Global equities have driven most of MLC’s FY26 return so far, but its exposures to alternatives have also put in the hard yards and helped the fund diversify beyond the AI thematic, according to chief investment officer Dan Farmer.

Farmer is expecting a return in the high single digits for the fund’s default MySuper option – though that might creep up into double digits depending on the course of markets over the next few days – with global equities doing a lot of the heavy lifting despite the pall that has hung over markets.

“At the start of the year, we were still digesting the fallout from tariffs, and then of course we were looking at the impacts of the Iran conflict – petrol prices skyrocketing, cost of living going up, a lot of volatility in equity and bond markets – but we’ve still delivered really strong returns, so a very pleasing year,” Farmer tells Investment Magazine.

Beyond AI, a big contributor has been the fund’s portfolio of insurance-linked securities – where relatively clear skies in the United States mean it is still getting “overcompensated” for the amount of risk it’s taking – and its exposure to litigation finance, which saw it reap the benefits of funding via its managers a case brought against opioid manufacturers by victims of the drug, an investment that has returned in the area of 15 per cent.

It’s also been deploying more into infrastructure, though the portfolio is weighed less towards the toll roads that are mainstays of most super fund infrastructure programs and into “contemporary assets” across digital infrastructure and renewable energy.

“An investment we’ve done [in that area] over the years is solar panels – so effectively we’ve distributed power generation, providing finance and assistance in getting solar panels onto consumer and business roofs, which generates a really consistent healthy return for us.”

Farmer says that funds ignore or underestimate the AI thematic “at their peril” but that, like other investors, he is alive to the cross-exposures emerging in portfolios. Outside equities, MLC is trying to play AI through what he calls the bottlenecks – demand for the infrastructure that supports it (data centres, basically). But while focus has been on the hyperscalers and chip manufacturers, Farmer thinks a bigger story is now emerging.

“I think we’re underestimating the productivity gain and the impact that might have on things like inflation and labour markets. I think that’s coming through… in subsectors of the AI story – even through things like tokens and how businesses are managing that cost,” he says.

“We’re trying to understand how that will emerge through the difference suites of models at different price points to manage different types of AI tasks. Businesses, broadly, have been in the space of ‘let’s get AI into the hands of our employees’ and I think that’s the right thing to do. And now it is, ‘what is AI being deployed for, and what is that costing us as a business?’ and building some frameworks around that.”