Australia's superannuation savings have long outgrown the ability of the Australian market to absorb the investment inflows and, in any event, there are clear benefits attaching to diversification, both in terms of asset type, sector and geography.
Consequently, we find currently find ourselves with the total superannuation investments under management of around $4.2 trillion - the majority held within corporate, retail and particularly industry funds, and the remainder within the self managed superannuation sector. Of that total, according to the two regulators, Apra and ATO, around $1.3 trillion is invested in international shares, real estate, infrastructure and alternative investments.
Details are difficult to obtain, but it's likely that something like two thirds of international investments made by Australian superannuation funds are made into the US market. That means that Australian superannuation funds have about $870 billion exposed to the US market. That comes in many forms, including fixed income, listed and unlisted share market investments, listed and unlisted property, listed and unlisted infrastructure and international alternative investments.
The exposure takes two main forms; market exposure and foreign exchange. Any fall in value of the USD will decrease the AUD value of US investments unless hedged.
In terms of the latter, Apra figures suggest that of the $870 billion invested in US equities by Australian retail, occupational and industry funds, as at June, 2025, only $193 billion or 22% is hedged - providing protection against falls in the value of the US dollar against the Australian dollar. There does seem to have been a creeping increase in hedging over the last few months, coincident with weakness in the USD.
This means, when you consider that none of the assets outside equities appear hedged, that over $1 Trillion of superannuation investments are exposed to US market and currency risk.
Exposure to the US market has served super funds - and consequently their members - very well over a long period and we have just seen the Federal Reserve deliver an interest rate reduction into a bull market. Since the greatest gains in a bull market are often derived just before a sudden transition to a bear market you might understand why super funds - focussed on relative performance against competitors - could linger in the market with the potential to "overstay".
In addition, the AUD has traditionally cushioned overseas returns by falling during broad market sell-offs. That, however, may not occur in the current environment - with the US burdened by poor economic management and a significant debt burden. If the AUD was to rally against the USD during a downturn then this would compound the impact of any market correction.
Super funds are in a difficult position, walking an unusually complex tightrope in terms of risk and return, particularly when you consider the absence of alternatives available to the funds. The US offers the broadest and deepest investment market in the world; finding an alternative home for substantial funds withdrawing from the US would not be easy and would likely be at the cost of lower returns.
However, given the current potential for "things to go wrong" in the US, there are likely to be many super fund members happy to adopt a more cautious asset allocation and accept lower returns - timing the market has never been a successful strategy but we should expect that the major super funds would have strategies in place which extend beyond "we need to remain invested". Otherwise, the very large salaries and bonuses earned by investment managers will likely attract very significant criticism.