Bullish global market keeps Future Fund returns on track

The Future Fund has brushed off earlier concerns, as bullish global markets helped lift returns in line with targets.

Future Fund Chairman Peter Costello. (David Geraghty/The Australian)

The Future Fund delivered gains in the March quarter exactly in line with its targeted growth rate as it benefited from a rise in global equity valuations.

For the three months to March 31, the value of the nation’s sovereign wealth fund lifted 1.6 per cent to just shy of $130 billion.

For the first nine months of fiscal 2017, growth stands at 5.6 per cent, placing it on track to beat the annual target of CPI plus 4.5 per cent, despite persistent warnings it may struggle to meet the target in a low rate environment. For the 12 months to March 31 the fund posted a return of 10.5 per cent.

The Fund has returned 7.7 per cent per annum, on average, since inception.

“Global markets have continued to deliver positive returns to investors and the portfolio has benefited from that,” chairman Peter Costello said.

“At the same time the board remains conscious of uncertainty around global growth, global monetary policy, international political tensions and the potential for shocks to investment markets.

“We also expect prospective returns to be lower than in recent times.”

The Fund said it had retained a “patient” approach as best highlighted by another rise in the proportion of cash in its portfolio — from 19.7 per cent to 20.4 per cent.

Alternative assets and developed equity markets also won a greater share of the pie in the March quarter, while declines were recorded for Australian and emerging market stocks, property, infrastructure, debt securities and private equity.

“The Future Fund’s overall risk level remains unchanged and towards the lower end of our normal expectations,” managing director David Neal said.

“This reflects our view that we should only take on additional risk where the expected returns are appropriate. We continue to work hard and in a disciplined way to identify areas of opportunity, taking up those with attractive risk-adjusted returns and ensuring the portfolio is flexible and efficient.”