Australia’s A$4.1 trillion pension industry has a perception that US stock valuations are stretched. — Bloomberg
SYDNEY: The top funds in Australia’s A$4.1 trillion pension industry are eyeing opportunities beyond the US, saying stock valuations there look stretched and President Donald Trump’s policies are increasing volatility.
AustralianSuper, the nation’s largest pension fund, has ended its “overweight” position in global equities, of which US shares make up the largest proportion, citing the geopolitical uncertainties caused by Trump’s changes.
Colonial First State has tilted its portfolio toward emerging markets given its desire to diversify away from US equities, which it considers are expensive.
One turning point in their view of US investments came in February with the so-called “revenge tax” embedded in Trump’s “Big Beautiful Bill,” that would have increased levies on income from US assets held by investors from countries such as Australia.
While that measure was ultimately removed from the bill, it did enough to damage sentiment.
In addition to emerging markets, pension firms in Australia are putting more money into alternative investments like private equity, and niche products such as insurance bonds and asset-backed financing.
Here are comments from Australia’s biggest pension managers about their investment plans for the second half of 2025.
AustralianSuper oversees A$365bil in assets
“The geopolitical environment is more volatile now than it was two or three years prior to that as Trump’s changes are being put through,” said Mark Delaney, chief investment officer of AustralianSuper.
Tariffs, for instance, will likely slow growth but not trigger a US recession, only marginally weakening the appeal of US stocks, he said.
The fund has trimmed an “overweight” position in US equities but is unlikely to go “underweight” given the market’s robust profit growth.
“If that changes, then the United States will become less attractive and the valuations won’t hold,” Delaney said.
AustralianSuper is looking to finalise deals with four private equity fund managers as it builds out unlisted holdings and remains bullish on infrastructure.
“Infrastructure returns we think still look pretty solid,” Delaney said.
Colonial First State – A$168bil
The money manager has tilted its portfolio toward emerging markets while boosting private credit and deployed money into private equity for the first time, said Jonathan Armitage, chief investment officer.
The moves reflected a desire to diversify the portfolio to “cope with a number of different scenarios,” amid heightened geopolitical uncertainty and stretched valuations in US stocks.
The company has also added insurance bonds and is exploring asset-backed financing, including credit card receivables, that can bolster returns while reducing correlations to other parts of the portfolio, like stocks and government bonds, he said.
The decision to boost emerging-market exposure reflects optimism over Chinese equities, which have performed strongly this year, Armitage said.
In contrast to US shares, “Chinese equities as a whole were trading at very low valuations and were discounting an awful lot of bad news,” he said.
Australian Retirement Trust – A$330bil
US stocks are “priced for unimaginable exceptionalism,” said Andrew Fisher, head of investment strategy.
The fund had been marginally “underweight” in the US market for a number of years and that’s unlikely to change, he said.
“The real story is that the multiples you’re paying for earnings growth that is unbelievably exceptional are just too high,” and “any piece of news can break that fragile confidence that they can continue to deliver earnings growth into infinity,” he said.
Fisher is focused on real assets for the coming year, but he doesn’t anticipate significant allocation changes.
Aware Super – A$185bil
“There’s more uncertainty around the political dynamics in the United States,” said Damian Graham, chief investment officer.
“Where market dislocations occur, if you stay front-footed you can make good investments and that could happen again with the United States and the uncertainty there.”
The money manager is reviewing its strategic asset allocation but doesn’t anticipate major changes.
Aware Super finalised a property deal in London last year that reignited its appetite for office space.
It’s working on a separate deal in continental Europe that it expects to finalise within months.
MLC Asset Management – A$94bil
MLC Asset remains constructive on the United States but is exploring alternative allocations across asset classes in Europe, including private equity and private debt, according to Daniel Farmer, chief investment officer.
Europe offers “attractive valuations” on a relative basis including “selective and very specific” opportunities in property, he said. The firm has identified “good quality property assets that could do with some mild repositioning,” through equity investments or by providing credit, he said.
Cbus Super – A$100bil
“We’re mildly ‘underweight’ global equities and overweight emerging-market equities,” said Leigh Gavin, chief investment officer at Cbus, a pension fund for construction industry workers.
The fund remains bullish on the US despite heightened uncertainty, he said.
“The United States sees itself differently in the world landscape over the next 10 years – it’s a more isolationist agenda,” Gavin said.
Hesta – A$94bil
The re-basing of the US economy to focus on national security and supply chains will provide opportunities and challenges, while tariffs “can reduce growth and increase inflation,” said Sonya Sawtell-Rickson, chief investment officer.
“Companies or assets that are exposed to global trade and predominantly imports might find that more challenging,” she said.
There is also a “phenomenal re-plumbing of the economy” through artificial intelligence, which has the potential to generate productivity gains, according to her.
“If that comes through, then I think the earnings growth and the results will sustain the performance” of the US stock market, she said. While the fund isn’t diverting money away from the United States, it’s being thoughtful about opportunities, according to Sawtell-Rickson.
Legalsuper – A$7bil
Legalsuper, which was set up for the legal profession, is holding its position in US equities and bonds but “not adding to them,” said Andrew Lill, interim chief investment officer.
“In the United States mid-cap space and credit markets, we feel like it still maintains its exceptionalism.”
The fund, which has about a quarter of its default fund invested in private markets, is less positive about the dollar, which is “reverting back to a sensible long-term norm.”
That means thinking about hedges, “and probably having a ‘slight underweight’ to the US dollar versus its benchmark and a slight ‘overweight’ to sterling, euro and and yen.” — Bloomberg
