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Sovereign Wealth Funds

Australia Future Fund’s Q1 gain lifts portfolio to A$154 billion

Australia's Future Fund on Monday reported a 5% investment gain for the quarter ended March 31, lifting the value of its portfolio to A$154.4 billion ($108.9 billion).

Peter Costello, the chair of the sovereign wealth fund's board, in a news release, attributed the latest advance to "strong returns in public equity markets" over the March quarter, driven in large part by the U.S. central bank's about-face on further rate increases and easing U.S.-China trade tensions.

The Future Fund's combined allocations to developed market, emerging market and Australian equities rebounded to 32.9% from 29.4% at the end of December.

Among publicly listed stocks, the fund's allocations to emerging market equities posted the biggest gains, surging 30% to A$13.9 billion, or 9% of the portfolio, followed by Australian equities, up 18% to A$10.1 billion and developed market equities, up 12% to A$26.8 billion.

A spokeswoman for the Melbourne-based fund said allocations to equities have increased in anticipation of a more favorable near-term environment for risk assets, even as the longer-term outlook remains subdued.

Over the past quarter, the fund's allocation to cash — which had stood at 20% of the portfolio or more for much of the time in 2015-'17 — dropped to 13.2% from 14.5% as of Dec. 31, the lowest figure since a 12.8% weighting at the close of 2014.

Elsewhere, the fund's substantial allocation to private debt and private markets — at more than 50% of the total portfolio — were little changed, even if the bounce in global equity valuations effectively trimmed their weights.

The fund reported allocations of 15.4% to private equities, down from 15.8% at the end of December; 14% in hedge funds, down from 14.6%; 9.3% in debt securities, mostly private debt, down from 10.1%; 8.2% in infrastructure and timberland, down from 8.5%; and 7% in property, down from 7.2%.

The fund's latest results suggested an admirable balance of "upside capture" in bull markets and "downside capture" in bear markets. The latest 5% gain in a quarter marked by a strong global rally for stocks stood in contrast to the Future Fund's modest 1.2% retreat for a December quarter marked by a dramatic drop in equity prices around the world.

David Neal, the fund's CEO, couldn't immediately be reached for comment.