Future Fund boosts infra allocation by A$2.6bn

Australia’s A$91.7bn sovereign wealth fund’s allocation to infrastructure surpassed that in relation to private equity and real estate this year.

Australia's Future Fund, the country’s A$91.7 billion (€64.4 billion; $86 billion) sovereign wealth fund, has increased its allocation to infrastructure and timberland to 8 percent over the past year, from just 5.9 percent the previous year – reflecting an increase of A$2.6 billion in just 12 months, according to the fund’s most recent portfolio update.

With this increased allocation, Future Fund’s investments in infrastructure now total A$7.3 billion, and have surpassed its investments in both private equity and real estate. That is a sharp contrast from just a year ago, when infrastructure was the second-lowest asset class in terms of allocation for the fund.

“Across economies, policy efforts to lift economic activity have been maintained and markets broadly have continued to respond positively,” Mark Burgess, managing director of Future Fund, said in a statement. “We have adjusted the portfolio to take advantage of this strength, repositioning over the past 12 months to attractively valued assets while also selectively selling assets we deem as becoming fully priced. Of note has been our shift toward listed equity, infrastructure and private equity.”

To September 30, Future Fund showed an 8.2 percent return per annum over a five-year period, and a 9.7 percent return per annum over three years. Since the fund’s inception in May 2006, the fund has achieved an average return of 6.4 percent per annum.

“As a disciplined long-term investor we will continue to build and actively manage a diversified portfolio designed to capture returns when markets are buoyant while avoiding excessive levels of risk,” Burgess added.

In April, Future Fund completed A$1 billion of acquisitions in minority stakes in airports, mostly in Australia, from the Australian Infrastructure Fund (AIX). The fund still has a long way to go, however, to meet its allocation target of 30 percent to real estate and infrastructure combined. As of now, that allocation stands at 15.2 percent.

Wendy Norris, director of infrastructure and timberland for Future Fund, will be speaking at next week’s Global Investor Forum in Hong Kong.