The $118 billion Future Fund continues to focus on removing risk from its portfolio, with over one fifth of the sovereign wealth fund's assets now sitting in cash.
Addressing media at a portfolio update to 31 December 2015, Future Fund chairman Peter Costello said returns are likely to be harder to come by in the immediate future.
The Future Fund, which like all sovereign wealth funds around the world pays no tax, returned a healthy 8.4 per cent throughout 2015.
However, the return for the last six months of the year was only 1.0 per cent.
Mr Costello put the difficulties facing the Future Fund down to the phenomenon of central banks "pumping lots of money at very low interest rates" into the global economy.
"That will affect returns that you get right across the board. We have expected that and have been warning about that for some time, and we see that process of adjustment going forward as taking some time," he said.
Future Fund managing director David Neal said the fund has steadily been removing risk out of its portfolio over the past "12 to 15 months".
As at 31 December 2015 the Future Fund held 6.5 per cent of its portfolio in Australian equities, as opposed to 8.8 per cent a year earlier.
Developed markets equities now constitute 17.2 per cent of the Future Fund's assets (down from 20.9 per cent in 2014) and emerging market equities are down from 9.4 per cent to 7.3 per cent.
The total amount of cash in the portfolio has increased from 12.8 per cent as at 31 December 2014 to 20.6 per cent as at 31 December 2015.
The fund has also "restructured" its private equity portfolio, most notably with the sale of the Future Fund's 50 per cent stake in Brisbane commercial property Waterfront Place in June 2015.
However, the total amount of the portfolio invested in private equity has increased from 8.3 per cent in 2014 to 10.8 per cent in 2015.
"We’ve sold down in excess of $15 billion worth of assets over the last year," Mr Neal said.
"A large portion of that reinvested into new investments that are well positioned for the future."
However, there is a "lot going on in markets" at the moment, Mr Neal said.
"[There's] much to worry about. China and oil have been the two much discussed topics this year so far," he said.
"Also, other things for markets to worry about: the refugee crisis in Europe and how that might affect the long-term economic outlook for Europe and the risks in the political sense."
But the current risks in the global economy are "nothing unusual", he added.
"What has been making us increasingly cautious over the last little while is the fact that alongside those risks you are expected to receive relatively low return," Mr Neal said.
"The other thing that is different at the moment is that policy firepower to deal with any potential downturn is rather more limited than it perhaps is in normal times."
More to come: