AI continued to dominate global investment markets over the past financial year, driving outsized returns in technology-heavy markets while leaving Australian equities trailing their international peers, according to UniSuper.
The fund’s head of fixed interest, David Colosimo, said on UniSuper’s Super Informed Radio podcast that the AI investment boom largely determined which markets outperformed, with countries at the centre of semiconductor manufacturing posting some of the strongest returns.
UniSuper emerged as one of the strongest industry fund performers, with its default Balanced option returning 10.4 per cent for the year to 30 June 2026, outperforming the flagship balanced options of its industry peers.
Taiwan gained 112 per cent over the financial year, Korea rose 179 per cent, while the United States, Europe, China and Japan all significantly outperformed Australia’s 6 per cent return, including dividends.
“Last year was definitely the AI trade that helped to dictate the winners and losers,” Colosimo said. “It was a boon for companies that are enabling the AI capex boom and as you said, top of that list is the computer chip manufacturers—hence the strength in Taiwan and Korea, and large parts of the US market as well.”
Although Australia’s resources sector returned 50 per cent over the year, Colosimo said the local market lacked the technology exposure that had powered global gains. At the same time, higher domestic interest rates and weakness across information technology stocks weighed on overall performance.
“In Australia, we only benefit indirectly through the resources sector,” he said. “It also didn’t help that the RBA were very aggressive in hiking. They hiked three times because of strong inflation and that was seen as a real headwind for the domestic economy.”
Despite easing geopolitical tensions in the Middle East and lower oil prices during June, Colosimo said investors had quickly shifted their attention back to inflation and interest rates, limiting any broader boost to equity markets.
“The first and probably most important is that the market had already been expecting a resolution for some time, so a lot of it’s already priced,” he said.
Instead, resilient economic conditions in the United States, persistent inflation and rising costs linked to AI infrastructure have reshaped expectations for monetary policy.
“The big surprise from the Fed meeting this month was that about half the committee members now think that the Fed will be hiking rates again later this year.”
Colosimo said investors were also becoming more discerning within the technology sector as spending on AI accelerated. While companies funding the massive expansion of AI infrastructure had come under pressure, businesses supplying chips and hardware continued to benefit from the investment cycle.
“The AI spenders are the companies that are paying for the capital investment in data centres and chips,” he said. “Together they’re spending about US$1 trillion of investment over the next 12 months to provide the compute capacity that’s necessary for AI.”
He said the divergence had contributed to sharp volatility across semiconductor stocks, although the broader US market remained more resilient than headline indices suggested.
“If [we look] at the equal weight index, which weights stocks equally rather than by market cap, that was actually up 2 per cent in June—so overall, the market doesn’t look too bad through that lens.”
Looking ahead, Colosimo said inflation would remain the key issue for investors, with upcoming US Federal Reserve and Reserve Bank of Australia meetings likely to determine whether interest rates had peaked.
“The RBA, to be clear, are still very worried about inflation,” he said. “A lot’s going to depend on the next inflation report which we get later this month, but more and more people are thinking we may have already seen the end of rate hikes and that in fact, yes, at some time in the future, we might start to see cuts again.”
UniSuper’s market outlook came as the fund reported positive returns across all investment options for the 2025-26 financial year, with its Balanced default option returning 10.4 per cent, or 11.2 per cent for zero-tax pension accounts.
Its High Growth and Growth options returned 13.1 per cent and 12.3 per cent respectively, while International Shares was the top-performing option at 17.9 per cent. The fund also said its Defined Benefit Division remained in a healthy surplus and members’ accrued benefits were well funded.
Chief investment officer John Pearce said the results had been achieved despite a volatile backdrop: “We’re very pleased to deliver these returns despite the market turmoil of the past year. This is the fourth consecutive year that pension members in our Balanced option have enjoyed double digit returns.”
Pearce said the fund had continued to strengthen its portfolio through investments in unlisted assets. “During the year UniSuper made significant investments in high quality assets in private markets and direct property, adding further diversification for our members. We continue to focus on ensuring our portfolios are well positioned for the long term.”
