APRA gives super funds green light for offshore investment amid growing engagement

Building on its extensive report highlighting superannuation funds as key investors in private markets both locally and offshore, ASIC chair Joe Longo said ASIC has no objections to funds investing overseas.

Joe Longo, Australian Securities and Investments Commission (ASIC) chair, said that the corporate regulator has no issues with Australia’s major super funds seeking overseas investments, as he launched the regulator’s key report, Australia’s Evolving Capital Markets: A Discussion Paper on the Dynamics Between Public and Private Markets, this week.

Speaking at a media briefing on Tuesday, the chair said: “We don’t have any concern about going offshore, it’s more about some of the unanswered questions about the possibility that things go wrong offshore to what extent will that translate to Australia.”

ASIC’s latest report explored, among other things, how the continued growth of superannuation funds will impact Australia’s capital markets and what the sector’s engagement with private markets, particularly offshore, looks like.

According to the regulator’s paper, over the past decade, while funds’ allocations to domestic public equities have remained steady at 24 per cent, investments in international public equities have increased from 21 per cent to 30 per cent.

Moreover, APRA-regulated funds allocate between 0 per cent and 38 per cent of their total assets – comprising a mix of cash, public assets, and private assets – to private assets.

The regulator’s paper coincided with a report released by IFM Investors, based on analysis from the Super Members Council (SMC) and Mandala, which said funds will significantly increase their investments in offshore assets to over US$2.6 trillion by 2035, with investment in the US expected to rise from US$400 billion to over US$1 trillion.

While Australian super funds have traditionally invested in both public and private markets, the report said that super funds will grow their investments in private markets from US$140 billion today to US$390 billion by 2035.

Of this, 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.

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.”

The report and ASIC’s paper arrived at an interesting time for the sector, with Australia’s ambassador to the US, Kevin Rudd, and consul-general to New York, Heather Ridout, currently convening the Superannuation Investment Summit in New York, to promote the Australian super system and explore new investment opportunities in the US – both public and private.

The summit is being attended by a delegation of funds, peak organisations, investment managers, and banks, with IFM Investors saying last week that funds are essentially hunting for new US investment deals for members.

Speaking to Super Review sister brand InvestorDaily on Tuesday, AMP’s chief economist Shane Oliver said that as Australian pension assets continue to grow and deploy increasingly large amounts of capital, international markets will present increasingly significant opportunities.

“The Australian economy is only a small part of the global economy, and therefore a small part of the opportunity set that an investor or a super fund can invest in,” Oliver said.

The chief economist pointed out a shift over the past two decades, with institutional investors favouring global sharemarkets. This evolution in the need for diversification, which has led funds overseas, has also fuelled the growing interest in private markets, he said.

“Initially, this was focused more on property, which had a home country bias, then infrastructure, which is more of a global bias. And then, of course, private equity, which is where there’s more global opportunities as well. So there’s several things going on here,” Oliver said.

Namely, while most current investments in the US remain in equities and bonds, a growing number of Australian funds are making significant moves into unlisted US infrastructure, real estate, and private equity.

In fact, the US accounts for over a third of all overseas private market investments made by Australian funds.

“I think it’s really just a natural part of their evolution that [super funds] have to think globally,” Oliver said.

IFM’s report also said that the US and Australia have a well-established trade and investment relationship, with the US serving as both the largest source of foreign investment in Australia and the biggest destination for outbound investment from Australia.

As such, it said, super funds can play a key role in supporting the infrastructure and economic priorities of the US.

For instance, the American Society of Civil Engineers said that the US will face a US$3.7 trillion infrastructure gap between 2024 and 2033 across energy, transportation, water, and aviation infrastructure.

At the same time, industry funds in Australia have tripled their investments in international private markets since 2014, largely driven by a diverse mix of infrastructure assets like toll roads, bridges, airports, telecom networks, and energy assets.

“Industry funds pioneered investing in these types of assets and continue to have an outsized allocation to infrastructure compared to funds in peer economies. As a result, Australian pension funds have a first mover advantage and boast in-house experience and expertise established over decades,” IFM said.

Building on this foundation, the super fund-backed firm underscored the opportunity for US policymakers and investors to engage with Australian funds on accelerating future plans in private markets.

With more opportunities for collaboration between the US and Australia, this week’s summit will bring together some of Australia’s largest super funds with leading figures from the US investment community at the Australian embassy in Washington.

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”.

In a recent interview with ABC’s David Speers, he pointed out that the summit will be important given Donald Trump’s impending decision on the aluminium and steel tariffs that could be imposed on Australia.

Chalmers said he will not be pre-empting the outcome of those discussions.

“Nor do I expect that those discussions will necessarily be concluded this week, to be upfront with you,” the Treasurer said.

“Prime Minister Albanese had a very productive conversation with President Trump. My colleagues Penny Wong and Richard Marles have similarly met with their counterparts already. That augurs well for the strength of the relationship, but I’m not going to predict or pre‑empt the outcomes of those discussions.

“This won’t be the first time that I’ve met with Secretary Bessent, but the first time since he was confirmed in that new role, and trade and tariffs will be part of the conversation, but not the whole conversation.”