Hedging pays off for Future Fund

The Australian Future Fund’s policy of hedging its foreign currency exposures so that 80 per cent of the portfolio is held in Australian dollars has resulted in large inflows due to the AUD’s recent appreciation.

In the September quarter, the Future Fund’s cash holdings increased from 13.1 to 18.5 per cent of the fund. The total portfolio assets of $69.3 billion represent an increase of $2.8 billion in that quarter, with gains across all sectors.

The $A hit a high of  1.0025, whether it settles at parity remains to be seen but it is now trading at around 0.99.

The Future Fund now has 11.5 per cent in domestic equities, 20.7 per cent in developed market global equities, 3.1 per cent in emerging market equities, 3 per cent in private equity, 5.2 per cent in property, 4.1 per cent in infrastructure and timberland, 19.3 per cent in debt securities, 14.5 per cent in alternative assets, and 18.5 per cent in cash.

In the past year the fund has been working hard to allocate its cash, and in the year to June 30, 2010, the fund has deployed more than 28 per cent of its cash, with alternatives and global equities the main beneficiaries. The alternatives allocation, for instance, increased from 5 to 15.6 per cent, and is now sitting just below that.