As of 2023, the Australian superannuation system had grown significantly, with the total assets under management (AUM) across all superannuation funds exceeding AUD 3.5 trillion. However, the total market capitalization of the Australian Securities Exchange (ASX) was approximately AUD 2.5 trillion. This implies that Australian Pension Fund CIO has to invest internationally and in different asset classes (which could be risky).
Here’s a list of the top 5 largest superannuation funds in Australia:
- Australian Super
- Aware Super
- QSuper
- UniSuper
- Australian Retirement Trust
While managing a large pool of assets offers opportunities for diversification and access to unique investments, it also brings about many challenges as below:
- As funds grow, finding sufficient investment opportunities that can absorb large amounts of capital without significantly impacting the market becomes difficult.
- The CIO may find it challenging to identify enough high-quality investment opportunities that align with the fund’s risk-return profile.
- As the fund grows, so does the complexity of its operations.
- Larger funds often require more layers of governance and oversight.
- Large pension funds are often subject to increased regulatory scrutiny.
- Large pension funds are under constant public scrutiny.
Australian Super, one of Australia’s largest superannuation funds, has faced scrutiny and criticism over the years for several investment decisions that were perceived as mistakes.
e.g. Australian Super has significant exposure to the UK property market. This market faced considerable headwinds due to Brexit and the COVID-19 pandemic, leading to lower-than-expected returns.
e.g. Australian Super reportedly experienced a significant loss of around AUD 200 million in its investment in Pluralsight. This loss occurred when Pluralsight, a U.S. based online education company, was acquired by the private equity firm Vista Equity Partners in 2021. The buyout price was lower than what many investors had anticipated, leading to a substantial loss for those who had invested in the company at higher valuations, including Australian Super. The investment in Pluralsight was part of Australian Super’s strategy to diversify into technology and growth-stage companies, but the outcome highlighted the risks associated with such investments.
Luckily, it’s important to remember that the top 10-20 Australian superannuation funds are huge and manage a large and diversified portfolio, which helps to mitigate the impact of losses from individual investments. This is the good news to Australian pensioners!
If you are interested to discuss Australian Superannuation market as well as Australian opportunities, please write email to [email protected]
