Australia’s Future Fund looks to tangibles

The A$72.9 billion ($78.9 billion) Australian Future Fund will ramp up its tangible asset investments this quarter to more than 14.5 per cent of the fund with a long-term goal of lifting that to 25 per cent, a spokesman said.

In its recent quarterly update tangible asset investments in property, infrastructure and timberland made up more than 10 per cent of the fund, but is expected that this will rise to 14.5 per cent of the fund by the end of June, the spokesman said.

On its current size this would mean investments in these assets will top more than $11.3 billion billion by June.

In its quarterly update the Board of Guardians said they would continue to build towards its target asset allocation, with a focus on private equity in addition to property and infrastructure.

The Future Fund achieved a 3.9 per cent return for the quarter ending March 31 (excluding Telstra), giving a return for the first nine months of the financial year of 11.7 per cent.

Despite scaling back its investment in the Telco giant, its Telstra portfolio also returned a surprisingly robust 8.2 per cent for the quarter, to claw back a 0.2 per cent return for the first nine months of the financial year.

Global equities in developed markets make up the biggest proportion of its investment (22.7 per cent) with debt securities the next largest at 19.5 per cent.

On a yearly comparison, the Future Fund has maintained the proportion of its overall investments in developed market equities. It has also boosted its alternative assets investment from 12.3 per cent to 16.3 per cent and shed its cash holdings from 16.5 per cent to 11 per cent.

Including its Telstra holdings the fund is now worth more than $80 billion and has averaged a 5.3 per cent return per annum since launching in 2006.