Australia SWF sights ‘New China’ healthcare opportunities

Raphael Arndt, the chief investment officer of Australia’s A$122.8bn Future Fund, said the fund is looking at opportunities in Chinese healthcare.

Raphael Arndt, the chief investment officer of Australia’s A$122.8 billion ($92.5 billion; €82.9 billion) Future Fund, said the fund is looking at opportunities in Chinese healthcare, as reported in sister publication Private Equity International.

The move is part of a general strategy to capitalise on businesses set to benefit from China’s middle class consumption amid slower global economic growth, Arndt said during the Australia Venture Capital and Private Equity Association Alpha Conference held earlier this week.

“The fund has recently been increasing exposure to onshore Chinese strategies where it can access the ‘New China’ opportunities being generated by an emerging middle class such as in healthcare, tourism, agriculture, and internet-enabled retail,” he said.

Arndt added that these trends are not accessible through public equity markets, which are “heavily tilted to the ‘Old China’ sectors of construction, manufacturing and state-owned enterprises.”

According to data from its 2015 annual report, Future Fund invested in Beijing-based CDH Investments, which counts among its holdings Henan-based pork producer WH Group and Foshan-headquartered home appliance company Midea.

The Future Fund, which on Tuesday posted portfolio updates as of June 2016, said it doubled in size since its inception 10 years ago, growing from the government’s A$18 billion seed capital to A$122.8 billion this year, “purely on the basis of investment performance”.

It delivered a strong 4.6 percent final-quarter performance and a 7.7 percent return per annum over the last 10 years, driven by a “more prudent approach to balancing the risk and return requirements of its portfolio, taking on risk only where the returns justify”.

As at the end of June 2016, the fund has invested about 6.3 percent in Australian equities, 22.5 percent in global equities, 7 percent in property, 6.7 percent in infrastructure and timberland, 33.3 percent in cash and debt securities, and 13.7 percent in alternative assets (assets not covered in the above-mentioned categories).

The Future Fund has returned an average 7.7 percent per annum net of all fees and costs, above its target return of 6.9 percent, and has more than doubled the original contributions of A$60.5 billion.