Due to the fall in global equity markets, the Future Fund has reported a negative result in its first quarter update for the 2008/9 year.

For the first three months to September 30, 2008 the Government fund produced a return of minus 1.81 per cent.

"The first quarter saw the Australian and global equity market indices fall in the region of 11 per cent, driven by concerns about the liquidity and solvency of the global banking system. This outweighed the stable performance of our large cash holding," Future Fund chair of the board of guardians David Murray said.

As at September 30, 2008, 9.7 per cent of the Future Fund portfolio was made up of Australian equities, and 20.9 per cent was international equities (both developing and developed markets).

"Given the very difficult investment conditions, we continue to take a carefully considered approach to building the portfolio," Murray said.

A concern for careful portfolio building was also emphasised in the Future Fund 2007/08 annual report published yesterday.

According to Future Fund General Manager Paul Costello, the changes in investment conditions mean the fund moved to take advantage of the new opportunities.

This included a transition of the portfolio from cash to a more appropriately diversified long-term structure.

"We slowed our equities program and prioritised development of our private equity, infrastructure, property, debt and alternatives programs," Murray said.

During the year the fund's assets grew to $64.18 million.

The operating result, excluding the holding of nearly 2 billion Telstra shares, was $652 million.