The Future Fund, meanwhile, doesn't rely on a reference portfolio with passive exposures to equities and bonds to determine the level of risk its willing to take in pursuing its investment goals, as asset owners in the region such as GIC, the $690 billion Singapore sovereign wealth fund, and Auckland-based, NZ$58.4 billion ($35 billion) New Zealand Superannuation Fund do. It employs its own measure of risk, called equity equivalent exposure.
That number, currently pegged at 55% to 65% of the portfolio, is "owned" by the board but "how we express that risk and how we take that risk is kind of up to us," Mr. Samild said. "So, whether we express that risk through credit, through equities, through infrastructure, through private equity, through listed equities, through small cap, through big cap, through Japan, through Australia, whatever, that's kind of an ongoing discussion and there's a lot of flexibility around that," he said.
Likewise, the fund doesn't set allocation targets for different asset classes. While such a framework could provide some welcome clarity, it would come at the cost of making it harder to consider and pursue new opportunities. A byproduct of such targets would be "an anchoring, which we think is not necessarily helpful," he said.
"Of course, there's also an anchoring to whatever … you own, so we're also constantly questioning ourselves about that, which is important," Mr. Samild said. "Our process is genuinely 'let's always question what we own and what we might own and how we might improve on our existing portfolio,'" he said.
"We have the ability to change (the fund's portfolio) reasonably aggressively and quickly if we have sufficient inclination and confidence" to do so, Mr. Samild said.
Other total portfolio approach practitioners in the region have likewise managed to maintain flexibility and dynamism in managing their portfolios.
Singapore's GIC, which on its website cites its total portfolio approach as a "competitive edge over strategic asset allocation models that could be more easily disrupted by policy and macroeconomic inflection points," has in recent years maintained portfolio risk below the level allowed by its 65% global equity/35% global bond reference portfolio, while its allocations to specific asset classes have alternately exceeded and trailed its policy portfolio targets.
And while New Zealand Super maintains an 80% equity/20% bond reference portfolio, a spokesman for the Auckland-based asset owner said the fund's strategic tilting program — which employs index futures or derivatives to buy or sell equities or currencies in expectations of benefiting from mean reversion — allows it to raise or lower risk in response to market conditions.