Macro TrendsSMSF Strategies

Super funds' share of ASX falls

15 Dec 2021 5 month(s) ago

In an effort to diversify, super funds are concentrating less on the Australian stock market.

The influence of Australia’s superannuation funds on the Australian share market is actually easing, despite their pool of funds steadily increasing. The reason seems to be that super funds are diversifying away from the stock exchange, with much of that diversification going offshore and into alternatives. Given the relative narrowness of the industries on the ASX this is not surprising.

Rainmaker Information Institutional Roundup Report showed that the share of the Australian Stock Exchange (ASX) market capitalisation owned by Australia’s superannuation funds fell from 39% to 36% in the past four years up to 30 June 2021.

Reinforcing this turn-around, not-for-profit (NFP) super funds such and industry and public sector funds were the main drivers for this drop as they have been diversifying away from the ASX.

Alex Dunnin, executive director of research and compliance at Rainmaker Information says:

“NFP super funds have been increasing their dominance of superannuation, but they have been reducing their ASX equities exposure, shifting towards global assets, property, and alternatives.

Reinforcing this shift from Australian to overseas owned shares, in the September 2021 quarter the shift gathered pace. In 2021, super funds held $908 billion in Australian equities, up 20% from the $758 billion they held in 2018. But in contrast, through the same period the ASX itself increased one-and-a-half times faster, growing 28% from $1.9 trillion to $2.5 trillion.

Superannuation is valued at 132% the size of the ASX, but super funds on average hold only 27% of their assets in these equities as of June 2021. NFP funds account for 10% ownership of the ASX, retail funds 7%, and small super funds such as SMSFs 11%.

Dunnin says:

“These results shows that while super fund influence over the ASX is likely to grow over time, the rate of this growth will be weaker and smaller than earlier expected.

“These new trends, should if anything, raise alarm bells amongst Australia’s policymakers that Australia has to work harder to make investing in the Australian share market more attractive.”

“Partisan focus on the role Australia’s super funds play in the Australian economy and among ASX listed companies in which they invest, as if it were a bad thing, is to totally miss the bigger picture of what is really happening within global capital markets.”

In 2018 Rainmaker projected that super funds would hold 50% of the ASX by 2030. However, recent trends suggest by 2030 they will only hold 40% of the ASX.


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