Institutional funds reassess U.S. equity exposure amid AI valuation concerns

Global pension funds are reducing U.S. equity exposure as valuations and AI concentration raise portfolio risks. The Australian Retirement Trust, Canada’s La Caisse and the UK’s People’s Pension now sit below global benchmarks, according to Financial Times research. ART manages about $260 billion, while La Caisse oversees about $388 billion.

The shift reflects growing concern that a small group of megacap technology companies has driven much of the S&P 500’s gains. Nvidia, Alphabet and Microsoft are among the stocks contributing to record concentration. A Marsh survey of 430 institutions, representing more than $5 trillion in assets, found one-third plan to cut U.S. equities over the next year. That share is twice last year’s level.

Meanwhile, People’s Pension reduced U.S. stocks to 49% of its global equity exposure from 53% at the end of last year. Denmark’s ATP is also monitoring elevated valuations and earnings expectations. Pension managers say diversification remains important despite the strong performance of U.S. technology stocks.