A$400bn Australian Pension Giant Turns Bearish on Stocks – Is AI the Bubble About to Burst?
One of the world's largest pension funds just slashed its stock exposure. The reason? A growing skepticism that the AI-fueled market rally has run too far, too fast.
### The $400 Billion Warning Shot
Forget the hype. While tech CEOs preach an AI-driven future, a titan with A$400 billion in assets is quietly pulling back. It's a classic contrarian move—selling when the crowd is buying the dream.
### Decoding the Institutional Skepticism
This isn't about denying AI's potential. It's about price. When valuations detach from tangible cash flows, even long-term investors get nervous. The fund's shift signals a belief that current stock prices bake in too much perfection, leaving no room for error.
### A Cynical Take on Wall Street's New Toy
Let's be real—the finance sector loves a good narrative. AI is the latest shiny object to justify any valuation. It's less about building the future and more about moving the decimal point on a stock chart. As one portfolio manager quipped, 'We'll believe the AI revolution when it shows up in the dividend check.'
The big money is starting to hedge. While retail chases momentum, institutions are preparing for the hangover. It's a stark reminder that in markets, what's popular isn't always profitable.
Watching the shift in global tech exposure
Normand said the world’s major stock indices are now ruled by US names, especially Big Tech and AI names, with the Magnificent Seven alone making up around one-quarter of the MSCI World index.
Inside AustralianSuper’s own book, international equities remain its biggest overweight position at 3 percentage points above its benchmark. But Normand said he has already started to adjust the fund’s overseas equity exposure since October by adding more listed infrastructure.
He said he does not see AI stocks sitting in a bubble yet, but the risk is rising fast enough for him to take action now instead of waiting for a blow-up.
Other large pension funds are moving in the same direction. Several schemes in the UK have started cutting their positions in US equities because they are uneasy about the market’s growing dependence on a small cluster of megacap tech names.
Some funds are shifting to new regions, while others are adding ways to protect their portfolios from sudden drops. John Graham, the chief executive of Canada’s CPPIB, said he is “worried about the concentration risk” in US stocks and admitted that the C$777.5bn fund is “knowingly underweight” AI in its American allocation.
Preparing for private equity and pricing risk in bonds
Normand said he expects to increase AustralianSuper’s exposure to private equity going into 2026. He said higher interest rates in recent years slowed dealmaking, reduced the cash returned to investors and pushed many players to reduce commitments.
He thinks 2026 could mark a turning point, saying, “I think next year will be the year where by the end of 2026 PE will deliver more than public equities and that’ll be a big change.” Private equity firms raised only $592bn in the 12 months to June, their weakest result in seven years.
He also warned about what he sees as an “underlying vulnerability” in the bond market. Investors, he said, are pricing in only one quarter-point rate hike from the Fed in 2027, but past cycles show the central bank often raises rates by more than that after easing.
Normand said that when the market adjusts, the most expensive assets will take the hardest hit. He said these pricey areas “tend to be centered around tech sector and AI theme – it doesn’t mean this is the end of the story, it just means we have to be mindful of the risks that we manage.”
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