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Australia's Future Fund returns 7.8 pct in 2016, tops target

Published 2017-01-30, 08:12 p/m
© Reuters.  Australia's Future Fund returns 7.8 pct in 2016, tops target
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Jan 31 (Reuters) - Australia's sovereign wealth manager, the Future Fund, beat its target in the year ending Dec. 31 with a return of 7.8 percent after shifting cash to infrastructure and private equity.

"Over the quarter we deployed capital into our private equity program, primarily through co-investments in venture capital and growth," said David Neal, managing director of the A$127 billion ($96.02 billion) Future Fund.

He said the fund cut its cash allocation to 19.7 percent, from 22.1 in the last quarter, due to a falling Australian dollar AUD=D4 . The Aussie shed more than 6 percent in the quarter to December of last year after the election of Donald Trump as U.S. President lit a fire under the U.S. dollar.

For the quarter, the fund returned 2.4 per cent, ahead of the targeted 1.7 per cent. Over ten years, the fund paid an average of 7.8 percent, versus a target of 6.9 percent.

Peter Costello, chairman of the fund, highlighted uncertainty around global monetary policy and geopolitical factors as risks for the future.

"We see a challenging investment environment ahead with elevated risks and lower prospective returns than in previous years," he said.

The fund delivered 8.4 percent in the year ending Dec. 31 2015 and an average of 11.2 percent in the past five years.

Equities - both Australian and global - accounted for 29.1 percent of its assets, a touch lower than 29.4 percent in September. The exposure to private equity rose to 10.9 percent from 10.0 percent, while that to infrastructure nudged up to 7.9 percent, from 6.6 percent.

The Future Fund was set up in 2006 with contributions of A$60.5 billion to cover pension liabilities for public servants.

Last year, the fund was part of a consortium which won a A$9.7 billion bid to purchase Australia's busiest port. China Investment Corp and Canada's Ontario Municipal Employees Retirement System were also part of the winning group. ($1 = 1.3226 Australian dollars)

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