Balanced Funds Australia 2025: Pros, Cons & Latest Trends

Australians have long gravitated towards balanced funds as a way to diversify their investment portfolios without having to pick and manage individual assets. But with market turbulence, rising interest rates, and superannuation reforms in 2025, is the classic balanced fund still living up to its name? Let’s unpack how balanced funds are evolving, what they’re offering investors this year, and whether they might deserve a spot in your portfolio.

What Exactly Is a Balanced Fund?

At its core, a balanced fund is a managed investment that typically splits its assets between growth assets (like shares and property) and defensive assets (like bonds and cash). In Australia, the traditional split is around 60-70% growth and 30-40% defensive, though this can vary by fund. The goal? Smoother returns than all-in equities, but better long-term growth than cash or bonds alone.

• Growth Assets: Australian and international shares, listed property trusts, infrastructure.

• Defensive Assets: Government and corporate bonds, cash, term deposits.

This mix aims to capture some upside during bull markets, while cushioning losses during downturns—a middle path for investors who want reasonable growth without the volatility rollercoaster.

What’s New for Balanced Funds in 2025?

Recent policy changes and economic shifts are influencing how balanced funds operate this year:

• Superannuation Performance Test Expansion: From July 2025, the government’s Your Future, Your Super performance test will cover more multi-asset options, including many balanced funds. Underperforming funds risk being named and shamed by APRA, so expect more pressure on fees and performance transparency.

• Rising Interest Rates: With the RBA cash rate holding above 4% in early 2025, defensive allocations are finally earning meaningful returns. Balanced funds are tilting slightly more towards fixed interest, offering higher yields than in the near-zero rate years.

• ESG and Sustainable Investing: More Australians are demanding ethical options. In 2025, several major super funds have launched ESG-focused balanced options, screening out fossil fuels, gambling, and tobacco, and increasing exposure to renewables and social infrastructure.

As a result, the 2025 balanced fund isn’t just a vanilla 60/40 split—it’s a dynamic, actively managed mix, often with a global reach and a stronger focus on risk management and responsible investing.

Performance, Fees, and Real-World Examples

How have balanced funds stacked up lately? According to the latest Chant West data, the median growth (balanced) super fund returned 8.1% for the 2024 financial year, bouncing back from a volatile 2022-23. The five-year annualised return sits around 6.6% (to March 2025), comfortably above inflation and cash rates.

Fee pressure is intense: as of 2025, top-performing industry super balanced options (like AustralianSuper, Hostplus, and UniSuper) charge total fees between 0.6% and 1.0% per annum, while retail funds can be higher. Look for funds with:

• Transparent asset allocation

• Low or no entry/exit fees

• Strong long-term performance (net of fees)

Example: The AustralianSuper Balanced option (the country’s largest) currently holds about 67% growth and 33% defensive assets. In 2024, it returned 8.5%, with a five-year annual return of 7.1%. Meanwhile, Hostplus’s Balanced option is more growth-tilted (around 76%) and has delivered similar results over time, with slightly higher volatility.

Is a Balanced Fund Right for You?

Balanced funds suit Australians who want a hands-off, diversified portfolio—especially for superannuation or medium- to long-term savings. They’re not immune to market downturns, but their diversified nature helps cushion the blow. Consider your risk tolerance, investment horizon, and whether you want an ethical tilt.

• If you’re under 40 with a long horizon, you might want a higher growth allocation.

• If you’re closer to retirement, a classic balanced or more conservative fund could be a safer bet.

• Always compare long-term net returns and fees—these make a huge difference over time.

Conclusion

Balanced funds remain a popular, pragmatic choice for Australians in 2025—offering diversification, professional management, and solid long-term returns. With regulatory pressure driving down fees and pushing for higher transparency, they’re likely to become even more investor-friendly this year. If you’re looking for a simple, robust core holding for your super or investment portfolio, a balanced fund is well worth a look.