Australia’s SWF Turns to Timber

The Future Fund plans to include timber in its allocation to “tangible assets,” which to date have only included real estate and infrastructure.  

(March 3, 2010) – Australia’s Future Fund, which has about $66.2 billion in assets under management, will seek  timber plantation investments as part of its alternative investment program.


The fund has invested about $7 billion or 11% of its portfolio into alternative assets, according to its latest portfolio update  of December 31. Last quarter, it allocated $5 billion to hedge fund investments. It plans to double its investment in “tangible assets” from 3% to 6%.


The fund’s General Manager Paul Costello told a Melbourne conference recently that the SWF’s allocation to cash has been reduced significantly, with an increase in listed equities and alternative investments contributing to the difference, according to Sydney-based Conexus Financial.


“Over the quarter, the level of cash in the portfolio fell from 32% of the fund to 15.5% as we further built the program to meet our long-term objective,” the Future Fund said in a news release. “We have also taken up attractive opportunities in debt, property and infrastructure markets as we build towards target exposures,” the report stated.


The sovereign wealth fund, established in 2007, has found opportunity from the global financial crisis by investing in a range of distressed debt and equity, and is now accepting a period of more sustainable but modest growth.


Ralph Arndt, the Future Fund’s head of infrastructure, will lead the transition into timber. He previously worked with Hastings Funds Management, the Australian Council for Infrastructure Development, the Victorian Department of Treasury and Finance and Ove Arup.