Australia's Future Fund Monday reported a 0.5% gain for its fiscal first quarter ended Sept. 30, lifting the value of the sovereign wealth fund's investment portfolio to A$117.8 billion ($85.8 billion).
The quarter's A$600 million gain left the investment portfolio up 12.8% from the year before, off the 15.4% pace for the full fiscal year ended June 30.
Fund executives called the latest results in line with their goal of participating in strong markets while limiting the fallout from periods of volatility. “We are pleased with how the portfolio has operated during a period when there was a large correction in Australian equities and increased volatility generally,” said Peter Costello, chair of the Melbourne-based fund, in a news release Monday.
During the quarter, signs of slowing growth in China and continued uncertainty about an anticipated U.S. Federal Reserve interest rate tightening prompted a considerable selloff of stock markets globally. The MSCI emerging markets index tumbled more than 17%; the broad MSCI All Country World Index dropped more than 9%; Australia's ASX 200 fell 8% and the S&P 500 7%.
In the news release, David Neal, the fund's managing director, said the latest results were “consistent with our expectation of lower long term prospective returns” going forward. He reiterated that, as a result, the portfolio's overall level of risk is lower now than it's been over the past few years, even as “we continue to work hard to identify and exploit interesting opportunities.”
The fund's latest asset allocation figures suggest that Mr. Neal's investment team found those opportunities primarily in the private lending segment which dominates the Future Fund's debt securities allocations, and in developed market equities over the past quarter – offset by a drop in the fund's cash holdings to 15.1% from 19.5%.
The fund's allocation to debt securities ended the quarter at 12.7%, up from 9.8% at the close of the previous quarter.
Allocations to developed market equities, meanwhile, rose to 18.8% from 17.6%, even as declines in emerging markets equities, to 7.9% from 9.4%, and Australian equities, to 6.4% from 6.8%, saw the fund's overall holdings of publicly listed equities fall to 33.1% from 33.8%.
The fund's private markets investments edged higher, with allocations to private equity climbing to 12.0% from 10.8%; infrastructure & timberland increasing to 7.7% from 7.4% and property rising to 6.4% from 6.0%.
Allocations to hedge funds, meanwhile, rose to 13.1% from 12.7%.