More than half of AustralianSuper’s $413 billion assets are managed internally now, according to its CIO, Mark Delaney, who told the CFA Society Australia Investment Conference in Sydney that the fund isn’t shy about terminating its own strategies for underperformance.

As many as three internal investment strategies have been terminated for non-performance, but Delaney defended AustralianSuper’s policy of not disclosing the investment returns of its internal managers on the basis that it doesn’t disclose the performance of – nor the hiring or firing of – external managers either.

“You’d like to think that you’re completely ambivalent around how you make those capital allocation decisions,” Delaney said.

“The audience won’t believe it, but it might surprise that internal gets far more scrutiny than external does, and the trigger to do something about internal is much more hair trigger than it is for external.”

AustralianSuper has underperformed its peers two years running, returning 9.52 per cent in its default balanced fund for 2025 and 8.46 per cent in 2024 as other funds posted returns in the double digits.

And beating the market is only getting harder for managers, Delaney noted, saying  that the rise and rise of passive investing may also come to pose an existential threat to active management if managers don’t lift their game, Delaney said, adding that passive strategies “smashed” 80 per cent of active strategies for the past four or five years and that is “not good news” for active managers.

“A lot of people, myself [included], are in the profession of making money, of making returns through active management, but for most of the time, that’s been a very unsuccessful activity,” Delaney said.

Last year an estimated 80 per cent of active equity managers underperformed “and the amount of underperformance was just enormous – you had managers which were top-quality managers doing minus seven, minus eight [per cent]”. 

“I’ve never seen that before in Australian equities. How many made one per cent alpha on a sustained three-year basis? It’s a big challenge, active versus passive, for the whole industry, in terms of is this just the market environment, or is it something bigger than that?”

Delaney said the move to passive has “phenomenally disrupted” how markets work. 

“It’s moving out of retail… and passive is a very viable investment strategy. If you can’t demonstrate skill, you should use passive, and so passive funds are growing very quickly. 

“The whole structure of the market is changing. So the investment opportunity set has changed, and I think the fund managers, almost everybody, has struggled to get on board that change.”

Delaney said that had investors known in 2020 what they know now, equity portfolios would have looked very different.

“Who would have had different portfolios? Of course you would. Why wouldn’t I have just had 10 US stocks, and then just had a bit of index as well on top of that?” he said. 

“It’s a really phenomenal thing going on. And it’s a real moment for the investment industry as to how it copes, because if it can’t make money on a sustained basis, it loses its right to exist.”

Size matters
Delaney said he does not know how big is “too big” for an Australian super fund.  

“When we were $15 billion, I thought $40 billion was miles too big. When we were $40 billion, I thought $100 billion; when we were $100 billion, I thought we could never be $300 billion. 

“Too big is too big if you still try and act follow the same methodology for doing things as when you were small. So what you need to do is adjust your investment strategy and evolve for the size of the money you’re managing.” 

Delaney said AustralianSuper’s Australian equity portfolio currently stands at about $80 billion and he argues it has been ranked as the fourth or fifth-best performing portfolio over the past five years. 

“If you asked anybody what was too big, they would have told you $20 billion, $15 billion,” he said. 

“So if we ran $80 billion the same way people try and run $10 billion it would clearly be too big, but we don’t.  

“I’m sceptical of when people say this is too big or not, because it presupposes that nothing else changes. 

“We can’t act like a small fund and be a big fund.”  

Delaney told the conference that AustralianSuper is using AI in its investment operations “a bit”. 

“You ask anybody if they use AI, if someone says “no” you don’t believe them; if someone says “a lot” you don’t believe them either. 

“Some of the quantitative teams are using a lot more technology; some of it’s good around equities… increasingly, it’s going to be very useful about your operations and transforming how we do all that. So I think it’s going to be very transformational.  

“As investors, it’s just fantastic if you can stop giving me false answers, it’s just going to be the most exciting thing I can get my hands on. I just got to make sure I don’t get too many false answers. But you get false answers from your staff too, so it’s OK.”