Australian Pension Funds to Invest $1 Trillion in US

Australian pension funds are forecast to invest over $1 trillion in the US as part of their plans to deliver the best investment returns for their millions of members. Besides the US, the pension funds are also scouring the globe to further their business.

According to a new report commissioned by IFM Investors, based on analysis from the Super Members Council and the economics, strategy and policy consulting firm Mandala, Australian pension fund investments in the US is expected to more than double over the next decade – from $400 billion to over $1 trillion.

Australia has one of the largest and fastest growing pools of retirement savings in the world, with the country’s pension assets totalling approximately $2.8 trillion.

As this pool of capital has grown, IFM and Australian pension funds have looked overseas for private market investment opportunities, with international investments more than doubling since 2014. The report said that international investments have grown faster than domestic investments, helping Australian pension funds achieve diversification and higher returns.

The report said that there are plenty of opportunities for more collaboration between the Australian pension funds and the US. With stronger partnerships, Australian pension fund investments in US private markets could reach $240 billion or more by 2035.

Investments in US Infrastructure

More Australian pension fund investments in American infrastructure could also increase from $20 billion today to $110 billion by 2035 across various sectors such as roads, ports and logistics, data centres, energy and telecommunications.

Australian pension funds have established themselves as trusted long-term investors supported by key policy settings, such as compulsory contributions and preservation, that underpin the strength of the Australian super system.

Australia’s Ambassador to the US Dr Kevin Rudd and Australia’s Consul-General to New York, Heather Ridout, are convening the Superannuation Investment Summit for IFM Investors and leaders of Australia’s superannuation funds to promote the profile of Australia’s super system and explore new investment opportunities in the US.

IFM Investors Global Head of External Relations David Whiteley said that Australia has built one of the world’s most successful pension systems, with the country’s pension assets they already have a significant footprint in the US but now is the right time to invest more.

“Based on existing trends, Australian pension funds are forecast to have over $2.6 trillion invested outside Australia by 2035. Investing in international markets helps to diversify portfolios and deliver healthy returns for Australian workers,” they said.

Great Opportunity

Australia Super Members Council Executive General Manager Strategy and Insights, Matt Linden said that such is the size and scale of Australia’s pension funds they need to scour the globe to find the best investment deals that will deliver their members a retirement they can look forward to.

“There is a great opportunity to unlock further investment opportunities for Australian super fund members in the US – the world’s largest market. And in a win-win the US economy benefits from Australian pension fund investments strengthening and growing their businesses,” Linden added.

Mandala Managing Partner, Amit Singh said that their analysis showed that Australian pension funds were becoming major global investors, with investments in the US alone expected to reach $1 trillion by 2035.

“Australian pension funds have grown beyond just domestic investments to become global players. Our research shows this trend will continue, especially in US private markets and infrastructure like roads and energy, which match well with Australian investors’ long-term outlook,” Amit Singh added.