Australia’s Sovereign Wealth Fund Posts Record Return in 2013

Australia’s Future Fund, the country’s sovereign wealth manager, returned a record 17.2 percent in 2013 as it increased its allocation to global equities at the expense of debt securities.

The A$97 billion ($85 billion) Melbourne-based fund, which was established in May 2006, boosted its allocation in stocks worldwide to 33.1 percent in the fourth quarter of 2013 from 23.4 percent a year earlier, the fund said in an e-mailed statement. It reduced its holdings of bonds to 12.2 percent from 19.1 percent over the same period.

The returns last year were up from 12.8 percent in 2012, according to the fund’s website. Loose monetary policy in the U.S. had encouraged the market to pay more for assets so that most classes have now reached their “full” valuations, the fund’s chief investment officer, David Neal, said in a conference call.

“The winds of very strong returns are getting more difficult,” Mark Burgess, managing director of the Future Fund, said in the call. “Many of the factors behind them are already factored into the asset classes.”

The Australian-dollar value of the fund’s foreign assets was helped by a drop in the currency’s exchange rate, which weakened 14 percent against the U.S. dollar in 2012, according to data compiled by Bloomberg.

“Future returns will increasingly need to be driven by improved global growth,” Burgess said in the statement.

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