Australian Pension Funds To Invest $1tn Globally

Australia’s superannuation system is on track to become one of the most powerful sources of capital in international markets, with funds expected to channel more than $1tn into overseas investments over the next decade.

Global reach expands

According to the Super Members Council of Australia (SMC), which represents more than 12mn retirement savers, the sector’s foreign holdings will rise from today’s $812bn to $2.6tn by 2035. That would take the share of international assets from just over a third of the system’s portfolio to almost half.

Around 60 per cent of the $1.8tn increase will be fresh allocations, with the remainder generated by performance gains on existing investments. With total assets forecast to climb from under $3tn today to $7.2tn by 2035, the industry is set to overtake the UK and Canada to become the largest pension pool outside the United States.

“The growth of the Australian superannuation system has been remarkable,” said Damien Webb, deputy chief investment officer at Aware Super, which manages A$200bn. “We absolutely need to be globalising.”

Contributions rising, local options limited

The expansion of international holdings is being driven by two forces: a steady rise in compulsory pension contributions, and the limited capacity of Australia’s domestic market to absorb the inflows.

As of July, employers are required to pay at least 12 per cent of workers’ salaries into superannuation accounts, up from 9.5 per cent in 2021. By comparison, the UK’s auto-enrolment scheme sets the minimum combined contribution from employers and employees at 8 per cent.

“Australia has the fastest growing super system globally — twice the rate of international peers,” said Misha Schubert, SMC’s chief executive. She noted that Australia is the only OECD country where government-funded pension spending is projected to fall as a share of GDP by 2060, as private saving continues to expand.

For funds managers, this means a growing pool of investable assets that must increasingly be deployed offshore. The domestic equity and property markets can no longer accommodate the scale of inflows without distorting prices or concentrating risk.

Focus on US and Europe

Roughly half of Australian funds’ international investments are already in the United States, with much of the rest in the UK and European Union. The emphasis reflects both market depth and longstanding economic ties.

Earlier this year, AustralianSuper, the country’s largest fund with $250bn in assets, said it planned to allocate around 70 per cent of new inflows to international markets, with more than half directed towards the US. It also intends to lift its private equity exposure from 5 per cent to 8 per cent over five years, with much of the activity led from its New York office.

Aware Super, which opened its first overseas branch in London in late 2023, announced in June that it was ahead of schedule on plans to deploy A$10bn in the UK and Europe over five years. The fund has identified infrastructure and energy transition projects as priority sectors.

Courted by governments

The growing clout of Australia’s pension industry has made it a target for foreign governments keen to attract long-term institutional capital.

In Washington, an Australian superannuation investment summit drew senior US officials including Treasury secretary Scott Bessent and commerce secretary Howard Lutnick. Jim Chalmers, Australia’s Treasurer, used the event to emphasise how the country’s investors could help fund infrastructure and data centres.

“You can judge by what access you get,” said the investment chief at one of the largest super funds. “The top US government officials were there. We were given really good insight on what the administration was planning to do around tariffs.”

The UK has been similarly active. London hosts offices for several major Australian funds, and a dedicated summit on co-investment opportunities is planned in the coming months. British officials see scope for collaboration in areas ranging from green energy to digital infrastructure.

Building partnerships

Institutional alliances are already taking shape. In February, the UK’s state-backed pension fund Nest bought a 10 per cent stake in the holding company of IFM Investors, one of the world’s largest infrastructure managers, joining 16 Australian funds as shareholders. Nest also pledged to invest £5bn with the firm by 2030, in one of the biggest private market commitments by a UK pension fund.

For Australian funds, such partnerships provide scale and access, while also diversifying exposure. For foreign partners, they offer a channel into a system that is growing faster than any other in the developed world.

Domestic pressures easing

The push abroad also reflects the funds’ desire to reduce their outsized influence at home. Australian superannuation funds have become dominant owners of the domestic equity market, prompting concerns that they risk distorting pricing and limiting diversification.

By shifting capital overseas, they can maintain high contribution flows without overheating local markets. At the same time, global diversification offers a hedge against domestic economic cycles and currency risk.

Long-term influence

Industry analysts believe the scale of projected overseas investment will reshape global capital flows. By 2035, Australia’s super funds could be among the most influential investors in infrastructure, private equity, and large-cap equities across North America and Europe.

The rise also reflects a structural change in pension provision. Unlike many OECD countries, where government spending on retirement is projected to rise, Australia’s private savings system is taking on a larger role. That means a steadily compounding pool of long-term capital that can be directed into international markets.

“The scale is unprecedented,” said one London-based infrastructure banker. “Australian funds are becoming price-setters in certain asset classes. Their decisions already move markets, and that influence is only going to grow.”

Outlook

For Australia’s savers, the internationalisation of their pensions brings both opportunity and risk. Exposure to overseas assets promises higher returns and diversification, but also increases vulnerability to foreign market shocks. The challenge for fund managers will be to balance that global reach with prudence and accountability at home.

For global markets, the message is clear: Australian capital is on the march. As the system expands to more than $7tn over the next decade, its impact will be felt from Wall Street to Westminster, and in every sector able to absorb the world’s fastest-growing pool of retirement savings.