This is why Australia's $117 billion Future Fund prefers to invest mostly offshore


Australia’s Future Fund was established in 2006 with the mandate “to help Australia prepare for the ageing of the population and to promote intergenerational equity for future Australians.”

That’s what its managing director, David Neal, told the Australian British Chamber of Commerce yesterday. Neal said “more specifically, the Fund was designed to save and grow capital to help the Commonwealth meet its unfunded public sector superannuation liabilities.”

Even with no capital injections from the Government since 2008 the Fund has grown to have a current value of around $117 billion, “$56 billion to the original contributions received.”

That’s impressive.

But where the fund has its assets invested speaks volumes about where the management team sees the best opportunities for achieving its investment return goal of “Australian
inflation plus 4.5% to 5.5% per annum over the long-term.”

It’s not in Australia.

Here’s what Neal told his audience was the current portfolio breakup.

  • 8% Australian listed equities
  • 30% in offshore listed equities, with around two thirds in developed markets and a third in emerging markets
  • 10% in private equity
  • 13% roughly equally split across property and infrastructure
  • 10% in our debt portfolio
  • 14% in alternatives such as hedge funds, and
  • 15% held in cash.

That, Neal said, meant around 70% of the portfolio is invested offshore.” This reflects where we have found the best opportunities but I should note that with a mandate tied to Australian inflation, we are strongly attracted to Australian investments all others being equal.”

Clearly things are not equal at the moment for Australian stocks and other asset classes. That’s an incredible warning to Australian investors.

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