Australia’s Future Fund Returns 9.3%, Beats Benchmark

Fund’s total asset value climbs to $A146 billion.

Australia’s Future Fund returned 9.3% for the fiscal year ending June 30, easily beating its benchmark of 6.1%, as the sovereign wealth fund’s total market value increased to $A146 billion ($106 billion) from A$141 billion at the end of the previous quarter, and A$133 billion at the same time last year.

The fund reported three-, five-, and 10-year annualized returns of 7.6%, 10.4%, and 8.7%, respectively, outpacing its benchmark, which had three-, five-, and 10-year annualized returns of 6.0%, 6.3%, and 6.6%, respectively.

“The short-term outlook is for a continuing period of sustained synchronized growth, but over the medium to longer term, a number of risks remain and continue to evolve,” Peter Costello AC, chair of the Future Fund Board of Guardians, said in a release. “Inflationary pressures may soon emerge in the US, and as interest rates around the world begin rising towards more normal levels, we expect to see downward pressure on asset prices.”

The fund said that since its creation in 2006, investment returns have added more than A$85 billion to the original contributions made by the government, which were A$60.5 billion at the time. No contributions have been made to the fund since 2008.

The asset allocation of the fund as of the end of June was 25.5% in global equities, of which 18.2% was allocated to developed markets, with 7.3% to emerging markets; 15.4% in alternative assets, 15.1% in cash, 14.1% in private equity; 8.9% in debt securities, 8.0% in infrastructure and timberland, 6.7% in Australian equities, and 6.4% in property.

The Medical Research Future Fund returned 4.7% for the fiscal year ending June 30, ahead of its benchmark’s return of 3.0%.

“During the year we made important changes to position ourselves for the decade ahead,” CEO David Neal said in a release. “We are continuing to strengthen our investment, technology and risk capabilities as the assets we manage continue to grow.”

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