The $80 billion Mercer Super has delivered returns between 10 per cent to 10.6 per cent for members of its SmartPath lifecycle product aged below 52, the fourth consecutive year of double digit returns for the fund.

“It’s been an extraordinarily volatile period, and there have been any number of things that could have derailed the portfolio over the last year,” Mercer Super chief investment officer Graeme Miller tells Investment Magazine.

“I think the lesson we’ve learned is one that we’ve learned time and time again, and that is having a well-diversified portfolio, staying focused on the long-term and avoiding having a knee-jerk reaction to the noise of the latest headline.”

While global equities drove the majority of its performance, Mercer Super has been looking further afield for returns, including in frontier market debt, which it thinks is both a diversifying return stream and a richly rewarding one relative to the amount of risk it requires the fund to take on.

“The interesting thing about many of these frontier markets is actually, because they find it difficult to raise debt, the credit risk premium that they offer is often very juicy, and their fiscal positions are usually pretty strong as well, because you’re not lending to highly indebted countries,” Miller says.

“When we look at the credit risk premium that this offers relative to that which we see now on high-yield securities or even emerging market debt or in the West where spreads are looking pretty tight, we have begun to see pretty attractive spreads on frontier markets and we think that reward for risk is pretty compelling.”

Elsewhere, Mercer Super is tilting its portfolio towards emerging market equities, where it thinks supportive technical factors and robust economic growth will drive returns higher; increasing its exposure to unlisted infrastructure, which will be funded from its listed real assets allocation; and building out its private equity program.

“We started that in earnest towards the end of 2025 and we’ve now got, of the $2.5 billion [PE] program we’re building, about $250 million committed, [and] that will continue to be a focus.”

And while Miller is alive to concerns of growing AI cross-exposures in super fund portfolios, he thinks that there are still areas of the market that are genuinely diversifying.

“As an Australian investor, we’ve probably got a bit of an advantage, because if you look at our economy it does act and has acted as a significant diversifier away from many aspects of the AI trade, and we’ve seen that in the last 12 months, where the Australian market has been diversifying – albeit underperforming global markets,” Miller said.

“It’s not something we’re particularly worried about, but it highlights the principle that we all know and understand well, which is that having many different drivers of investment returns and not being sort of reliant on any single engine to drive the investment portfolio is a much stronger, resilient strategy than taking big bets on single drivers, no matter how powerful they are.”