Australia’s Future Fund grew from ~$196.8 billion to to ~$199.1 billion even though its portfolio of equities retreated by nearly $5 billion in the last quarter.

It closed June 30 with $70.6 billion in equities – $16.805 billion of which were Australian equities, $35.806 million in developed market equities and $18.002 billion in emerging markets.

But three months on, this had shrunk to $65.7 billion. Australian equities made up $16.049 billion, developed markets $33.109 billion and emerging markets $16.586 billion.

Its cash reserves grew from $25.9 billion to $29.9 billion. But it also grew its debt securities from $12.98 billion to $14.38 billion.


Future Fund impacted by global equities markets

Overall, the fund is still in positive territory with a 10-year return of 10.5% per annum and it made 22% in FY21.

But it noted the environment had changed in the past few months.

Equities retreated from all-time highs seen in mid-August as the global recovery slowed down and indications were given that stimulus that had driven the recovery would soon be withdrawn.

Lockdowns in Australia’s eastern states also had an impact.

“The lockdown in New South Wales and Victoria during the September quarter is likely to have detracted from growth and Australia is lagging other developed economies in COVID recovery,” said Future Fund chair Peter Costello.

“Global uncertainties around inflation, the adjustment of fiscal and monetary policy and geopolitical tensions remain and despite some weakening in markets during September, asset prices remain elevated.”

“Given this environment, the board has taken a prudent approach to positioning the portfolio with risk levels at a neutral setting around the middle of the range we would normally expect.”

The fund’s CEO Raphael Arndt said more adjustments could be on the way.

“COVID-19 has accelerated and catalysed change in the investment environment including the way households, businesses and markets operate and how countries and economies interact,” he said.

“We are working hard to incorporate our assessment of these paradigm shifts into our decision-making over the long term.”