sustain, potentially because of increased competition, tighter regulation, and the maturing of opportunities in private markets.
