Emerging markets, private assets lift NGS Super FY26 performance

Emerging markets, commodities and maturing private assets took the shine away from equities, helping deliver nearly 12% p.a. for NGS Super members over the last financial year.

Headline performers were less about the dominance of global and local equities, but the role of alternatives, particularly private equity, and emerging markets in delivering an 11.51% p.a. return for the MySuper Diversified option. Commodities, in the form of gold, were also a standout contributor.

The super fund beat the Rainmaker MySuper Index's estimated return of 9.3% p.a.

NGS Super chief investment officer Ben Squires told Financial Standard: "The other important point of comparison between us and other funds is that we came into the year with a slightly higher assessment of recession risk."

"Ultimately, from an asset allocation perspective, that meant we held fewer equities. Our effective equity exposure was probably around 1% to 2% lower than peers. As a result, the portfolio had to work harder in other areas to make up for both relatively average equity returns and a slightly lower allocation to equities."

Being overweight emerging markets, not just on equities, during the year benefited the portfolio. Opportunities located South Korea, Hong Kong and China were prominent contributors.

"We also expressed it through the tactical asset allocation overlays we use," he said.

"Our internal trading activities added around 70 to 80 basis points of return over the year, and part of that came from having a higher weighting to emerging markets, among other things."

The fund's allocation to precious metals stems from research undertaken in 2019 around de-dollarisation trends and central bank demand for gold.

The fund also benefited from liquid alternatives, including biotech and long-short strategies, as healthcare and biotechnology sectors rebounded from prior-year weakness.

However, it was the super fund's bet on private markets that began to pay off during the period.

"The J-curve effect primarily comes from private equity. To some extent, it also comes from more opportunistic investments, whether that's opportunistic real estate or opportunistic infrastructure," Squires said.

"Private debt, on the other hand, is generally a more stable, income-producing asset class. We've been investing in it since 2017, so it's been a relatively stable allocation within the portfolio."

NGS Super had $17.1 billion in assets at the end of March managed on behalf of more than 111,000 members, according to APRA. The lion's share, or 75%, of membership sit in the MySuper Diversified option.

"Ultimately, when we think about what we're delivering for members, we're focused on generating the best possible risk-adjusted returns," said Squires.

"Member behaviour can be highly reactive during market downturns. If we can reduce sequencing risk and help prevent poor investment decisions, that's a positive outcome."

The industry fund's High Growth option delivered 12.7% p.a. while the Property and Infrastructure options returned 14.6% and 15% respectively.