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INVESTING/PORTFOLIO STRATEGIES

Australia trims Future Fund’s investment target by 50 basis points

Australia's government announced Wednesday it had trimmed the A$129.6 billion ($95.7 billion) Future Fund's investment return target by 50 basis points to the consumer price index plus 4% to 5% a year, effective July 1.

A spokeswoman for the Melbourne-based fund said the reduction was the first change to the Future Fund's mandate since it was established in 2006, with marching orders to achieve annual returns of CPI plus 4.5% to 5.5%.

Raphael Arndt, the fund's chief investment officer, noted in a speech May 5 that inflated asset values now have left asset owners facing the choice of either taking on more risk or moderating their return expectations, “with both options being unappealing.”

The fund's investment leadership has warned for more than a year that lofty market valuations would leave returns for coming years down from the more than double-digit annualized returns of the past five years.