Australian Future Fund favours hedge funds

David MurrayThe A$66 billion ($58.8 billion) Australian Future Fund has tapped its cash portfolio to increase its exposure to alternatives, with cash dropping from 46 to 15 per cent in the past year, including an estimated allocation of $3.7 billion to three hedge fund managers in the fourth quarter of last year.

In the past year the fund has moved from a 46 per cent cash allocation to about 15 per cent, with alternatives increasing over the time period from 3.7 to 11.4 per cent.

Developed market equities and debt securities have also been beneficiaries of the cash allocations in the past year.

Chair of the Future Fund Board of Guardians, David Murrary, said significant progress had been made in transitioning the portfolio towards the long-term asset allocation.

In the final quarter of 2009, the fund, a bellwether for many large super funds in the region, has allocated an estimated $3.7 billion to three hedge fund managers, plus an unspecified amount to three other managers.

The three new hedge fund managers are Och Ziff, a US-based multi-strategy manager, BlackRock Alternative Advisors, which has various hedge fund strategies managed from several countries, including the former Quellos Capital Management, and Brevan Howard, a UK-based alternatives manager.

The other new managers are: Macquarie Investment Management for Australian equities; and M&G Investment Management and Vianova Asset Management (a boutique backed by Australian Unity), both for debt securities.

The new hedge fund managers have taken the allocation to alternatives from $2.4 billion to $6.2 billion during the December quarter.

The Future Fund now has mandates with 10 alternatives managers and 58 managers overall.