Major Australian pension fund trimming US dollar exposure on weakening outlook

[SYDNEY] Australia’s second-biggest pension fund says it is reducing its exposure to the US dollar through currency hedging as falling interest rates and ongoing global volatility have investors around the world reassessing their US allocations.

Andrew Fisher, Australian Retirement Trust’s (ART) general manager of total portfolio management and resilience, said the prospect of US rate cuts while some other major economies were expected to lift rates would weaken the dollar this year.

Financial markets have priced in about 50 basis points worth of interest rate cuts in the US in 2026, whereas rates are expected to rise in Japan and Australia and remain steady in Europe.

ART has A$353 billion (S$305 billion) of funds under management and is the second-largest fund in Australia’s A$4.5 trillion pension system, known as superannuation.

Fisher said while ART was not reducing its US stock holdings, it was increasing its currency hedging position to reduce exposure to a forecast weakening greenback.

“The US dollar seems to be the one place where I think the US administration is going to get what it wants, which is a weaker dollar,” Fisher told Reuters in an interview on Monday.

“They made it clear they want the dollar to weaken. It’s hurting US competitiveness, and I think they’re going to succeed.” Previously, almost all pension fund investors in US equities would have very little currency hedging because the dollar was expected to rise on negative shocks.

A low-hedging strategy would insulate a fund because if the value of its US stocks fell, it would be cushioned by the dollar also going down. ART holds about A$53 billion of US stocks, according to the fund’s figures.

“We’re not going to change our allocation to US equities, we’re just going hedge more of the US equities and unhedge more of the other equities,” Fisher said.

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“Our Japanese exposure might be fully unhedged and our US exposure might be much more hedged than it has been in the past to try and get that balance right,” he said.

While the dollar traded near a six-week high last week, the currency has eased this week against the safe-haven yen and Swiss franc after US President Donald Trump threatened additional tariffs on goods imported from European nations that oppose his planned takeover of Greenland. REUTERS