Australia's Future Fund, Melbourne, announced a 0.9% decline for the fiscal year through June 30, together with moves to trim portfolio risk and boost its ability to respond nimbly in uncertain times.
For the quarter ended June 30, meanwhile, the portfolio's value edged down 0.7% to A$161.1 billion ($110.7 billion).
Sue Brake, the sovereign wealth fund's acting chief investment officer, in a news briefing Wednesday, said her team was "pleased" that the Future Fund portfolio was able to emerge from a period of heightened volatility with only "muted drawdowns."
With a tougher investment environment ahead, she said the portfolio is positioned now "just moderately below our neutral risk settings," with an eye to being able to respond flexibly if conditions remain volatile.
The fund's mandate is to achieve investment returns of 4 to 5 percentage points in excess of consumer price inflation without taking excessive risk, Ms. Brake said.
The biggest change to Future Fund's portfolio mix over the latest quarter was an increase in cash allocations to 17% of the portfolio from 9.6% at the end of March — an jump of almost A$12 billion. The move brings the fund's risk exposures into line with what it requires to achieve its mandated return target, Ms. Brake said.
Despite a sharp rebound in equity markets around the world since late March, the fund's combined allocations to developed markets, emerging markets and Australian equities ended the quarter at 34%, up only marginally from 33.7% as of March 31.
The fund's combined allocations to illiquid alternatives — private equity, real estate, infrastructure and timberland — tumbled to 28.1% from 32.4%, while allocations to hedge funds dropped to 12.9% from 14.7%.
Allocations to debt securities, meanwhile, dropped to 8% from 9.7%.