The Future Fund has 'slightly' increased its risk level

Brian Bielmann/AFP/Getty Images
  • Annual return of 9.3% lifts Future Fund to $146 billion.
  • The 10-year return of 8.7% a year exceeds benchmark target of 6.6%.
  • The short-term outlook is for sustained growth.

The Future Fund achieved a return of 9.3% in 2018, smashing the benchmark target of 6.6% and lifting the value of the sovereign fund to $146 billion.

The fund says it slightly increased its level of risk during the year to meet a short-term outlook for growth.

Peter Costello, a former federal treasurer and chair of the Future Fund, says the Board of Guardians remains disciplined in balancing its return and risk objectives.

“The short-term outlook is for a continuing period of sustained synchronised growth,” he says.

“Over the medium to longer term, a number of risks remain and continue to evolve.

“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.

“International political and trade tensions continue to impact markets and the potential for further shocks remains.”

David Neal, the CEO of the fund, says the fund “slightly” increased the level of risk during the year, balancing perspective on the more positive near-term outlook with the longer-term risks.

“We remain sharply focused on our long-term objective,” he says.

“Everything we do, every decision we make is focused on investing for the benefit of future generations of Australians.

“In the current environment we retain high levels of portfolio flexibility to both withstand — and potentially take advantage of — any market dislocations that might arise.

“We are particularly attracted to investment strategies that are uncorrelated to equity returns, and that are focused on genuine innovation and value creation.”

The 10 year return of the fund was 8.7% a year, exceeding its benchmark of 6.6% and adding 6.6% over and above inflation.

From the original seed capital $60.5 billion in 2006 the Future Fund has earned $85 billion. The Fund now stands at $146 billion.

The asset allocation of the Future Fund at the end of June 2018:

Source: Future Fund

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