The Future Fund delivered a return of -0.9 per cent through “an unprecedented year”, its first negative return since the tail end of the GFC. The fund now stands at $161 billion, with over $100 billion in earnings on $60.5 billion of capital since the fund was established in 2006.
“The second half of FY 2020 was dominated by the COVID-19 pandemic and the lockdown of much of the Australian economy by [governments] in response,” said chairman Peter Costello.
“The [global] economy went into reverse and the Australian economy moved into recession for the first time in 30 years. The downturn was fast and steep… Future Fund has performed as intended through a highly volatile period reducing the impact of market falls while looking forward to benefit as markets recover.”
Future Fund is now looking towards the recovery, positioning itself for “a challenging and volatile environment” that will likely lack the factors that have fuelled its strong performance over the last 14 years, and warns that it will need to be “ever more strategic” in how it pursues returns going forward.
“We will continue to prioritise portfolio flexibility, ensuring the portfolio is robust to a range of possible scenarios and has ample liquidity,” Mr Costello said.
“This will open up opportunities from the current market to position ourselves for long-term returns.”
Future Fund also undertook a “material rebalance” of its private equity portfolio, reducing some exposure to international growth and buyout managers, while completing the sale of unlisted assets including Gatwick Airport. Capital is now being redeployed into new infrastructure themes, including fibre and data centres both in Australia and internationally.
“We remain sharply focused on our long-term objective,” said CEO Raphael Arndt.
“Everything we do, every decision we make is focused on investing for the benefit of future generations of Australians. Now, more than ever, we are conscious of our obligation to avoid ‘excessive risk’. The changes in the global economy and financial markets are momentous and we are positioned cautiously with risk levels just below neutral.”
