Fund news looks good, but not so the future
THE future fund has reduced its exposure to the sharemarket, with chairman Peter Costello warning difficult times are ahead.
Mr Costello said “prudent, patient” investing helped the fund to almost double in nine years.
The fund – set up to meet the Federal Government’s superannuation liabilities – has chalked up a return of 15.4 per cent for the past financial year, generating $15.6 billion.
The fund’s investments value is $117.2 billion, compared with the initial $60.5 billion cash injection made by the former Howard government.
The mandate of the fund, set up in 2006 by Mr Costello when he was Liberal treasurer, is to make returns equal to inflation – measured by the consumer price index – plus 4.5 per cent.
“It’s in excess of that objective as of the moment, which is good because we are going into more difficult conditions,” Mr Costello said yesterday, speaking at the fund’s latest portfolio update.
The enormous stimulatory policy measures being pursued by central banks in recent years, which had helped drive strong rises in asset prices, could not be sustained indefinitely, he said.
“It seems likely that generally returns in the future will be lower than in recent years,” Mr Costello said.
The fund’s managing director, David Neal, said that while the result for the past year was pleasing, he was conscious of the mixed global economic and market outlook.
The fund has taken the opportunity to cut risk in its investment portfolio by reducing the amount it invests in shares.
Mr Neal said it also took a long-term view of markets, rather than trying to predict short-term movements.
He said that in a fragile environment, any news could “spook” markets.
His comments come during a period of pronounced volatility in global stockmarkets, amid concerns over the rate of the slowdown in China’s economy, structural issues in Europe and the outlook for interest rates in the US.