After the end of each financial year, I review super returns across the top 8 industry super funds. This year, I have included Vanguard Super into the mix as it’s the most competitive retail super fund in term of fees and certainly challenges the industry funds.
However, selecting the best fund is not just about investment returns and fees. There are many other factors that should be considered when deciding which fund is best.
Investment returns for the 2024-2025 financial year
The table compares investment returns for the periods ended 30 June 2025 for the Balanced investment option. A Balanced investment option allocates between 60% and 76% of your superannuation balance into shares and growth assets. Hostplus has recorded the highest returns over the past decade.
Here are the results for the investment options that have the highest allocation towards growth asset. I have previously argued that most superannuation investors should consider investing their super almost entirely in growth. UniSuper has recorded the highest returns over the past decade.
Comparing apples with apples
In the past, I have raised concerns about the lack of transparency around unlisted investments, particularly how and when they are revalued. In contrast, listed assets are traded openly and transparently, which means prices reflect all publicly available information. This price discovery mechanism gives investors’ confidence in valuations and therefore returns.
Historically, listed developed market assets have delivered returns of around 10% p.a. over multi-decade periods, which is more than enough for most people to achieve their retirement goals. Therefore, I do not see a compelling reason to take on the added opacity of unlisted assets.
Since it’s possible for super funds to manipulate reported returns on unlisted assets (not suggesting they do – just saying it’s possible), it makes sense to focus on listed asset performance, where comparisons are fairer and more reliable, especially since that most super fund portfolios are primarily invested in listed markets. The tables below compare returns in Australian and International share markets.
AustralianSuper, Aware Super and UniSuper have performed consistently well in the Australian shares sub-asset class.
Aware Super has performed the best in the international shares sub-asset class.
It’s interesting to note that ART and Hostplus have not been top performers in this comparison, unlike their strong performance in pre-mixed Growth and Balanced options. This suggests that much of their past outperformance may have come from asset classes like unlisted and alternative investments. The key question for super investors is whether that performance is repeatable and sustainable over the long term.
Trustee director experience is lacking
Industry super fund boards (trustee boards) are made up of equal numbers of representatives nominated by employer groups and employee groups, typically unions. In theory, this structure is meant to create balance and prevent any one group from having too much control. But in practice, unions often hold significant influence, even over employer representatives. For instance, while I have no inside knowledge, I would be surprised if the CFMEU did not have some sway over the Master Builders Association. That’s not an accusation – just an observation.
The advantage for unions is they are able to attract “sponsorship and training” support from the super fund.
However, in my view, the real concern is whether the people sitting on these boards, who are ultimately responsible for managing billions of dollars of retirement savings, have the necessary skills and experience. People I trust, who work within the industry fund sector, have told me that some directors lack even basic financial services knowledge and are completely out of their depth. This is a real concern!
That’s why I believe the Equal Representation Model is no longer fit for purpose. Super fund boards should include an equal number of independent directors with genuine expertise to provide proper oversight. If you are considering an industry super fund, I would avoid any fund that appears to be heavily influenced by unions.
Don’t get trapped in a fund with poor service
Some industry super funds have come under fire for poor service. Issues like taking more than a year to pay out death benefits (the regulator has sued AustralianSuper and Cbus over this), long phone wait times, and failing to respond to member requests. While most tasks can now be handled online, when you do need to speak to someone to resolve an issue, you want to be confident you won’t have to spend hours on the phone.
CoreLogic’s Best Possible Retirement 2025 report recently measured member trust across different types of super funds. Retail funds came out on top with an average score of 56.9, followed by public sector funds at 55.6. Industry super funds scored lowest, averaging just 48.9. Interestingly, UniSuper was ranked as the most trusted fund, with a score of 62.8.
The AFR published the table below in December 2024, showing that UniSuper, Hostplus, and REST received the fewest complaints in the 2024 financial year. Complaint data for 2025 is not yet available.
This next chart from SuperRatings shows that most medium to large super funds take over a minute to answer the phone. I contacted Vanguard Super to check their average call wait times, and they confirmed they are in the 31–60 second range.
Unfortunately, there’s no single source of real-time data that tells us which super funds offer the best service. Instead, it’s a matter of pulling together different bits of information to build a complete picture. Perhaps the government should require funds to publish this information.
Cybersecurity
In April 2025, four major industry super funds in AustralianSuper, Australian Retirement Trust, Hostplus and REST, were targeted in a cyberattack that reportedly led to member losses totalling $750,000. Almost a year earlier, in May 2024, UniSuper members were locked out of their accounts for around two weeks due to a configuration error by its cloud service provider – this was not a cybersecurity issue. And Hesta was recently offline for 7 weeks!
Both APRA and ASIC have criticised super funds for weaknesses in their cybersecurity practices, particularly around authentication and scam prevention. They have made it clear that the industry needs to do better.
I’m not a cybersecurity expert, and I don’t think most members could reliably assess a fund’s cybersecurity practices anyway. But what you can control is your own account security by using a long, unique password and enabling multifactor authentication. Several funds now offer multifactor authentication, including AustralianSuper, Australian Retirement Trust, REST, HESTA, Vanguard Super and UniSuper.
In my view, any super fund that doesn’t offer multifactor authentication should be treated as a red flag.
You’ll pay more tax in a pooled fund
Just a reminder – last week, I wrote about the tax disadvantages of pooled super funds such as the ones mentioned above. In contrast, un-pooled structures such as AustralianSuper’s Member Direct, wrap accounts or SMSFs can allow you to avoid paying any capital gains tax over your lifetime.
In a pooled fund, it costs you nothing to change
There are always two sides to every coin. While pooled super funds do factor in unrealised capital gains, which is a tax disadvantage, is also means that are no negative tax consequences associated with switching funds.
Exit fees were banned back in 2019, and today all rollovers are handled through SuperStream, a government-mandated system that standardises the data and payment process. Legally, funds must complete rollovers within three business days of receiving all the required information, so you will not be out of the market (uninvested) for long.
If you have insurance linked to your existing super account, it’s important to consider that before switching. A simple solution can be to leave a small balance in the old fund to retain the insurance cover (check if there are any conditions with this e.g., you might have to opt into the insurance every 1-2 years).
The bottom line is this: there’s no real downside to switching super funds when needed. You just need to notify your employer of the change. I’m not saying you should switch regularly – just do not hesitate to do so if there’s a better option. Setting up a new super account is straightforward. Just jump online, open the new account, enter your current fund details, and they will typically take care of the rest.
Should you spread money across two funds?
Maintaining two super fund accounts is not necessarily a lot more expensive. Most funds charge a fixed admin fee, plus typically a second capped admin fee, and then an investment fee based on your balance. Aside from the investment fees, the additional cost of keeping a second fund might only be a few hundred dollars a year. So, the more important question becomes: which fund is likely to deliver the best net return after investment fees?
If you have a relatively high balance, say over $400,000, it may be worth splitting your super across two different funds.
Alternatively, if you have a spouse, you could each use a different fund. This approach can help diversify your exposure to super fund performance risk.
The best fund is…
Based on historical data, the best super option is to use AustralianSuper’s Member Direct** and invest as much of your balance as possible in VDHG (Vanguard High Growth), as its 10-year return is only 0.27% behind the top performer, UniSuper. Member Direct is cost effective and avoids CGT on unrealised gains, which is a big plus. This option typical suits people that are more engaged with their super.
However, my concern is that Vanguard relies solely on traditional market cap indexing. This approach has worked well over the past decade because growth stocks have outperformed value (see discussion here), but that’s unusual. Since 1927, value has outperformed growth by an average of 4.4% p.a., so this past decade looks more like an anomaly. At some point, mean reversion may kick in and value is likely to outperform again, possibly by a wide margin. Of course, it’s possible that AI, robotics, and the broader technology sector could continue thriving for another decade or even longer, given their predominantly growth-oriented nature. However, investor sentiment will inevitably shift from favouring “growth at any cost” to seeking “growth at a rational and justifiable price.” This shift does not necessarily mean abandoning growth companies altogether; rather, it suggests that value-oriented investments could potentially outperform growth as this sentiment evolves. If you share that concern, it might make sense to choose a super fund that blends different investment methodologies. In that case, UniSuper appears to be the most consistent performer.
Last week, I estimated that using a wrap platform to invest your super is only about 0.15% to 0.22% p.a. more expensive than AustralianSuper’s Member Direct option. The key advantage of a wrap is that it gives you access to a wider range of investment methodologies, not just traditional market cap indexing. This should exposure your portfolio to higher returns and lower risk. If you and your partner have around $400,000 each in super and other (non-super) financial matters that justify ongoing advice, then a wrap could be a smart solution. However, in most cases, it probably only makes financial sense to engage an advisor solely to manage your super if your combined balance is over $1 million.
** A reader has kindly highlighted up some important points regarding AustralianSuper’s Member Direct:
(1) When transitioning from accumulation to pension phases, you must move your entire Member Direct balance. If your balance exceeds the Transfer Balance Cap, you’ll need to sell some holdings, potentially triggering Capital Gains Tax (CGT).
(2) You cannot allocate your entire balance to Member Direct; at least 20% must be invested in a pre-mixed option like High Growth.
(3) Member Direct accounts do not support Transition to Retirement (TTR) functionality.
Thanks Stuart for this detailed blog. In vanguard VDHG though, there are 2 components of the yearly performance, this year total returns were 14.55% out of which Growth accounted for 9.71% and Distribution accounted for 4.84%. When you talk about saving capital gain tax on VDHG in super via member direct or SMSF, would it apply only to the 9.71% Growth part as the distribution I guess would be considered a realised gain ?
Thanks for your question. In an un-pooled fund, the capital growth will eventually be tax-free if you hold the investment until age 60, or when you convert to pension phase. Therefore, the 4.84% will be taxed at 15% leaving 4.11% after-tax, and the 9.71% will not attract any tax, meaning your after-tax return would be 13.82% for FY25.
You have made it very clear to understand
Thanks as always
You’re welcome.🙏
In a non ideal situation though, in case I decide to sell the ETF after 1 year to adjust my portfolio, I believe I am left with 4.11% as part of distribution as you explained above but what about the growth part, would it be 10% CGT deduction or would the tax payed under distribution be deductible from it? Regards
Yes, if you sell an investment that you have held for at least 12 months, you’ll pay 10% capital gains tax.
Hi Stuart, thanks for the good article.
Have you considered the tax consequences of holding VDHG within super given its own structure? I wrote about it recently here: https://blog.stockspot.com.au/vdhg-vdgr-tax-efficiency-stockspot-vanguard/
It seems likely that any benefit from avoiding the pooled structure within super could be offset by the underlying fund having similar issues.
regards,
Chris Brycki
Hi Chris, thanks for your article here, but I must say it is still awaiting any detailed description and calculation about the tax drag you are talking about. A real life example of how much it happened which year on what size portfolio would be good way to begin. That’s becomes very important as you do have a financial interest in stockspot which is the link there!
Wouldn’t be better buying the individual ETF’s that make up VDHG – VAS, VGS etc within your Member Direct Australian Super portfolio?
Maybe, but the benefit of the diversified option is that Vanguard manages the asset allocation ongoing so it’s a set-and-forget solution, which suits more people. Asset allocation is an important factor. As I said above, Vanguard will soon resolve this issue.
Hi Chris, you are correct that fund turnover in ETFs that invest in managed funds creates taxation issues for investors. Looking at VDHG, the realised versus unrealised proportions are 50/50, unlike 40/60 in my blog. However, part of that will be the hedging issue – but now that Vanguard has made the TOFA hedging election, that should reduce. Vanguard has indicated that it will replace the managed funds with the ETFs soon, so this issue will be resolved. A more tax-effective ETF would be DHHF, but I don’t think AustralianSuper allows that one.
Thanks,
Stuart
Hi Stuart,
Thanks for the wonderful 2025 updates.
Reading the latest version of the Australia Super Member Direct guides, it seems that they have removed the restriction of a minimum of 20% in their pre-mix options.
https://www.australiansuper.com/-/media/australian-super/files/tools-and-advice/forms-and-fact-sheets/superannuation/guides/member-direct-guide.pdf
Cheers,
Jason
You’re welcome, Jason.
G’day Stuart,
Great article as always.
Are you familiar with Hostplus’ new suite of indexed funds?
They offer an Indexed High Growth option (100% growth) with an extremely small 0.04% fee.
Given this very low fee, would the overall net benefit of this product rival or potentially beat the CGT saving in other funds, such as those mentioned in your article? Love to get your thoughts. Cheers
I’m aware of these options. They are similar to Vanguard in that they track the MSCI index. Let’s monitor its performance over the long term – it’s not even 2 years old yet. In the past, I’ve regretted using products that don’t have a long enough track record. Vanguard has a proven track record in indexing with global trading desks that help reduce trading costs through strategies like stock lending. These factors do impact performance, i.e., how close to the index they get – it’s not a case that “everyone can do it”. If both funds track the same indexes, the key differences lie in their effectiveness and fees. Also, I have some concerns with using 100% market cap indexing, which I’ll discuss in next week’s blog.
Thanks for the prompt response.
I appreciate seeing longer evidence ie 2yrs trading is important.
If after the 2yrs they are seen to be tracking the indexes fairly closely, would the much lower fees put this on the top of list or quite high vs wraps/smsf and their CGT saving ?
Yes, it is probably likely. But it’s a pretty dynamic market at the moment – who knows what other options will be available in the years to come.
I agree.
For what it’s worth my thoughts are thats there’s a fair chance something will trigger a CGT event whilst holding the funds via a wrap/smsf/member direct during the next 20+yrs of accumulation. Whether it’s the fund/product closing, government intervention, etc, which would obviously wash away all the potential CGT savings. So I feel taking the bird in the hand today holds a lot of merit.
Cheers
Yes, as I wrote in my previous blog about this, I did highlight that lots of things could happen to crystallise CGT. However, also, looking at my client accounts that have been in existence for up to 15 years, on average, 60% of returns are unrealised. I think this evidence is quite compelling. But I acknowledge it’s far from guaranteed. It’s a very difficult thing to put a number on – and it’s only one of many considerations.
Hi Stuart, thanks for the great podcasts on superannuation options over the last few weeks. I am with Australian Super and the suggestion to look at their Member Direct option is a good one. As you discussed, I am concerned that growth stocks have dominated the market recently and Vanguard’s VDHG may not have such a good run in future. The investment menu within Member Direct includes Vanguard’s VVLU – Global Value Equity Active ETF (and a few other companies with actively managed value ETFs). I think that a 50% allocation to VDHG and 50% to VVLU and holding for the next 10 years until I convert to pension phase would be a good option. It is an actively managed ETF which I understand you don’t favour, but seems a way to get exposure to value investing. Is this a good idea?
Hi Mark, I like VVLU and we incorporate it into our portfolios. Vanguard classifies it as ‘active,’ but I don’t see it that way because it follows rules-based, low-cost, and highly diversified principles – to me, it’s still indexed. If you split your investment 50/50 between VDHG and VVLU, you’ll have 18% allocated to Australian markets and 77% to international markets, which most would view as underweight in Australia. If you’re concerned about market cap indexing (and I do share that concern), then consider investing through UniSuper or consulting with an advisor for a wrap option – your choice should depend largely on your investment balance. I caution anyone constructing their own portfolio if they don’t have the knowledge and experience to do so. Thanks, Stuart
Hi Stuart,
Great article as always! I’m giving myself 7 years before retiring and wondering if it’s worth moving away from Australian Super Balance to High Growth with Unisuper or ART for better returns. Do you think it’s too risky given my timing?
In my blog, Should you invest 100% of your super into shares?, I explained that the right strategy depends on your circumstances and time horizon. With only seven years until retirement, volatility matters more because you have less time to recover from market downturns.
If your financial position is strong – for example, you have substantial assets outside super or a very high super balance – then switching to a higher-growth option may make sense. You can usually afford to ride out short-term volatility. But if your position isn’t as robust, taking on more risk could delay your retirement if markets fall at the wrong time.
Ultimately, the right allocation comes down to risk tolerance, super balance, and other assets. For many people within a decade of retirement, an “all-in” approach to shares is unlikely to be appropriate.