The 10 super funds delivering the best returns for the risk they take

Livewire readers love super fund performance data. But after our recent look at the best-performing growth funds of the past decade, many of you asked: what about risk?

So, we asked research house SuperRatings to crunch the numbers, and the leaderboard looks very different when risk is taken into account.

Hostplus returned 8.9% p.a. over the decade to 30 June 2026, versus 7.7% for First Super. But First Super achieved its return with substantially less volatility. Adjust for that risk and it jumps to number one, recording the highest Sharpe ratio in SuperRatings' analysis.

So, what has Australia's top risk-adjusted performer done differently?

The 10 best-performing super funds after adjusting for risk

Risk can be measured in several ways, but SuperRatings' analysis uses standard deviation to measure volatility.

Put simply, standard deviation measures how widely a fund's returns tend to fluctuate around its average return. The higher the standard deviation, the bumpier the ride. A lower number indicates returns have generally been more stable.

That's what makes First Super's result stand out. Its Balanced option returned 7.7% per annum over the decade with a standard deviation of just 4.6%, compared with 6.2% for Hostplus, which returned 8.9%.

SuperRatings then uses the Sharpe ratio to bring those two pieces of information - return and volatility - together.

"SuperRatings measures volatility-adjusted performance using Sharpe ratios, which measures a fund's excess return relative to its total volatility, regardless of whether that volatility is the result of positive or negative return movements," Rappell says.

In simple terms, the higher the Sharpe ratio, the more return a fund has generated for each unit of risk taken.

How First Super delivered more return for its risk

According to McQueen, the answer isn't a secret asset class or a series of perfectly timed market calls. It's a portfolio deliberately designed to perform across different environments.

"Rather than trying to time markets or predict trends, we aim to build an 'all weather' fund that will perform across a variety of macroeconomic environments," he says.

The Balanced option spreads members' money across Australian and global shares, private equity, infrastructure, property, fixed interest, debt and cash. Shares remain its largest growth driver, but private markets - and particularly real assets - have played an important role.

"Infrastructure has been a key pillar of our private markets exposure for many years, delivering attractive net returns and adding resilience to the fund in periods of volatility and uncertainty," McQueen says.

But diversification alone isn't enough. McQueen says First Super regularly reviews its asset allocation targets and then takes that process down to the sector level, considering return targets, tracking error, breadth and fees against the role each asset class is supposed to play.

Just as importantly, the fund deliberately resists the temptation to make its portfolio overly sophisticated.

"Importantly, we don't reach for complexity in portfolio construction. Complexity can obscure underlying risk exposures, demand higher fees and often doesn't pay off over the long-term," he says.

It's a relatively simple philosophy, but the SuperRatings numbers suggest it has worked. First Super hasn't avoided risk - it has sought to ensure members are adequately rewarded for taking it.

"This pragmatic approach to risk management has helped ensure that whilst we focus on generating returns, we ensure that the return we get per unit of risk is in line with our expectations," McQueen says.

AI, commodities and the risks shaping the next decade

Of course, the SuperRatings numbers tell us what worked over the past decade. The challenge now is navigating the next one.

McQueen sees an increasingly inflationary world, as shifting US policy and the pandemic's aftermath reshape supply chains, fiscal policy and inventory management.

Then there's AI.

Beyond soaring technology stocks, McQueen is focused on the enormous investment required to support the AI boom - and what that means for energy and commodities.

"We see the energy transition being supercharged by the boom in AI-related capital expenditure, which in itself is underpinned through an arms race that is grounded in both capitalism and geopolitics," he says.

But First Super isn't responding by simply loading the portfolio with whatever happens to be the hottest investment theme.

"We don't get too caught up in trying to leverage these themes in the portfolio – that is delegated to our investment managers who are best placed and empowered to make these decisions," McQueen says.

Instead, his team focuses on understanding how these structural forces could influence - or distort - valuations across both public and private markets. And while AI currently dominates investors' attention, McQueen believes another much slower-moving force deserves just as much consideration.

"We also haven't forgotten the role demographics, the ultimate thematic, will play over the coming decades."

The question every super member should be asking

So, should you simply look for the super fund with the lowest volatility? Not necessarily.

As Rappell points out, the right amount of risk depends on you — your age, financial circumstances, objectives and how close you are to drawing on your super.

"Unlike investment performance, which can be easily expressed in dollar terms, volatility is a concept that requires additional context, including a member's individual circumstances and financial objectives to become truly meaningful," he says.

If you're approaching retirement, for example, avoiding large swings in your balance may become increasingly important. But greater stability can come with a trade-off: accepting less risk can also mean giving up some potential return.

As Rappell cautions: "Lower volatility does not necessarily translate into stronger investment outcomes."

So, when you're comparing super funds, don't just ask how much did it return?

Ask: how much risk did it take to get there? And how much return am I willing to sacrifice for greater stability?