The Future Fund, which was set up in 2006 to cover escalating pension liabilities for public servants, said it made a negative return of 1.2% in the year to end-June, compared to a decline of more than 10% in global equities and bonds.
It also noted that it returned 22.2% the year before, amid ultra-low interest rates and rallying investment markets, meaning its 10-year target of returning an average of 6.6% a year was relatively unaffected.
“Not unexpectedly we now have significant global and domestic inflation,” said fund Chairman Peter Costello, a former Australian treasurer.
“It is likely that further interest rate rises will be needed to achieve … inflation objectives. We expect deglobalisation, geopolitical tensions, trade barriers and high inflation to be a feature of the investment climate going forward,” Costello added in a statement.
After reporting in early 2022 that it had surpassed A$200 billion ($137 billion) under management, the Future Fund said it now has A$194 billion. A year ago, it managed A$197 billion.
Fund CEO Raphael Arndt said the organisation had benefited from a project to adjust its portfolio for an environment of higher inflation, increased volatility and lower returns.
Since a year ago, the fund said it upped its exposure to “alternatives” to 17.8% of total funds under management, from 13.2%, without specifying what it meant by alternatives. It said it cut its equity exposure to developed markets to 15% from 18.2% and cut its equity exposure to emerging markets to 5.4% from 9.1%.
In February the fund said it was winding down a small exposure to Russian-listed companies in response to Russia’s invasion of Ukraine.
($1 = 1.4586 Australian dollars)
Source: Economy - investing.com
