Future Fund, Melbourne, increased its cash holdings by 1.5 percentage points in the third quarter of the calendar year as the sovereign wealth fund manages geopolitical, currency and inflation risks, according to its latest portfolio update published on Nov. 1.
The fund’s total assets rose to A$229.7 billion ($158.5 billion) as of Sept. 30, marking an 11.9% return for the preceding 12 months. Chief Executive Officer Raphael Arndt attributed the strong result to the listed equity markets rally driven by the U.S. economy.
The portfolio also saw positive contributions from its alternatives, credit and infrastructure holdings, Arndt wrote in the portfolio update.
The fund increased its allocations to Australian equities to 10.9% from 10.3% the previous quarter and to global developed markets to 21.9% from 20.8%. Emerging market equity holdings were cut, however, to 5.7% from 6.2%.
Exposure to private equity fell to 12.9% from 14.5%, and property decreased to 12.9% from 14.5%. Other alternatives such as hedge funds were also reduced to 14.7% of the portfolio from 15.2%. Credit allocation fell slightly to 10.9% from 11%, while infrastructure and timberland held stead at 9.9% of the portfolio.
Cash made up 8.2% of the portfolio, up from 6.7% in the quarter ended June 30, marking the first quarter in at least 12 months that the fund has increased its cash holdings.
Since 2020, the fund has been steadily reducing its cash holdings. At the end of the financial year that ended on June 30, 2020, the fund had 17% of the portfolio in cash. By June 30, the fund had 6.7% of the portfolio in cash.
“We have continued to pursue investments that provide greater exposure to the local currency and protection against higher inflation. The portfolio is positioned towards the middle of its risk settings,” Arndt said.
The fund has been releasing a series of position papers that detail its approach to investments. Geopolitics in particular was highlighted in its latest position paper in June as a growing factor to consider in portfolio construction.
