Future Fund chair Peter Costello said: “We are pleased with how the portfolio has operated during a period when there was a large correction in Australian equities and increased volatility generally.”

The Future Fund reduced its allocation to cash in September to 15.1 per cent compared to 19.5 per cent as at 30 June 2015.

As at 30 September 2015, debt securities constitute 12.7 per cent of the portfolio, up from 9.8 per cent last quarter.

Allocation to emerging markets equities decreased slightly in the quarter, down to 7.9 per cent from 9.4 per cent. Developed markets continue to make up the largest proportion of the portfolio, with 18.8 per cent or $22,115 million allocated to the asset class.

Future Fund managing director David Neal said the fund’s approach looks beyond volatility, remaining focused on the long term.

“Adding to the uncertainty over the quarter was a series of events in China which raised doubts for many about how successfully the Chinese government will manage its transition to a more sustainable economy,” he said.

“Accordingly we continue to have the portfolio positioned with a somewhat lower level of risk than in the past few years, but we continue to work hard to identify and exploit interesting opportunities.”

Mr Neal indicated that global macro trends are likely to result in lower long-term prospective returns.

Mr Costello also said stimulatory policy settings cannot be sustained forever, and it "seems likely that generally returns in the future will be lower than in recent years".

The Future Fund delivered 0.5 per cent for the September quarter, down from the target return of 1.6 per cent.