Investment strategies for the new economic environment

4 min read
4 min read

Australia’s superannuation industry is facing some of the most challenging investment markets of the last two decades. This is coupled with intense regulatory scrutiny and merger activity, prompting funds to invest heavily in their operational capabilities in an effort to bolster portfolio returns.

J.P. Morgan’s inaugural Future of Superannuation report last year (in March 2022) captured the industry’s views and expectations, and you can read about the report findings in J.P. Morgan’s Superfunds article last year by Nick Paparo and download the 2022 report at the end of the article.

This year, J.P. Morgan’s 2023 Future of Superannuation report reveals how the industry’s size is allowing funds to become global investment players leading the charge towards unlisted assets. Merger activity continued strongly through 2022 and early 2023, in line with J.P. Morgan’s first survey, which found more than half of executives expected there to be fewer than 75 funds left by 2025.

Those predictions proved largely correct, with 137 funds remaining by the end of March 2023, down from 174 in the September 2021 quarter, and more mergers have since been announced.

Some mergers were prompted by the introduction of APRA’s performance test, which initially called out 13 funds in mid-2021. Since then, investment markets have become far more challenging, pushing the median fund’s return into negative territory over the full year and for the fifth time in the past 35 years.

While executives initially surveyed were concerned that the performance test would encourage benchmark-hugging, J. P. Morgan said the funds spoken to this year remained focused on their existing investment strategies in the face of these challenges.

Unlisted assets have been a significant driver of their long-term outperformance. While funds also see opportunities in listed vehicles – and remain mindful of illiquidity and valuation issues – their appetite for private market assets continues to grow.

Some funds say they are ramping up their internal investment capabilities to make bigger deals, including offshore. It is a strategy closely tied to their increase in size, with several funds now managing more than AUD$100 billion in assets each.

Following are the key highlights from the 2023 report:

  1. The record pace of super fund mergers has matched the predictions made by fund executives a year ago. More than half of the executives in the Future of Superannuation report predicted there would be fewer than 75 funds left by 2025. There were just 137 funds remaining by end of March 2023, compared to 174 in the September 2021 quarter, and more mergers are in the pipeline.
  2. Some of the largest funds with assets above AUD$100 billion are using this scale to increase their offshore investment across a range of asset classes and set up global offices to explore new opportunities. Fundsin the AUD$50-$100 billion range have taken a ‘wait and see’ approach regarding the benefits of offshore offices and continue to assess the strategy.
  3. Funds are using their growing scale to continue building internal investment teams to manage certain asset classes or co-invest alongside their fund managers. The strategy is delivering greater investment insights at lower cost.
  4. Unlisted assets are set to play an ongoing key role in portfolios, with a particular focus on infrastructure, which has delivered historically strong returns. Funds are maintaining their investment strategies despite a highly uncertain investment and economic outlook.
  5. The growing size and complexity of portfolios is placing new importance on gathering quality data to reveal investment insights and manage risk. Funds are investing heavily in their operating infrastructure to drive future performance.

This year’s J.P. Morgan Future of Superannuation report demonstrates how funds continue to look at ways to support their members as the industry works to deliver optimal outcomes for all Australians. For further insights and information, you can download a full copy of the 2023 report here.

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By Superfunds

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Few speakers can match Derek Thompson‘s ability to synthesize mega-trends in society, labor, economics, technology, and politics. Put another way: Derek trawls the data sets and does the forecasting and deep reporting necessary to help us better understand how we live, how we vote, how we spend, and how we work.

In his paradigm-shifting #1 New York Times bestseller, Abundance (co-written with Ezra Klein), this award-winning journalist reveals how our policies and culture have pushed us into a world of scarcity (not enough housing, workers, or progress)—and offers a radical new path towards a world where housing is affordable, energy is plentiful, and innovation flourishes across industries.

He shares a compelling vision of a future where we have more than enough for everybody, and a practical, actionable roadmap for how to get there. It starts with taking more risks, building more expansively, and recognizing that we all have the power to create a world of abundance. “Everything’s utopian until it’s reality,” he says.

Carmen Beverley-Smith

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Carmen joined APRA in March 2023 and holds the role of Executive Director, Life and Private Health Insurance and Superannuation.  

She has had an esteemed career in financial services, spanning over 25 years. She has held diverse leadership roles at Westpac and Commonwealth Bank of Australia, including across risk, transformation and change, product and portfolio development, and sales and service. 

Prior to joining APRA, she held the role of General Manager, Risk Transformation Delivery Integration at Westpac. This involved leading the group-wide implementation of a suite of solutions to uplift risk management capability and develop data, analytics and reporting. 

Carmen leads with a values-driven approach and a particular interest in developing and mentoring talent. 

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Novartis Professor of Leadership and Management, Harvard Business School

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Amy C. Edmondson is the Novartis Professor of Leadership and Management at the Harvard Business School, a chair established to support the study of human interactions that lead to the creation of successful enterprises that contribute to the betterment of society.

Edmondson has been recognized by the biannual Thinkers50 global ranking of management thinkers since 2011, and most recently was ranked #1 in 2021 and 2023; she also received that organization’s Breakthrough Idea Award in 2019, and Talent Award in 2017.  She studies teaming, psychological safety, and organisational learning, and her articles have been published in numerous academic and management outlets, including Administrative Science Quarterly, Academy of Management Journal, Harvard Business Review and California Management Review. Her 2019 book, The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation and Growth (Wiley), has been translated into 15 languages. Her prior books – Teaming: How organizations learn, innovate and compete in the knowledge economy (Jossey-Bass, 2012), Teaming to Innovate (Jossey-Bass, 2013) and Extreme Teaming (Emerald, 2017) – explore teamwork in dynamic organisational environments. In Building the future: Big teaming for audacious innovation (Berrett-Koehler, 2016), she examines the challenges and opportunities of teaming across industries to build smart cities. 

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Daniel Mulino MP

Assistant Treasurer and Minister for Financial Services

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Born in Brindisi, Italy, Daniel was a young child when he moved with his family to Australia. He grew up in Canberra and completed his first degrees – arts and law – at the ANU. He then completed a Master of Economics (University of Sydney) and a PhD in economics from Yale.

He lectured at Monash University, was an economic adviser in the Gillard government and was a Victorian MP from 2014 to 2018. As Parliamentary Secretary to the Treasurer of Victoria, Daniel helped deliver major infrastructure projects and developed innovative financing structures for community projects.

In 2018 he was preselected for the new federal seat of Fraser and became its first MP at the 2019 election, re-elected in 2022 and 2025. From 2022 to 2025, Daniel was chair of the House of Representatives’ Standing Economics Committee in which he chaired inquiries; economic dynamism, competition and business formation and insurers’ responses to 2022 major floods claims.

In 2025, he became the Assistant Treasurer and Minister for Financial Services.

In August 2022, Daniel published ‘Safety Net: The Future of Welfare in Australia’, which aims to explore the ways in which an insurance approach can improve the effectiveness of government service delivery.