Australia’s Future Fund reported a 17.2% gain on its investments for calendar year 2013, lifting the value of its portfolio to A$96.6 billion (US$84.6 billion.)
In a briefing early Monday, executives of the Melbourne-based fund said an early 2013 asset allocation shift into equities from credit contributed to the portfolio’s strong returns for the year. Currently, however, it’s tough to find any asset classes offering clear value, they said.
David Neal, the Future Fund's chief investment officer, said at the briefing that the big macroeconomic trends of the past year, marked by extraordinary central bank monetary stimulus to combat deflation, are likely to persist for a while, but with the U.S. moving to pull back a bit.
Both Mr. Neal and Mark Burgess, the Future Fund’s outgoing managing director, said they don't believe equity markets are overvalued at present but the need to emphasize prudent diversification is growing as the bull market equity trends of the past four years can’t be expected to continue much longer.
For the Future Fund’s investment team, which pursues a dynamic asset allocation approach, that spells a more challenging environment for the coming year.
“In our view,” Mr. Neal said, valuations across most asset classes — including real estate, infrastructure and credit — “look full … (and) it’s certainly getting harder to find pockets of really interesting valuations.”
As of Dec. 31, the Future Fund’s allocation to public and private equities stood at 50.9%, up from 41.3% the year before.
Within equities, the developed market equities allocation as of Dec. 31 was 24.5%, up 6.4 percentage points from a year earlier, followed by emerging market equities, 8.6%, up 3.3 percentage points.
Private equity, meanwhile, saw a 0.9 percentage point rise to 7.7%, while Australian equities dropped one point to 10.1%.
Allocations to alternative assets stood at 14.6%, down 1.7 points from the year before, while debt securities accounted for 12.2%, down 6.9 points.
Infrastructure and timberland investments stood at 8%, up 1.6 points. Allocations to property claimed a 5.3% share, down 1.3 points. Cash, meanwhile, ended the year with a 9% allocation, down 1.3 points.