- Cash now 22.9% of fund after increasing from end of 2015
- Developed-market stocks down from prior quarter to 15.2%
Australia’s sovereign wealth fund increased the amount of cash it holds to almost one quarter of its A$117.4 billion ($91 billion) portfolio as it says global central banks have less firepower to respond to economic weakness.
The so-called Future Fund raised its holdings in cash to 22.9 percent as of the end of March, citing the prospect for lower future returns, according to a statement Friday. Since being formed in 2006, its assets have almost doubled from A$60.5 billion, with the fund returning 7.4 percent per year.
Volatility roiled global markets in the first quarter of 2016 amid concern Chinese economic growth is slowing as the Federal Reserve signaled it will raise interest rates again this year. Equity markets have recouped losses since mid-February on expectations global central banks will continue to run loose monetary policy.
“We see prospective returns on risk at a lower level than in the immediate past years,” said Peter Costello, chairman of the fund and the nation’s former treasurer. “We are also conscious that monetary authorities, having stimulated so much, have less flexibility now to respond to future weakness. Given this, we have less risk in the Future Fund than we would under more normal circumstances.”
Developed market equities now comprise 15.2 percent of the fund, down from 17.2 percent at the end of 2015. Cash levels at that time were 20.6 percent.