Australia's Future Fund Returns 8.4% in 2015, Expands Cash Level

  • Sovereign wealth fund managed $83 billion at year-end
  • Withdrawal of global stimulus may lower future returns

Australia’s sovereign wealth fund returned 8.4 percent last year to beat global and domestic benchmarks, as it increased cash holdings to pare risk.

Future Fund, which manages A$118.4 billion ($83 billion), trimmed its global stock and private-equity investments, it said in an e-mailed statement Wednesday. It warned that future returns may be lower as central banks withdraw monetary stimulus.

“We have gradually reduced the level of risk in the portfolio through 2015, reflecting our view of the investment environment,” Managing Director David Neal said in the statement.

The fund benefited from an increase in prices of assets bought by investors hungry for returns amid low interest rates globally. Since 2006, assets have almost doubled from the initial A$60.5 billion, it said in the statement. The 2015 return compares with a 2.1 percent decline for Australia’s benchmark S&P/ASX 200 stock index and a 4.3 percent drop in the MSCI gauge of developed and emerging world markets.

Still, the return fell short of the 12.9 percent three-year average and was the lowest since 2011, the statement showed. Cash holdings increased to 20.6 percent of the portfolio as of Dec. 31 from 15.1 percent three months earlier, it said. Global equities made up 24.5 percent, down from 26.7 percent.

Future Fund is aware of the risks “as central banks adjust their policy settings and as policy makers attempt to generate sustainable growth,” Chairman Peter Costello said. “This outlook means greater volatility and lower prospective returns.”

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