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Future Fund reports 0.8% quarterly gain, incremental move to equities from cash

Australia's Future Fund on Tuesday reported a 0.8% investment gain for the quarter ended Sept. 30, lifting the value of the sovereign wealth fund's portfolio to A$134.5 billion ($105.4 billion).

The latest gain trailed the fund's 1.4% target return for the period, reflecting its long-term mandate of delivering returns 4 to 5 percentage points above consumer price inflation.

The fund's returns for the 12 months through Sept. 30, at 7.9%, continued to exceed its mandated target of 6%.

In a potential sign that fund executives, after trimming portfolio risk in recent years, are becoming more confident about global growth prospects, the latest portfolio review showed a shift of roughly A$2 billion to developed market equities from cash.

The move saw the Future Fund's cash holdings slip to 18.9% of the portfolio from 21% as of June 30 — the lowest weighting in two years since the 15.1% allocation the fund reported as of Sept. 30, 2015.

By contrast, the fund's allocation to developed market equities, after keeping to a tight range between 14.9% and 15.3% over the prior six quarters, jumped to 16.8% — the highest allocation since the 17.2% weighting the fund reported for Dec. 31, 2015.

A Future Fund spokeswoman said in an email that while risk levels remain toward the lower end of the investment team's normal expectations, “we have increased risk at the margin through developed market equities, reflecting improved global growth and that some risks appear to be receding.”

Elsewhere, the fund reported allocations of 15.4% for hedge funds, 11.8% for private equity, 9.9% for debt securities, 7.9% for infrastructure and timberland, 7.2% for emerging market equities, 6.2% for property and 6% for Australian equities.

As of June 30, the fund had allocated 14.8% for hedge funds, 11.6% for private equity, 10.6% for debt securities, 8% for infrastructure and timberland, 6.9% for emerging market equities, 6.2% for property and 6% for Australian equities.