Australia’s largest superannuation funds, including AustralianSuper, are approaching the limit of how much they can invest in the Australian stock market while still maintaining strong returns. As a result, these funds are shifting more of their members’ retirement savings overseas to access better diversification and higher-growth opportunities.
According to the Australian Financial Review, AustralianSuper, which manages over $365 billion, expects to hit an effective cap on its ASX-listed investments within months. This shift marks a significant moment for Australia’s superannuation industry, as major funds face new challenges in balancing local and global investments to secure the best possible returns for their members.
Why Are Super Funds Moving Away From the ASX?
Super funds have long played a key role in Australia’s financial markets, investing billions into local companies to fuel economic growth. However, as these funds continue to grow in size, they face a critical issue—investing too much in Australian-listed stocks could limit their ability to achieve strong long-term returns.
AustralianSuper’s Head of Equities, Peter Schroder, explained that while Australian assets will always be a major part of superannuation portfolios, the sheer size of investments is making it increasingly difficult to outperform the market.
“It will always be the case that Australian assets form a large part of a super member’s assets,” Schroder said. “It is also the case that our internalised Aussie equities team is getting close to scale. They will be managing $100 billion, and it will be difficult after that to achieve an active outperformance.”
As super funds grow, they need to find new markets to continue delivering competitive returns. The United States, Europe, and Asia have become attractive destinations for investment, offering a broader range of opportunities and higher growth potential in various industries.
What This Means for Australian Investors and the Economy
The shift in investment strategy could have long-term implications for both superannuation members and the Australian economy. On one hand, diversification into global markets allows super funds to spread risk and protect members’ savings from downturns in any single economy.
As Schroder highlighted, this change is ultimately beneficial for both investors and the country as a whole.
“This is a good thing for our members, and our country,” he said. “Having the opportunity to put our members’ capital to work anywhere around the globe improves overall diversification and offers opportunities to improve risk-adjusted returns. Looking at the US, for example, we have around $105 billion invested there.”
However, less capital flowing into the ASX could impact liquidity and valuations for Australian companies. With fewer large investments from super funds, some ASX-listed businesses may need to seek international capital or expand their global presence to remain attractive to institutional investors.
