Falling Australian dollar helps drive a 12.2pc return for the Future Fund

The strong performance of the US share market and a falling Australian dollar has helped drive the Future Fund to a record $234bn.

The Future Fund’s value has soared to a record $234bn.

The strong performance of the US share market and a falling Australian dollar has helped drive a 12.2 per cent return for the Future Fund in 2024, boosting its value by $26bn to a record $234bn.

Releasing the fund’s results for the year, chief investment officer, Ben Samild, said the strong returns were an “extremely pleasing result driven by the strength of the US economy.”

“These conditions provided lots of opportunities for active return generation and the Future Fund benefitted from its increasing allocation to international equities,” he said.

The Future Fund increased its exposure to international shares over the year from 17.8 per cent at the end of December 2023, to 24.7 per cent at the end of December 2024.

Mr Samild said fears at the beginning of last year of a US and global economic downturn caused by rates had not been realized.

“Inflation has moderated and economic growth, trade, employment, wages and corporate

balance sheets remain in good shape, underpinning another strong year for the US share

market,” he said.

He said the fund’s investments in alternatives, credit and infrastructure had all made positive contributions.

“Returns were helped by the decline in the Australian dollar, which increased the value of offshore assets,” he said.

The latest results means the Future Fund has now delivered a 10-year average return of 8.1 per cent, well in excess of its mandated target of 6.8 per cent a year.

Mr Samild said the Future Fund’s portfolio had been “constructed to be more resilient to inflationary pressures and more responsive to the fast-changing world while generating attractive long-term returns.”

The results show the Future Fund has increased its exposure to Australian shares over the year from 9.6 per cent at the end of 2023 to 10.4 per cent at the end of December 2024.

It has significantly reduced its allocation to cash from nine per cent at the end of 2023 to 5.9 per cent at the end of 2024, ending the year with a $13.9bn in cash, down from $18.9bn at the end of 2023.

The year saw it reduce its relative exposure to property from 6.4 per cent to 4.7 per cent and its exposure to emerging market shares from 6.3 per cent of the portfolio to 5.8 per cent.

The total funds managed by the Future Fund Board of Guardians have risen to $304.5bn, from $211.9bn at the end of 2023.

“This was a strong result that reflects the work we have done over the past few years,” the fund’s chief executive officer, Dr Raphael Arndt, said.

He said changes in the Future Fund’s investment strategy were highlighted in its paper Geopolitics: the Bedrock of the New Investment Order which had identified major changes occurring in the world economy.

“We have focused on ensuring we are equipped to navigate these changes to the investment

environment including the resurgence of geopolitical risks,” he said.

He said the fund’s investment returns had boosted the value of the fund by $177bn since it was established in 2006.

“Investment returns also helped increase the value of the six other funds managed by the

board to $66.7bn, from $60.4bn at 31 December 2023,” he said.

“This was after accounting for $790m in payments to support various policy initiatives

including medical research, the work of the Indigenous Land and Sea Corporation and

drought and disaster resilience.”

While the Fund has benefitted from its strong offshore exposure, it is now operating under a new investment mandate from the Federal Government requiring it to “have regard to national priorities.”

It was part of an agreement which saw the government deferred the date at which it may draw on the Future Fund from 2026-27 until at least 2032-33.

Dr Arndt said the arrangement provided “the foundation for the Future Fund to become an enduring institution and to continue to invest for the long term.”

The funds new investments included buying a stake in the Eastlink toll road, and a national portfolio of student accommodation facilities.

“We continue to evaluate investment opportunities in the Australian economy consistent with

the new investment mandate,” he said.

Originally published as Falling Australian dollar helps drive a 12.2pc return for the Future Fund