Australia’s Superannuation: A rising global powerhouse in pension funds

Why we should care about Super down under: How Australia’s pension pool is reshaping global capital flows

Australia’s superannuation system – commonly known as “Super” – is emerging as a global powerhouse in pension fund management. As of 2025, the sector’s rapid growth, evolving asset allocation, and increasing offshore exposure are reshaping both domestic and international investment landscapes.

In a recent report, Deutsche Bank Macro Strategist Lachlan Dynan explored how Super funds influence global capital flows and investment trends. FX Blog: Super funds - Deutsche Bank Research (Available to Deutsche Bank clients).

Some key themes from Lachlan’s report include:

How large is Australia’s superannuation pool globally?

Australia’s superannuation pool now totals approximately AUD 4.2 trillion, representing 150% of the country’s GDP. APRA (Australia's prudential supervisor) regulated funds account for about AUD 3 trillion (110% of GDP), making Australia’s pension pool one of the largest and fastest-growing globally. This scale puts it at the top end of global pension fund rankings, outpacing many peers in both absolute and relative terms.

What is behind the super-sized growth of the fund?

Investment returns are the primary driver of growth, followed by rising net contributions.
The superannuation guarantee rate (mandatory employer contribution) has increased from 3% of ordinary earnings in 1992 to 11.5% in 2024 and 12% in 2025.
Australia’s younger demographic compared to many global peers supports a seemingly more aggressive investment allocation, with larger allocations to equities.

What share of new contributions is invested offshore, and how is this evolving?

Australian Super funds are increasingly investing offshore. As of end-2024, 48% of assets were held internationally, up 10 - 15 percentage points over the past decade.

Funds have been increasingly moving into offshore assets in search of greater liquidity, diversity of investment opportunities, and as their growth outstrips the domestic economy (funds now own just under a quarter of the ASX).

How could offshore investment impact FX markets and funds’ FX risks?

Funds’ FX risks: Historically, only 20–30% of offshore equity portfolios were hedged, relying on the natural hedging properties of the Australian Dollar to global equities. Hedge ratios had been declining in recent years as those correlations were firm, but have since stabilised, and now face fresh questions on if they’ll need to rise as correlations have been impacted by recent global events.
FX bases: As their need to hedge quickly growing offshore assets rises, Super funds are becoming a larger presence in markets used for hedging, like FX swaps. That may be exerting downward pressure on FX bases that have traditionally been positive (partly due to domestic banks’ offshore funding activities).
Impact on FX spot markets: As funds convert large contribution flows into foreign currencies to purchase assets, an impact on FX spot markets can’t be ruled out.

Which asset classes dominate offshore exposures?

The dominant offshore exposure is to international listed equities, which now make up almost a third of Super funds’ overall portfolios. Infrastructure and fixed income also feature prominently, but equities remain the main driver of offshore growth.

“The size, growth, and sophistication of the Australian superannuation sector requires increasingly multi-product, global, and bespoke solutions. Deutsche Bank is dedicated to clients’ lasting success and financial security at home and abroad – meaning that partnering with superannuation funds is right in our wheelhouse. We offer unique perspectives, access, and products.”
Glenn Morgan, Chief Executive Officer for Deutsche Bank Australia

The role that Deutsche Bank plays in supporting Australian superannuation funds

As the Super funds expand globally, Deutsche Bank’s role as a Global Hausbank is more important than ever. We are able to support the Super funds across the spectrum of our business - FX, Rates, Listed Derivatives, Credit Trading, Financing, Corporate Banking or strategic advisory.

By offering tailored risk management strategies and leveraging its global reach, Deutsche Bank enables Australian Super funds to navigate foreign markets with greater scale, efficiency, and confidence.

What is Australia’s superannuation Sector?

It is a mandatory, government-supported retirement savings scheme designed to help Australians accumulate funds for retirement. The system is one of the largest and fastest-growing pension pools globally, with assets now totalling around AUD 4.2 trillion, or 150% of Australia’s GDP.

Australia’s superannuation system largely began in 1992 with the introduction of the Superannuation Guarantee. At that time, the minimum mandatory contribution rate was set at 3% of regular income.

How does superannuation work?

Superannuation works by requiring employers to contribute a fixed percentage of an employee’s regular income into a Super fund. These contributions are invested across a range of asset classes (such as equities, fixed income, infrastructure, property, and cash), and the returns are reinvested to grow the retirement savings over time. The funds are typically preserved until the individual reaches retirement age, ensuring long-term financial security.

Why was superannuation introduced?

Superannuation was introduced to ensure that Australians have adequate savings for retirement, reducing reliance on the government age pension. The system was designed to address the challenges of an ageing population and to encourage individuals to take responsibility for their own retirement funding.

What does asset allocation look like for the fund?

Australian Super funds maintain a diversified portfolio. According to APRA, as of end-2024, asset allocations were estimated to be as follows:

57% in equities (among the highest globally)
19% in fixed income
8% in infrastructure
8% in cash
The remainder in property, alternatives, and commodities.

This more aggressive equity allocation is partly due to Australia’s relatively young population vs peers, which supports a higher appetite for growth assets.

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