Most Australian super funds offer a dedicated international shares investment option alongside their core diversified options. Here’s what these options invest in, how they compare to the default balanced option, and when they might be suitable.
What Does an International Shares Super Option Invest In?
An international shares option invests in equities (company shares) listed on stock exchanges outside Australia — primarily:
- United States: New York Stock Exchange (NYSE), NASDAQ — includes Apple, Microsoft, NVIDIA, Amazon, Alphabet
- Europe: FTSE 100, CAC 40, DAX — includes Nestlé, LVMH, ASML, Novo Nordisk
- Asia: Tokyo, Hong Kong, Shanghai — includes Toyota, Samsung (via ADRs), Alibaba
- Emerging markets: India, Brazil, Southeast Asia
Some funds offer a single global option; others split into US shares, developed markets, and emerging markets as separate choices.
Currency Risk
International shares carry currency risk — changes in the Australian dollar vs foreign currencies affect your returns:
- If AUD falls vs USD: Your international shares return in AUD terms is amplified (your $10,000 US shares is now worth more in AUD)
- If AUD rises vs USD: International returns are reduced in AUD terms
Some international share options are hedged (currency risk reduced by derivatives contracts) and some are unhedged. Most funds offer both. Over the long run, currency hedging may reduce volatility but doesn’t reliably improve returns.
Historical Returns
International shares have historically delivered strong long-run returns:
| Market | Approximate long-run return (AUD, unhedged) |
|---|---|
| US shares (S&P 500) | 9–12% p.a. |
| Global developed markets (MSCI World) | 8–11% p.a. |
| Emerging markets | 6–9% p.a. (higher volatility) |
Past performance is not a reliable indicator of future performance. Returns will vary.
International Shares vs Balanced Option
| Feature | International Shares Option | Balanced Option |
|---|---|---|
| Asset class | 100% global equities | ~60–70% growth, ~30–40% defensive |
| Volatility | High | Moderate |
| Expected long-run return | Higher | Lower |
| Diversification | Equity-only | Multi-asset |
| Franking credits | Not available (overseas companies don’t pay Australian dividends) | Partially available (from Australian shares component) |
| Suitable timeframe | 10+ years | 7+ years |
Franking Credits — An Important Difference
Australian shares held in super generate franking credits (dividend imputation), which are particularly valuable inside the super fund’s 15% tax environment. International shares do not generate Australian franking credits, as overseas companies don’t pay Australian company tax.
This is a genuine disadvantage for international shares options — particularly relevant in the accumulation phase where the fund can use franking credits to reduce tax.
When an International Shares Option May Be Suitable
An international shares option may suit members who:
- Already have significant Australian shares exposure elsewhere (e.g., direct ASX shares, Australian shares options)
- Have a long time horizon (15+ years) and want maximum growth potential
- Want to tilt their super toward global innovation sectors (tech, healthcare, consumer) underrepresented on the ASX
- Are comfortable with higher volatility in exchange for higher expected returns
When It May Not Be Suitable
It may not be suitable if:
- You have a shorter time horizon (under 10 years)
- You have already retired or are in the pension phase
- You need stable, predictable returns
- You are not comfortable with 30–40% drawdowns in a bad year
For more: Super Asset Allocation, Returns by Asset Class in Super, Good Super Fund Return, Super Investment Options Explained. For advice tailored to your situation, speak with a licensed financial adviser via MoneySmart.