Australian Pension Funds May Flow Overseas

Australian pension funds are lying on an A$245 billion or $167.38 billion wall of money. And this might even flow overseas due to lack of domestic options, according to some asset managers.

Fortunately, Australian laws are requiring employers to share at least 9% of a worker’s salary to a pension, superannuation funds. And this is a third-largest pool of pension assets globally, worth around $1.9 trillion. On the other hand, the Australian stock market is only worth about $1 trillion.

Based on the Bank of America Merrill Lynch, the almost 2:1 ratio is the highest among major developed economies. Also, the imbalance is growing, as is the range of overseas markets luring those funds.

BAML head of Australian equity markets Mark Warburton stated, “We have the world’s tenth-biggest stock market but the third-biggest pension fund pool.” He also said that the wall of money is just sitting and waiting for a place to invest.

Then, the Australian Bureau of Statistics placed the number around A$245 billion.

More on Australian Pension Funds

Meanwhile, some of the money lingered in Australia. For instance, the A$2.1 billion purchase in March education group Navitas by AustralianSuper and private equity group BGH Capital.

However, asset managers stated the cash imbalance was bringing pressure on Australian funds. And they feel the need to seek infrastructure, property, private equity, and listed companies offshore.

In the previous month, AustralianSuper agreed to put up at least $1 billion in the National Investment & Infrastructure Fund of India. Also, it has piled up major staked in listed firms like drinks maker Diageo, and consumer company Reckitt Benckiser.

Also, Superannuation fund-owned IFM Investors – one of the country’s largest infrastructure investors – announced its expansion in its listed equities business across Australia. Aside from that, head of markets Drew Bradford commented that the scale is tremendous in the potential overseas investments.