The Future Fund continued to grow in the first quarter of 2017 buoyed by rising investment markets, but it will "only take on additional risk where the expected returns are appropriate".
The Future Fund increased its funds under management (FUM) by $3 billion over the three months to 31 March 2017 to stand at $130 billion.
Australia's sovereign wealth fund has returned 7.7 per cent per annum since its inception in May 2016, surpassing its target return of 6.9 per cent (CPI +4.5 per cent).
The asset allocation of the fund remained little changed since its 31 December 2016 quarter update, with 29 per cent of the portfolio in equities (15.2 per cent developed markets, 7.3 per cent emerging markets and 6.5 per cent Australian equities) and 20.4 per cent in cash.
Alternatives were the third biggest asset class (15.1 per cent) followed by debt securities (11.3 per cent), private equity (10.6 per cent), infrastructure and timberland (7.6 per cent) and property (6 per cent).
Commenting on the result, chairman of the Future Fund Board of Guardians Peter Costello said the fund "continues to perform well" in its function to strengthen the Commonwealth's long-term financial position.
"At the same time, the board remains conscious of uncertainty around global growth, global monetary policy, international political tensions and the potential for shocks to investment markets. We also expect prospective returns to be lower than in recent times," Mr Costello said.
"With all this in mind we continue to take a patient approach to investing, balancing the need to deliver returns against our obligation not to take excessive risk," he said.
Future Fund managing director David Neal said the overall risk level of risk in investment markets remains "unchanged" and "towards the lower end of our normal expectations".
"This reflects our view that we should only take on additional risk where the expected returns are appropriate," Mr Neal said.
"We continue to work hard and in a disciplined way to identify areas of opportunity, taking up those with attractive risk-adjusted returns and ensuring the portfolio is flexible and efficient," he said.
Investors are being advised to position their portfolios defensively in 2019 as Europe may be teetering on the brink of recession according ...
The government has asked for public consultation on two bills that will implement the tax and regulatory components of the CCIV regime and i...
Despite Theresa May’s proposed Brexit plan suffering a large defeat in the UK parliament, AMP thinks it may result in a softer outcome ove...