Approach impacts growth

Fund’s returns proving less than super

A risk-averse investment strategy has seen the Future Fund post returns of just 1.6 per cent for the three months to March, well below that of its industry rivals.

A RISK-AVERSE investment strategy has seen Australia’s sovereign wealth fund post returns of just 1.6 per cent for the three months to March, well below that of its superannuation industry rivals.

In its latest quarterly report card, the Future Fund said returns for the financial year so far were 5.6 per cent.

The average balanced super fund returned 2.5 per cent for the quarter, while the majority of funds earned 8.6 per cent for the nine months to March, according to independent research companies SuperRatings and Chant West.

The Future Fund was established 10 years ago to manage the superannuation liabilities of Commonwealth employees. However, it has since expanded to become a general investment fund for the government.

According to the latest update, the Future Fund’s total assets are worth $129.6 billion, up from $127.6 billion three months ago.

Future Fund chairman and former treasurer Peter Costello said the fund was performing well, however he warned of lower returns ahead.

“Global markets have continued to deliver positive returns to investors and the portfolio has benefited from that,” Mr Costello said.

“At the same time the board remains conscious of uncertainty around global growth, global monetary policy, international political tensions and the potential for shocks to investment markets.

“We also expect prospective returns to be lower than in recent times. With all this in mind we continue to take a patient approach to investing, balancing the need to deliver returns against our obligation not to take excessive risk.”

The proportion of the fund’s portfolio in cash climbed from 19.7 per cent to 20.4 per cent in the quarter. It reduced its exposure to Australian equities, property and infrastructure.

The Future Fund holds growth assets of between 60 and 70 per cent, similar to the balanced investment option of most super funds. Its investment mandate, however, is similar to a growth-style super fund as it aims to achieve returns of 4.5 to 5.5 per cent above inflation.

The fund’s board also manages other government funds, including the Disability Care Australia Fund.