Australia Future Fund Logs a Stunning 11.5% Return

Sovereign wealth fund’s assets grew to A$162 billion, as it overcomes a ‘complex investment environment.’

The Australia Future Fund reigned supreme above its peers in its fiscal year, posting an 11.5% return for the period ended June 30, which encompassed some tough times.

The fund, which grew to A$162.6 billion ($110 billion), outperformed last year’s 9.3% showing, and now has returned 9.8%, 9.9%, 11.3%, and 10.4% over the three-, five-, seven-, and 10-year period. It has also returned 8.2% since inception and crushed its targets, which lay between 5.6% and 6.7%, for each of those years.

“As we navigate a complex investment environment, we are focused on constructing the most efficient portfolio possible for generating strong long-term returns,” Chief Executive Officer David Neal said in March. “To that end, we continue to prioritize and balance diversification and flexibility while carefully managing risk.”

And the fund’s “balance” between the two really paid off. The results are especially impressive as they are not only the fund’s best 12-month returns since 2015, but because pension plans and other financial institutions are reporting low and sometimes negative returns in recent weeks—many which have underperformed their benchmarks.

So what did it for the sovereign wealth fund? A big bet on equities. Allocations from domestic, developed, and emerging stocks grew to 7%, 18.5%, and 10% of the portfolio, respectively, from 6.5%, 17.4%, and 9% in March. Private equity investments also increased by a smidge, to 15.8% from 15.4%. Property, infrastructure and timberland, debt, alternatives, and cash assets were decreased since then. They stood at 6.7%, 7.5%, 9%, 13.5%, and 11.9%, respectively, on June 30.

Neal reiterated his March sentiments, addressing the complex investment landscape and prioritizing “diversification and flexibility as we dynamically manage the portfolios to respond to shifting global conditions.”

“Accordingly, we are investing in a range of projects to enhance our technology capability and other business processes, which will help us to sustain our strong performance into the future,” said Neal.

‘One of the core principles that we’ve consistently managed the Future Fund to is that we aim to construct a diversified portfolio that is as robust as possible to a range of scenarios,”Raphael Arndt, the Future Fund’s chief investment officer told CIO. “The Future Fund is highly diversified – across geographies, asset classes and within that by different types of risk drivers.  We consider the range of possible outcomes in the future, and then we aim to construct a portfolio specifically at managing the risk needed to generate our mandate return target. That is what has delivered our strong long-term performance results.’

Related Stories:

Australia Future Fund Bounces Back in Q1

Australia is Killing It in the Long Game

Tags: , , ,