Australia's Future Fund Has Made Billions Off The Fall Of The AUD

Fifty dollar bill: Shutterstock

The Australian Government’s $85 billion investment fund has made more than $2 billion from the AUD’s fall in the past two months by keeping a sizable portion of its assets in foreign currencies.

The Future Fund invests about 70% of its $85 billion overseas, of which about $23 billion is unhedged.

That means that as the AUD fell from about $US1.03 before May to $US0.93 today, the fund was worth over $2 billion more in Australian dollars – the currency in which it is assessed.

“We invest extensively offshore; we do that for diversity,” Future Fund chairman David Gonski told the Financial Services Council today.

“Our purpose is to maximise returns on the capital given to us at acceptable levels of risk.

“About 70% of our $85 billion plus portfolio is invested outside of Australia. With our hedging program, our foreign currency exposure at the moment is just around 27%.”

The Future Fund was founded in 2006 with the aim of holding $140 billion by 2020 to pay for public servants’ superannuation.

The Government requires it to seek annual returns of 4.5%-5.5% above Australian inflation in the long term.

Gonski said the Future Fund planned its investments in 10-year periods, rather than monthly, quarterly and annual reviews more common in the private sector.

“I don’t comment on short-term gains,” Gonski told Business Insider, when queried on the AUD. “We’re looking longer term and we will map our course accordingly.”

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