Sovereign wealth fund sticks with private equity

Australia’s sovereign wealth fund, the Future Fund, has maintained a substantial allocation to private equity as it deals with increasingly difficult global market conditions.

The Future Fund’s $33.28 billion allocation to private equity – including venture capital – represented 13.8% of its total portfolio on 31 March, down 0.1% since 31 December.

The largest increase in allocation over that period was to total listed equities, up 2.8% to 43.7%. This included an increase of 0.5%, to 10.9%, in Australian equities.

The allocation to credit was reduced significantly, down 7.5% to 9.3%.

Alternatives – mainly hedge funds – remained the second largest allocation after equities, increasing 0.3% to 15%.

Infrastructure and timberland increased by 0.2% to 10.2%, while property increased 0.1% to 4.8%.

Cash holdings reduced 2.8% to 3.1%.

Over the 12 months to 31 March, the Future Fund returned 7.9% taking its value to just under $240.8 billion.

Future Fund chief executive Dr Raphael Arndt said: “This was a strong result that reflects the work we have been doing in the past four years to ensure the portfolio is resilient and flexible to a range of scenarios.

“We are seeing consequential changes in geopolitical, economic and market environments at the moment and that is causing volatility and uncertainty for investors.”

Arndt said the Future Fund team expected these changes would lead to higher inflation and higher bond yields for an extended period.

Chief investment officer Ben Samild said the return rate was pleasing in the light of increasingly difficult market conditions.

“Over the past 12 months there were particularly strong contributions to performance from the alternatives, credit, and infrastructure & timberland asset classes, highlighting the resilience and diversification of the portfolio,” he said.

Image: Future Fund chief executive Dr Raphael Arndt.