Recent headlines about investor Michael Burry $2.3 billion bet against the AI boom and US tech giants have sparked concerns about the exposure of Australian superannuation funds to US tech stocks.
Burry, famous for predicting the 2008 housing crisis, is hedging against stocks like Nvidia and Palantir (two of the biggest AI players in the US stock market). So, it’s only natural to start to wonder: what does this mean for your superannuation?
The short answer? While the risks are real, your super is likely in safer hands than you might think.
What’s the issue?
Australian superannuation funds have roughly $800 billion invested in US companies, representing about 20% of our $4.3 trillion retirement savings system. Major funds like AustralianSuper held approximately $2 billion in Nvidia shares alone as of mid-2024.
These figures might sound alarming, research from JPMorgan shows that Australian super funds are actually underweight on five of the seven “Magnificent Seven” tech stocks (Alphabet (Google), Amazon, Apple, Meta, Microsoft, Nvidia and Tesla). This means they hold less than the market average, suggesting a more cautious approach than headlines are suggesting.
Australian superannuation funds have roughly $800 billion invested in US companies, representing about 20% of our $4.3 trillion retirement savings system. Major funds like AustralianSuper held approximately $2 billion in Nvidia shares alone as of mid-2024.
These figures might sound alarming, research from JPMorgan shows that Australian super funds are actually underweight on five of the seven “Magnificent Seven” tech stocks (Alphabet (Google), Amazon, Apple, Meta, Microsoft, Nvidia and Tesla). This means they hold less than the market average, suggesting a more cautious approach than headlines are suggesting.
Do you need to worry?
Diversification: The First Line of Defence
Australia’s largest super funds don’t put all their eggs in one basket. As of June 2024, 49% of superannuation money was allocated to international assets, with the remaining 51% spread across domestic investments.
Within those allocations, funds invest across multiple asset classes. Global equities, infrastructure, property, fixed income and alternative investments all play a role. This spread means that even if US tech stocks experience a sharp correction, your entire portfolio shouldn’t be on the line.
Active Management Makes a Difference
Fund managers don’t just buy and forget. They continuously assess market conditions, company fundamentals and emerging risks. When concentration risks become elevated, managers can shift allocations, reduce exposure or hedge positions.
AustralianSuper recently acknowledged that performance has been concentrated in US tech stocks and they’re repositioning international equities to generate better outcomes. This kind of active adjustment is happening across the industry.
Currency and Hedging Tools
Overseas investments come with currency risk. Super funds use currency hedging and tactical asset allocation to manage this volatility, providing more stable returns for members.
Long-Term Focus
Remember, superannuation isn’t a short-term investment. It’s designed to grow over decades. Short-term market corrections, even significant ones, tend to smooth out over the entire period. Diversified portfolios emphasise resilience alongside growth.
Regulatory Oversight
APRA licenses and ASIC guidelines are strict. This is to ensure that financial decisions and promises made by insurance and superannuation businesses to members are kept under all reasonable circumstances. Funds must maintain systems for identifying, assessing, managing, mitigating and monitoring material risks, and are accountable for their investment decisions.
This isn’t optional. It’s mandated, monitored and enforced. When deficiencies are found, APRA requires remediation plans and doesn’t hesitate to take action.
What does this mean for you?
Yes, there are concentration risks in US tech markets. Yes, AI investments have driven exceptional returns that may moderate. But Australia’s median growth super fund achieved 11.4% returns in 2024, marking the 12th positive year out of the last 13.
Your super fund trustees are aware of these risks. They’re managing sophisticated, diversified portfolios with long-term member outcomes as the priority. While no investment is without risk, Australia’s superannuation system has proven resilient through multiple market cycles.
The best approach? Stay informed, review your super fund’s performance annually. Your retirement savings are backed by expertise, regulation and decades of investment strategy. So, you can be confident that your nest egg is being managed with a long-term, diversified approach that prioritises stability as much as growth.
If you have any doubts or would like more information, consider reaching out to your fund provider or a financial adviser.
