Australian super funds are expected to invest trillions of dollars in international markets by 2035, with the US emerging as the top destination for these funds, according to a new report commissioned by IFM Investors.
The report, based on analysis from the Super Members Council (SMC) and Mandala, predicted that Australian superannuation fund investments in the US will more than double over the next decade, rising from US$400 billion to over US$1 trillion.
“Australia has built one of the world’s most successful pension systems, with the country’s pension assets totalling approximately US$2.8 trillion. We already have a significant footprint in the US but now is the right time to invest more,” said IFM Investors global head of external relations, David Whiteley.
“Based on existing trends, Australian pension funds are forecast to have over US$2.6 trillion invested outside Australia by 2035.”
While Australian super funds have traditionally invested in both public and private markets, IFM Investors and others are increasingly focusing on private market opportunities abroad, with investments in this area expected to grow from US$140 billion today to US$390 billion by 2035.
Of this, Australian funds are expected to invest US$140 billion in US private markets, with around US$60 billion earmarked for infrastructure, targeting sectors such as roads, ports, logistics, energy, and telecommunications.
Under an accelerated investment scenario, which accounts for stronger partnerships between Australian pension funds and the US, the report predicted that up to US$240 billion could flow into US private markets, with approximately US$110 billion allocated to infrastructure.
Commenting on the report’s findings, Matt Linden, executive general manager strategy and insights at SMC, said: “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.”
Australia’s ambassador to the US, Kevin Rudd, and consul-general to New York, Heather Ridout, are convening at the Superannuation Investment Summit this week in New York to promote the Australian super system and explore new investment opportunities in the US.
In a joint statement published last week, representatives of the superannuation funds, including SMC and the Association of Superannuation Funds of Australia, alongside investment managers, said: “As Australia and the United States continue to strengthen diplomatic and economic ties, the historic summit is a rare opportunity to acknowledge and celebrate what brings our nations together – and forge a plan for how we deepen these relationships for years to come, ultimately benefiting Australian workers in retirement.
“By scouring the world for the best opportunities to grow members’ retirement savings, funds are also helping strengthen Australia’s economic and diplomatic ties, shoring up our growing influence on the international financial landscape, and most importantly, protecting and growing the retirement savings of working people.”
Treasurer Jim Chalmers, who will deliver an address at the summit, said the gathering is “all about stronger returns for Australians from stronger ties with the American economy”.
