Markets, Tech, and a Swift Detour
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Hello, I'm Alan Kohler, editor-at-large of Intelligent Investor and finance presenter, columnist and podcaster for the ABC.
And I'm James Thompson, senior Chanticleer columnist at the Australian Financial Review.
And we are The Money Cafe. James, you're joining us on holidays. Good on you. Thanks for doing that.
Oh, no worries, Alan. Always happy to chat.
Yeah, well, that's good. So, well, I hope you're having a good break, which we've just broken into. But interesting piece this morning by your colleague, Anthony McDonald, about quoting the J.P. Morgan report showing that Australia's stock market has underperformed the world. for 11 of the past 17 financial years and has been persistently underperforming and the result is poor performance by Australian super funds. Well, relatively poor compared to the rest of the world. So, you know, Australian super funds returning somewhere around 9 or 10% per annum. Yeah. And the MSCI World Index has just done 22.4% in the year to June 30, so... And the trouble is Australian super funds are all kind of overweight Australia naturally because that's what they kind of, that's what they do, right?
Well, they're overweight in Australia, so that is a problem. I mean, just think of the last 12 months. I think the ASX 200 did 2.7% for the 2026 financial year. Wall Street did 21%. The MSCI did 22.4%. So, you know, our home bias, and we do have a bit of a home box, certainly doesn't help us in that respect. Um, and then of course, layer on top of that, our super funds tend to hold a lot more private and unlisted assets. So, you know, the, the funds that have more pure equities exposure, they've done a bit better, but the funds that, and this is the majority of them, including all the big ones that have a lot of unlisted assets. So that's stuff like property infrastructure, you know, toll roads, ports, airports, and then, you know, private equity and venture capital.
Those asset classes have performed worse than shares. Alan, I've spoken to the CIOs of AusSuper and Australian Retirement Trust, so they're the two biggest, plus CBUS. And I think they're relatively relaxed about where they are. Now, are they getting that full 22%? No. But are they taking the risk that's involved in getting in that 22.4% from the MSCI World Index? No. So they have that trade-off that they've got to manage. The most important thing is they don't lose capital. They've all beaten their benchmarks, which is generally sort of inflation plus between 3.5% and 4%.
What are the recent trends in the Australian stock market?
So, you know, tick there. And they all think something nasty is probably around the corner. This bull market's been running for, you know, it's well into its fourth year now. How long can it go? They're all positioned for downside and to protect the members from downside. So... In their view, they've probably had a pretty reasonable year, captured enough of that hot Wall Street action to make members feel good about it while protecting them from the downside. Now, you know, I guess that's up for debate. But it's a tricky job that these super fund guys have gotten.
They probably measure risk-adjusted returns, don't they?
Of course, yeah.
I suppose if you looked at the returns versus the world returns on a risk-adjusted basis, they're probably quite different, wouldn't they?
Yeah, that's true. That's true. I mean, I think there's a couple of things that, to come back to that piece that my colleague Anthony McDonald wrote, you know, there are a couple of things to sort of think about here. One is, why is Australia a perennial underperformer versus the rest of the world? Now, partly it's because we don't have a lot of tech companies here, and that's what's powering the market rally. But we also have, this is what happens when you have a decade of crappy productivity performance. You get a pretty weak economy that has pretty mature companies in it, very little dynamism, And you see sort of a market that's just rolling along. If you're a domestically focused company in Australia, there's no earnings growth to be found.
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