Australia’s Future Fund Increases Allocations to Alternatives

By Nick Hedley

Australia’s Future Fund has increased its allocations to alternative assets as it repositions its portfolio for a low-return world.

In the three months to end-September, the sovereign wealth fund reduced its exposure to equities and trimmed its cash holdings by about A$4.7 billion (US$3 billion), its quarterly update shows. Meanwhile, its allocations to private equity and other alternative strategies increased, along with a slight boost to its debt portfolio.

The A$193 billion (US$141 billion) fund’s portfolio sank 0.6% during the quarter as equity and bond markets retreated.

“As was anticipated by the fund, the exceptional monetary and fiscal stimulus of the last few years is being withdrawn, reducing asset prices and introducing much more volatility,” Peter Costello, chair of the Future Fund Board of Guardians, said in a statement.

“The board continues to take a prudent approach to positioning the portfolio. We expect that real returns will continue to be much lower than in recent decades.”

Future Fund CEO Dr. Raphael Arndt said: “We are focused on enhancing portfolio resilience while increasing our allocation to strategies designed to protect the portfolio against inflationary scenarios. In addition, the risk of a global recession has increased at the same time, further testing investment strategies.

“The portfolio continues to be positioned moderately below a neutral risk setting.”