After a productive foray into the US, Europe is the next destination for Australia’s juggernaut superannuation funds, which are deploying trillions of dollars in search of investment opportunities.

They will arrive with a simple pitch: patient, long-term capital and a willingness to work with governments to identify funding needs. 

Between now and 2035, Australian super funds are expected to deploy a staggering A$3.8trn (€2.3trn) globally. Of that, around A$1.5trn is likely to go to the US, A$203bn to the UK, and A$460bn to the EU, according to a recent white paper by IFM Investors, industry bodies and consultants.

Collectively, the funds manage A$4.3trn today, a figure projected to reach as much as A$8.3trn by 2035. It will then be the world’s largest pool of retirement capital after the US. Already, the system is roughly twice the size of the domestic economy and, thanks to compulsory contributions, is growing much faster than the nation’s GDP. In short, Australian superannuation has well and truly outgrown the country’s small economy.

Kyle Mangini, global head of infrastructure at IFM Investors, says: “Every week, more than A$4.5bn flows into the Australian superannuation system. In a relatively small market, that means the amount of capital being invested outside Australia has progressively increased, both in dollar and percentage terms.”

Mary Delahunty, CEO of the Association of Superannuation Funds of Australia (ASFA), recalls that, in 2015, offshore investment accounted for about 35% of super investment and, by 2025, the figure had climbed to 51%. Today, between 50 and 60 cents of every new dollar of inflow is invested offshore.

Delahunty says the US dominates as a destination, attracting 60% of outbound super investment. Europe accounts for around 12% and the UK about 3.5%, with the balance going to developed Asia and smaller allocations to emerging and frontier markets.

In time, she says, more super capital may flow into Asia. “We’ve been having conversations with jurisdictions there about how to attract institutional capital.” She adds that super funds have fiduciary responsibilities and must be cautious when investing in emerging and frontier markets.

So far, Australian pension funds have invested about A$740bn in the US, much of it in equities. Infrastructure accounts for roughly A$45bn, although real estate allocations are harder to isolate. As of mid-2025, they had invested A$83bn in the UK and A$181bn in the EU.

While funds compete for opportunities both at home and abroad, the industry has the uniquely Australian advantage of being able to act collectively. Importantly, the top 15 funds are joint owners of IFM Investors, a global asset manager with A$266bn in retirement savings – about half sourced from Australians. Last year, the UK’s Nest became a shareholder.

Australian funds are also distinctive in their ability to invest heavily in unlisted, illiquid assets, supported by the stability of the country’s 12% superannuation levy on all workers. This mandated contribution, Delahunty explains, allows them to take a long-term view while engaging with governments on policy frameworks to attract capital.

Unlisted real assets are a core building block of portfolios, although property plays a relatively modest role internationally. 

According to research from MSCI, the cumulative total of Australian outbound flows since 2016 and up to 2025 totalled US$48.5bn, with super funds accounting for the majority portion of outbound investments. In the case of joint ventures, MSCI uses the full value of these investments in the total.

“Australian super funds allocate around 3% to listed property and about 4% to unlisted property,” says Delahunty. “So property won’t make up an enormous share of international allocations.”

Consortium-style investing 

Instead, the focus at scale is on infrastructure. Unlike real estate, large infrastructure assets – airports, seaports and toll roads – lend themselves to consortium-style investing, a tested strategy Australian funds have used extensively.

Australia’s expertise in infrastructure investment is recognised, with firms such as IFM Investors and Macquarie Group active globally. As well as Australian capital, these firms manage on behalf of pension funds from around the world. Crucially, the presence of domestic pension capital can help ease political sensitivities around foreign ownership of public assets in most countries.

“If you take the US, for example, and this is the case in any jurisdiction, sometimes there can be reticence around foreign investment involving the sale or leasing of assets or construction of major public infrastructure where it involves foreign capital,” says Matt Linden, executive general manager of strategy and insights at the Super Members Council.  “And through managers like IFM Investors, Australian super capital can co-invest alongside money from US pension funds.” 

Similarly, he adds, as Australian global asset managers also invest on behalf of pension funds in the US and Europe, the presence of domestic capital can smooth the negotiation process and political hurdles that might arise if public infrastructure were owned solely by non-domestic investors.

Industry bodies and IFM Investors have scoped out the opportunity set in key markets. Infrastructure needs are substantial; the UK faces a shortfall of up to A$4.1trn, while the EU has a capital gap of more than A$7.1trn to 2030. The need is greatest in the US, where much infrastructure is “in a poor state of repair or no longer fit for purpose”. The US faces a funding gap of US$3.7trn through 2033.

During a March visit to the US, an Australian super delegation told their hosts they expect to allocate US$69bn to the country over the coming decade.

Armed with a policy blueprint, Revitalising US Infrastructure: The Pension Capital Advantage, prepared by IFM Investors, the group has been offering practical solutions based on Australia’s experience in privatising public assets and recycling capital into new projects.

“Demand for infrastructure is effectively unlimited because it grows with population,” says Mangini. “It is hard to keep up with the amount of investment required. This is where long-term pension capital plays a critical role. Unlike other investors, super funds hold on to their investments and can reinvest cash flows over extended periods.

“If you look at our aggregate portfolios over the next five years, we are reinvesting about A$110bn into our assets. In the UK, for example, we’ve invested hundreds of millions of pounds upgrading terminals and runways at Manchester and Stansted airports.”

Super funds help sustain what Mangini describes as “a virtuous cycle” of capital in the investment markets of their host countries. He notes this was a key theme in discussions in the UK, where a memorandum of understanding (MOU) was signed with the government in 2023. Major Australian funds also signed a MOU with Canada’s Maple Eight in March this year, and similar discussions are continuing in the US.

Engaging with governments

Engagement with governments is central to the strategy to unlock stabilised public infrastructure assets for private investment.

“In the UK, there’s a growing understanding of how to attract institutional capital,” says Delahunty. “The blueprint developed by IFM has been important in helping the government open up deal flow for investors.”

Linden notes these trips allow the industry to “work firsthand with policymakers” and resolve issues around tax and regulation. One tangible outcome from UK engagement is the creation of a dedicated investment desk for Australian pension funds within government.

On the second trip to the US this year, the delegation put forward several ideas, including asset privatisation, an approach that has worked well in Australia, where state and federal governments recycle capital from existing assets to fund new infrastructure.

“Increased engagement with US state governors this year is a positive development. They indicate strong interest in our expertise built over decades,” he says. “Another is the leasing model, sometimes in partnership with governments or municipal authorities. This has proven effective elsewhere – for example, at Manchester Airport in the UK. We’re eager to explore how these models might work in the large US market.”

Other asset classes beyond traditional infrastructure are also being examined, says Delahunty: “We also explored artificial intelligence as an investable asset, gaining a clearer picture of its potential beyond data centres, especially after visiting Silicon Valley.”

Mangini notes that digital infrastructure and energy are increasingly intertwined. “There is massive demand driven by AI, and behind that sits the energy required to power those digital assets. There’s tremendous investment needed not just in generation, but also in transmission – moving electricity from where it is produced to where it is needed.”

Managing the unpredictable

As super funds deploy members’ savings into an increasingly unpredictable world, they must carefully calibrate risk.

Mangini accepts that risks cannot be eliminated but must be managed. Factors such as fuel prices and their impact on airports, toll roads and traffic volumes are stress-tested under different scenarios to ensure sufficient buffers.

“We prepare for worst-case outcomes to maintain confidence and remain proactive, because equity investment always carries risk and some risks can emerge rapidly,” Mangini says. He points out that, during the 2008 global financial crisis and COVID-19, some assets suffered more than others, but infrastructure proved resilient because it is essential to the movement of people, goods and energy.

There have, however, been disappointments. Early toll road projects often relied on overly optimistic traffic forecasts, while some US renewable assets have recently struggled due to policy shifts. Offshore wind investors have also faced losses following abrupt regulatory changes – risks that are difficult to anticipate in developed markets, Mangini says.

On valuations, he notes that unlisted asset values can fall when listed markets decline sharply. “That’s logical. It’s not a risk you can mitigate.”

For Linden, investing offshore is itself a form of risk management. “Funds need global exposure to mitigate concentration risk in their home market. Listed markets, whether domestic or offshore, can be volatile. Australian funds use real assets for diversification, with exposures across geographies to reduce risk and volatility.”

Delahunty adds: “Not all assets perform as expected – that is the nature of investing. There has perhaps been more disappointment in private equity than in other asset classes, but that reflects its risk profile.”

Ultimately, the success of funds’ investment decisions – and of the risk mitigation strategies they use at home or abroad – is measured by the returns to members. Over the past decade and beyond, Australia’s super funds have consistently delivered strong, often double-digit returns.