Outlook for Global Equity Markets: Aware Super Anticipates Slower Growth in 2025 After Strong 2024 Performance

Aware Super, Australia's third-largest pension fund, anticipates a flatter performance in global equities in 2025, following a notable year with a 11.02% return, driven by the U.S. S&P 500's 23% surge. Despite international equities looking expensive, the fund plans to only modestly reduce equity exposure, influenced by uncertainty in the pace of rate cuts and the potential for increased market volatility. This contrasts with the median return of 10.5% for similar Australian funds.

In the dynamic world of finance, pension funds play a crucial role in shaping the investment landscape. One such prominent player is Aware Super, Australia's third-largest pension fund, which anticipates a more modest performance in global equities in 2025 [1].

Despite an impressive 11.02% return in the previous year, driven by the US S&P 500's 23% surge [1], Aware Super's Chief Investment Officer, Mark Delaney, acknowledges that international equities appear expensive. However, the fund plans to only modestly reduce equity exposure, a decision influenced by uncertainty surrounding the pace of interest rate cuts and the potential for increased market volatility [1].

This contrasts with the median return of 10.5% for similar Australian funds, indicating that Aware Super's more cautious approach to equity exposure could set it apart from its peers [1]. Delaney's decision to maintain a significant allocation to equities is not solely based on current market conditions, but also on his belief that the ongoing tech boom will continue to fuel gains in the stock market for years to come [1].

Technology has undoubtedly emerged as a standout asset class for Aware Super, with the fund maintaining an overweight position in equities to capitalize on the potential of artificial intelligence and other technological innovations [1]. Delaney views the current tech boom as comparable to other periods of innovation, such as the introduction of computing, the internet, and mobile phones, which are expected to run for several more years [1].

However, while tech has been a bright spot, other asset classes have lagged behind. Delaney noted that investments with exposure to higher interest rates, particularly real estate, struggled in the previous year [1]. Aware Super's balanced option, which accounts for 90% of members' retirement savings, returned 8.5% for the financial year, while the high growth option delivered 10.2% [1]. Rival Australian Retirement Trust, the nation's second-largest fund, reported a higher return of 11.3% for its high growth option [1].

Despite the challenges, Aware Super remains committed to growth and expansion. The fund plans to open new offices in London and New York, aiming to provide better access to deals and opportunities [1]. As one of the largest funds in the world's fastest-growing retirement savings pool, Aware Super's strategic decisions will undoubtedly continue to shape the investment landscape in Australia and beyond.

References:
[1] Bloomberg. (2024, July 3). AustralianSuper expects AI will fuel further gains for stocks. https://www.bloomberg.com/news/articles/2024-07-03/australia-s-largest-pension-fund-shifts-to-equities-on-tech-boom