The Future Fund increases infra exposure

In a statement announcing its annual results, The Future Fund – which was established in 2006 to manage the Australian government’s budget surplus – has revealed that property and infrastructure rose from 4% of the portfolio to almost 10% in the year to 30 June 2010.

The Future Fund, the A$67 billion (€48 billion; $63 billion) fund set up to meet the future pension payments of Australian  civil servants, had 4.5 percent of its portfolio committed to infrastructure on 30 June 2010, amounting to a total commitment of more than A$2.8 billion. At the same date, the fund had 5.0 percent committed to property (A$3.1 billion).

The fund’s alternatives allocation rose during the year from 5.0 percent to 15.6 percent (A$9.9 billion), largely on the back of greatly increased commitments to US hedge funds. Private equity, which is viewed as a separate category, accounted for 3.0 percent of the portfolio (A$1.9 billion).

In the statement, all the portfolio percentages referred to  above exclude The Future Fund’s 10.86 percent stake in Telstra, the Australian telecoms company. The Fund sold off 684.4 million shares in Telstra last August, reducing its stake from 16.4 percent in the process.

Since 1 January 2009, The Future Fund has had responsibility for investing the assets of the A$9.8 billion Building Australia Fund, the A$5.5 billion Education and Investment Fund and the A$4.7 billion Health and Hospitals Fund. All three are so-called “nation-building” funds, launched in 2008 in a stated attempt to modernise the Australian economy.

In the reporting period, the Building Australia Fund and Education Investment Fund both returned 4.6 percent, while the Health and Hospitals Fund returned 4.7 percent. The 12-month benchmark return for the funds was 4.2 percent.

Overall, The Future Fund returned 10.6 percent for the year (excluding Telstra), though three positive quarters were followed by a negative 1 percent return in the final quarter. The holding in Telstra generated a 6.7 percent return. “Improved market confidence through the year has seen performance pick up, albeit that the outlook for global markets remains fragile in the aftermath of the global financial crisis,” said David Murray, chairman of the Future Fund Board of Guardians, in the statement.