Every year super funds find new ways to make their performance look smoother and stronger than it really is.
One of the oldest tricks is stretching the definition of defensive assets. By doing so, funds can appear to take less risk and still post higher returns when they are benchmarked against other super funds.
When performance tables are published, very few people look under the hood. They see returns. They see rankings. And they assume the risk is comparable.
Often it is not.
Why definitions matter
When comparing super fund performance, the way defensive assets are defined can differ widely.
There is no single industry standard. Each fund is largely free to decide what it calls defensive. Some classify unlisted property, infrastructure or private credit as defensive assets, even though these investments can still fall sharply in market downturns.
This matters because defensive assets are meant to anchor portfolios. They are meant to reduce drawdowns and protect members during periods of stress.
If higher risk assets are labelled defensive, the comparison breaks down. Funds can look safer and higher performing at the same time.
What defensive assets really are
Defensive assets exist to protect portfolios when markets fall.
ASIC defines defensive assets as cash and government bonds. That is the definition we use at Stockspot. We also classify gold as defensive because it is the purest form of cash. It has preserved purchasing power for centuries and trades in deep global markets.
Cash is defensive because it holds its value during market drawdowns.
High quality government bonds often go further. Historically they have risen when share markets fall.
Gold has also played a defensive role over long periods. It trades in deep public markets, has observable prices and has repeatedly provided protection when inflation or financial stress rises, making it a reliable store of value.
These assets share one important feature. They trade openly and are priced continuously. That makes genuine risk comparison possible.
The benchmarking problem
Ratings agencies rely heavily on self reported asset classifications.
When funds classify higher risk assets as defensive, they lower their reported risk profile. That makes it easier to outperform peer funds within the same benchmark group.
Funds that stick to narrow definitions and hold genuinely defensive assets can look more conservative and may rank lower in strong markets. Funds that stretch definitions can look both safer and more successful.
Members rarely see this distinction. They just see league tables.
The impact becomes clear when you put funds side by side.
Below is a simplified comparison showing Stockspot and several large super funds. It compares reported returns and advertised defensive allocations with what those defensive allocations would look like if you only include cash, fixed interest and gold.
| Fund | Advertised defensive allocation (%) | Defensive allocation using cash, fixed interest and gold (%) | Return over period (%) |
|---|---|---|---|
| Stockspot Super High Growth (Topaz) | 22 | 22 | 19.00 |
| Stockspot Super Growth (Emerald) | 30 | 30 | 17.40 |
| Hostplus High Growth | 15 | 0 | 12.68 |
| Colonial First State High Growth | 15 | 1.5 | 11.18 |
| Australian Retirement Trust High Growth | 15 | 3 | 10.23 |
| AustralianSuper High Growth | 12 | 5.2 | 10.03 |
| Hostplus Balanced | 35 | 9 | 10.51 |
| Vanguard High Growth | 10 | 10 | 11.58 |
| AustralianSuper Balanced | 25 | 17.25 | 8.69 |
| Australian Retirement Trust Balanced | 35 | 17.25 | 9.55 |
| Rest Growth | 35 | 20 | 9.22 |
| UniSuper Balanced | 40 | 23 | N/A |
| HESTA Balanced Growth | 34 | 25 | 9.42 |
| Vanguard Growth | 30 | 30 | 9.89 |
Once you adjust for definitions, the comparison looks very different. Returns line up far more closely with how much each fund allocates to genuinely defensive assets under a narrow definition, cash, fixed interest and gold.
In 2025 this was particularly clear.
Stockspot’s outperformance was largely driven by its larger allocation to gold. While many super funds had little or no exposure, gold delivered strong returns during the year and provided protection when other assets were more volatile. That contribution showed up directly in member outcomes. It was not the result of smoothing or reclassification. It came from holding a defensive asset that performed exactly as expected in real market conditions.
Private assets and the illusion of stability
Unlisted assets sit at the centre of this issue.
Infrastructure, unlisted property, private credit and private equity do not trade daily. Their valuations are updated infrequently.
That does not make them less volatile. It simply means the volatility is not visible.
Instead of being marked down during market falls, valuations often remain unchanged. There is no sharp dip on the chart. The fund appears stable while public markets move sharply.
This is what Cliff Asness has described as volatility laundering.
It improves relative performance when funds are benchmarked. Not because risk is lower, but because it is not being measured properly.
Hidden leverage and hidden risk
Private assets also tend to carry more leverage.
Stable cash flows allow higher levels of debt. A small change in income can have a large impact on equity values.
This leverage is rarely transparent. Loan terms are commercial in confidence. Risk is buried deep in the structure.
When conditions turn, adjustments can be sudden and severe.
Illiquidity is not defensive
A core feature of defensive assets is liquidity.
You need to be able to sell them in a deep open market when stress hits.
Private assets do not meet this test.
Sales are slow and constrained. Other investors may need to approve transactions. First right of refusal clauses and other restrictions apply.
The harder an asset is to sell, the less defensive it truly is.
Marking your own homework
Private assets are usually revalued only a few times a year. Valuers are selected and paid by the fund. Trustees often have discretion over valuation outcomes.
Many members assume their daily unit price reflects real time value. With private assets, it does not.
This creates inequity between members entering and exiting at different times. It also makes it easier to game annual performance rankings.
APRA has warned about weaknesses in valuation governance, conflicts of interest and fair value reporting for unlisted assets.
Defensive in name only
Calling an asset defensive does not make it defensive.
If an investment only looks safer because its price is not updated, risk has not disappeared. It has just been hidden.
Private assets often come with higher fees, less liquidity and more complexity. Members may be paying for the illusion of stability rather than genuine protection.
What needs to change
Private assets can have a place in super portfolios. This is not about excluding them.
But benchmarking needs to be honest.
Funds should clearly disclose what private assets they hold, how they are valued, how often valuations occur and who performs them.
Ratings agencies need to challenge classifications rather than accept them at face value.
At Stockspot we use a narrow and transparent definition of defensive assets. Cash, fixed interest and gold. Assets with observable prices and well understood behaviour in market stress.
Real diversification comes from assets that actually behave differently. Not assets that just look calm on paper.
Defensive assets should protect members. Not help funds climb the rankings.
