The Future Fund has more than doubled the pool of funds initially deposited in 2006, reaching almost $123 billion as at 30 June 2016.
In a portfolio update, Future Fund chair Peter Costello said earnings from the fund, now ten-years-old, have “surpassed the original sum invested”, with returns adding $62.3 billion to the $60.5 billion invested at the fund’s inception.
“Following a disciplined long-term investment strategy has balanced the twin risk and return objectives of the government’s investment mandate directions, exceeding the return objective while avoiding excessive risk,” Mr Costello said.
Asset allocation within the fund remained relatively similar to the previous quarter’s update, with the biggest changes being a 1.2 per cent decrease in cash exposure and a 1 per cent increase in alternative assets.
Mr Costello acknowledged that the current investment environment is “challenging”, and cautioned that returns are likely to be lower moving forward, though risk is expected to increase.
While global growth remains weak, monetary authorities globally continue to have limited flexibility to stimulate activity.
“With this outlook, it is prudent to hold the level of risk in the portfolio at a lower level than would normally be the case,” Mr Costello said.
Future Fund managing director David Neal agreed, adding that, in the current climate, the fund aims to “take on risk only where the rewards justify it” and look for returns in alternatives instead of taking on higher levels of risk.
“We continue to work closely with our global network of partners to seek out and access pockets of opportunity, particularly in our private market and alternatives programs,” Mr Neal said.
Economists agree that the Reserve Bank is likely to remain in inflation fighting mode until December. ...