Australia's Future Fund trims PE exposure

The sovereign wealth fund had about 10.4%, or A$12.3 billion ($8.7 billion), deployed in the asset class as of December 2015. This is down from the 10.8% as of June 2015, though still represents an increase from the 9.5% allocation at year-end 2014.

Future Fund increased its cash reserves significantly over the year, from 12.8% to 20.6%. The fund attributed the increase to a rebalancing of its risk exposure, including the reduction in the PE portfolio along with reductions to its Australian and global equities exposure; its holdings in the latter two categories were reduced from 8.8% to 6.5% and from 30.3% to 24.5%, respectively.

Future Fund Chairman Peter Costello indicated that the results are in line with the fund's expectations due to changes in central bank lending policies and the withdrawal of monetary stimulus across markets. He warned that continued volatility and lower prospective returns will require further changes to the portfolio.

"With the help of our managers and research partners, we're continuing to work hard to identify opportunities that offer diversification to the portfolio and that can help us achieve returns in line with our mandate whilst controlling risk in these challenging times," said David Neal, the fund's managing director.

The sovereign wealth fund reported returns of 8.4% for the year ended December, with total assets under management reaching A$118 billion; this is a substantial decline from the same period last year, when it reported 13.2% returns over the past 12 months. Since its founding in 2006 the fund has generated 7.7% returns per annum, for a total of A$57.9 billion.

While Future Fund's returns declined over the last year, the 8.4% figure is still above the 6.1% annual target. The three-year and five-year averages tell a similar story, dropping from 14.3% to 12.9% and 10.7% to 10.5% respectively, but above the targets of 6.5% and 6.8%.

Upon its founding in 2006 Future Fund received contributions from the Australian government of A$61 billion. It is targeted to reach A$140 billion in size by 2020 to help to government meet the cost of public sector superannuation liabilities.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Australasia
• LPs
• Performance
• Australia
• LPs
• Performance
• Future Fund