Australia’s Future Fund reported a 3.3% gain for the quarter ended Dec. 31, lifting the value of its portfolio to A$138.9 billion ($108.4 billion).
With the latest gain, the sovereign wealth fund’s return for the 12 months through Dec. 31 came to 8.8%, well ahead of its mandated target — in terms of returns in excess of Australian consumer price index — of 6.4% for the period.
David Neal, CEO of the Melbourne-based sovereign wealth fund, said in a briefing on the latest quarterly results that the fund’s investment team had boosted risk — in response to improved economic conditions globally — by shifting assets to developed markets equities from cash.
For the quarter, the fund’s allocation to developed markets equities rose to 18.6% of the portfolio from 16.8% as of Sept. 30. Cash holdings, meanwhile, fell to 16.4% from 18.9%.
Mr. Neal depicted that pickup in risk as “material but … modest.”
He said with high valuations for risk assets globally and uncertainties regarding how economies around the global will respond to central bank efforts to scale back their recent unprecedented monetary accommodation, “we do still see vulnerabilities in the market environment.”
For the latest quarter, the fund’s allocations to emerging markets equities rose to 7.7% from 7.2% three months early, while Australian equities climbed to 6.4% from 6%.
The fund’s private debt-focused fixed-income allocations slipped to 9.6% from 9.9%. Hedge funds, meanwhile, claimed the largest chunk of the Future Fund’s roughly 40% allocation to alternative strategies with a 15.2% portfolio weighting, down from 15.4% at the close of the prior quarter, followed by private equity at 12.1%, up from 11.8%; infrastructure and timberland at 7.7%, down from 7.9%; and property at 6.1%, down from 6.2%.