Australia’s Future Fund delivered a 9.1% annual return in fiscal 2024, adding A$18.8 billion ($12.65 billion) to its portfolio and bringing the Australian sovereign wealth fund’s total to A$224.9 billion ($151.35 billion.)
The performance in the year that ended June 30 lifts the Future Fund’s 10-year average annual return to 8.3%, exceeding a mandate target of 6.9%. Future Fund CEO Raphael Arndt said the strong result reflects the work done over the past few years to understand and navigate significant, lasting changes in the world.
“The changes in the investment environment and the resurgence of geopolitical risks of which we have been warning for several years continue to play out,” Arndt said in a statement. “As we have explained, our portfolio is now more robust to these events with relatively low exposure to fully priced equities, low exposure to interest rates and a range of inflation hedges in place. In this environment, I consider the annual return of 9.1% to be very strong.”
Notably, a Future Fund position paper from earlier this year warned that the longer-term investment environment is expected to be more complex, volatile and ultimately more challenging for investors. According to the paper, forward-looking returns will be more difficult to earn, prompting a need to refresh how the Future Fund invests to continue meeting its investment purpose.
Arndt also noted that equity markets rallied strongly over the year, thanks in large part to the strength of the U.S. economy and expectations that U.S. interest rates had peaked and would soon begin to fall. He added that private credit and alternatives also delivered strong returns, as anticipated by the fund’s view that inflation and rates would remain markets volatile.
“In a year where equities were the only strongly performing traditional asset class, many of our positions, and in particular our hedge fund portfolio, delivered,” he said.
Future Fund Chair Greg Combet said in a statement that the long-term investment success of the fund makes a valuable contribution to Australia’s finances.
“In taking up my role, I have been impressed with the culture of the organization, the capability of the team, and the investments of the fund in Australian infrastructure assets such as airports, a major port, renewable energy and telecommunications and data centers,” Combet said. “These are important investments in Australia’s future. Building on these will be a priority for me, particularly given the investment opportunities in transition.”
This article initially appeared in our sister publication, Financial Standard, which, like CIO, is owned by ISS STOXX.
Tags: Asset Allocation, Australia Future Fund, Greg Combet, Raphael Arndt