Representing 80% of the $3.6 trillion Australian Managed Fund Industry assets, the Australian Superannuation funds have become highly influential in global capital markets. Their asset allocation trends and preferences have important implications for other asset owners, asset managers and institutional investors.

The latest asset allocation report from Foresight Analytics reveals interesting trends and preferences of the Australian Superannuation funds. One of the most revealing insights from our analysis is the continued unwinding of the ‘home bias’ by these funds.

Global equities stand as the largest portfolio contribution and continue to rise

Global Equities now represent 24.4% of the portfolio, the single largest portfolio allocation. The allocation to the asset class has been rising steadily, notwithstanding the recent market performance. We expect the unwinding of the ‘home bias’ to continue in coming years which will benefit this asset class. Over the past 12 months, a weaker AUD against most major currencies has provided strong and positive currency effects for unhedged investors.

However, allocations to Australian Listed Equities continue to decline as funds seek greater international diversification. Over the past 5 years, allocations to this asset class have declined from 25% to 22%. Investors have been well rewarded from this decision as returns from global equities have been higher than domestic equities, even after adjusting for currency effects.

Exhibit 1: Allocation of international equities rises whilst Australian listed equities decline as fund seek greater diversification

Picture1-1 What is the latest allocation structure and preference of the Australian Superannuation funds?

Check complete report here.