Future Fund hits record $211.9bn value
Australia’s sovereign wealth fund has exceeded its long-term investment return target for 2023 despite inflationary pressures as it reaches a record value of $211.9 billion.
Announcing a portfolio update to 31 December 2023, Future Fund reported a return of 8 per cent for the last calendar year, which added $15.6 billion in earnings to the fund. However, the result slightly fell short of its one-year target return of 8.4 per cent.
Observing the fund’s performance over a 10-year period, it outperformed its 6.9 per cent target with returns of 8.2 per cent.
“Since 2006 the Future Fund has taken a once and only contribution of $60.5 billion and grown it to a record $211.9 billion. It has earned more than $151 billion,” said Peter Costello, chair of the Future Fund board of guardians.
“As the government’s only substantial financial asset, the fund is fulfilling its role of strengthening the nation’s balance sheet, which is now carrying significant government debt.”
Total funds managed by the board of guardians increased to $272.3 billion.
Costello also confirmed his term on the board will end on 3 February 2024 after 14 years, including 10 years as the chairman of the Future Fund.
“I leave with great confidence in the will and ability of the agency team to continue producing strong returns for the benefit of future generations of Australians,” he added.
Former treasurer Costello set up the $256 billion Future Fund in 2006, and has been its director since 2009. He was appointed as chairman in February 2014 for a five-year term, then reappointed in February 2019.
Moreover, the chairman noted that Australia’s 12 interest rate rises are finally moderating price rises.
“However, inflation is still well above the government and Reserve Bank of Australia target. Strong labour markets, wage pressures and high energy prices are still feeding into price pressures,” he added.
“Although inflation has fallen from its peak, it is still well outside the target range of 2 per cent to 3 per cent and won’t be tamed until it is back within the target band. Whilst markets rebounded on an expectation that rates could be lower this year, there is still a way to go.”
According to Raphael Arndt, Future Fund chief executive, sustained higher inflation alongside less investor-friendly conditions continue to be prominent risks for the fund.
“The changes we have made are designed to provide resilience and flexibility to the changing investment environment. The portfolio is positioned around a neutral risk setting with a focus on resilience while we seek opportunities to generate attractive long-term returns,” he said.
AUTHOR
Jasmine Siljic
Recommended for you
Outflows from an Australian private markets fund manager have caused FUM at Pacific Current to decline by $1 billion in the last quarter.
Former RIAA chief executive Simon O’Connor has joined the ethical advisory panel at U Ethical Investors.
Financial services leaders are “all cashed up with nowhere to grow” when it comes to M&A activity, according to Deloitte, with 90 per cent saying they have strong balance sheets ready for an acquisition.
As fund managers are urged to diversify their product ranges, they are finding a faster way to do this is via an acquisition of existing firms but experts say it is not without potential culture clashes.
