Future Fund reported its strongest 12-month return in four years amid a shift in allocations to equities from cash.
The Australian sovereign wealth fund Wednesday said it posted an 11.5% return for its fiscal year ended June 30, lifting the portfolio's value to A$162.6 billion ($110 billion). The latest annual return was an improvement from 9.3% the year before and marked the fund's biggest gain since a 15.4% jump for the year ended June 30, 2015.
During the past few years, fund executives pointed to high global capital market valuations as a reason for trimming the portfolio's risk exposures. For the three prior fiscal years, Future Fund reported gains of 9.3%, 8.7% and 4.8%, respectively.
At the June 30 close of the latest fiscal year, the fund's combined allocations to developed market, emerging market and Australian equities — a barometer of its risk appetite — stood at 35.5%, up from 32.2% the year before and well above the 27% to 28% levels of the previous two years.
Allocations to cash, meanwhile, dropped to 11.9% from 15.1% the year before and roughly 21% at the close of the prior two fiscal years.
In a news briefing Wednesday, CEO David Neal said that for the first half of the fiscal year through December the portfolio was defensively positioned. "We were a little worried about the risks in the world" and trimmed equity positions — which stood the fund in good stead when equity markets fell sharply in the quarter ended Dec. 31.
The fund added back risk in January to what Mr. Neal called a "more neutral" level, and the portfolio benefited as central bank support contributed to stronger returns for markets in the second half of the fiscal year through June 30.
Peter Costello, the fund's chairman, said Future Fund continues to enjoy impressive risk-adjusted returns, delivering growth-fund-like gains on an underlying portfolio with the risks of a balanced fund.
