Australia Future Fund Logs a Stunning 11.5% Return

The Australia Future Fund reigned supreme above its peers in its fiscal year, posting an 11.5% return for the period ended June 30, which encompassed some tough times.

The fund, which grew to A$162.6 billion ($110 billion), outperformed last year’s 9.3% showing, and now has returned 9.8%, 9.9%, 11.3%, and 10.4% over the three-, five-, seven-, and 10-year period. It has also returned 8.2% since inception and crushed its targets, which lay between 5.6% and 6.7%, for each of those years.

“As we navigate a complex investment environment, we are focused on constructing the most efficient portfolio possible for generating strong long-term returns,” Chief Executive Officer David Neal said in March. “To that end, we continue to prioritize and balance diversification and flexibility while carefully managing risk.”

And the fund’s “balance” between the two really paid off. The results are especially impressive as they are not only the fund’s best 12-month returns since 2015, but because pension plans and other financial institutions are reporting low and sometimes negative returns in recent weeks—many which have underperformed their benchmarks.

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So what did it for the sovereign wealth fund? A big bet on equities. Allocations from domestic, developed, and emerging stocks grew to 7%, 18.5%, and 10% of the portfolio, respectively, from 6.5%, 17.4%, and 9% in March. Private equity investments also increased by a smidge, to 15.8% from 15.4%. Property, infrastructure and timberland, debt, alternatives, and cash assets were decreased since then. They stood at 6.7%, 7.5%, 9%, 13.5%, and 11.9%, respectively, on June 30.

Neal reiterated his March sentiments, addressing the complex investment landscape and prioritizing “diversification and flexibility as we dynamically manage the portfolios to respond to shifting global conditions.”

“Accordingly, we are investing in a range of projects to enhance our technology capability and other business processes, which will help us to sustain our strong performance into the future,” said Neal.

‘One of the core principles that we’ve consistently managed the Future Fund to is that we aim to construct a diversified portfolio that is as robust as possible to a range of scenarios,”Raphael Arndt, the Future Fund’s chief investment officer told CIO. “The Future Fund is highly diversified – across geographies, asset classes and within that by different types of risk drivers. We consider the range of possible outcomes in the future, and then we aim to construct a portfolio specifically at managing the risk needed to generate our mandate return target. That is what has delivered our strong long-term performance results.’

Australia is Killing It in the Long Game

Tags: Australia Future Fund, David Neal, Fiscal Returns, Raphael Arndt

Rosemarie McClean

Ontario Teachers’ Pension Plan Chief Operating Officer Rosemarie McClean announced this week that she will be leaving the pension after a 33-year tenure to serve as the chief executive officer of the United Nations Joint Staff Pension Fund. McLean will succeed Janice Dunn Lee, the acting CEO for the UN pension.

In her position at OTPP, McClean leads all operational activities, including management of financial operations for the pension’s investments and portfolio management activities, information technology, process improvement, and project management.

She joined the pension in 1986, and has since simultaneously served as a board member for Alberta Pensions Services Corp., the Toronto Financial Services Alliance, and Heartland Dental, an Illinois-based dental service organization supporting over 800 dentists.

“I have been very fortunate to spend the majority of my career at such a great organization as Ontario Teachers’. The people here are truly exceptional. It has been an honour working with such dedicated teams, who come to work each day with the clear mission of providing excellent service and retirement security to teachers in the province of Ontario,” said McClean.

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Her departure comes as the pension’s CEO, Ron Mock, is set to retire at the end of the year. In July, the plan named Jo Taylor as its new CEO and president effective Jan. 1, 2020.

At the same time, the OTPP recognized a new asset increase by $10.3 billion from December 31, 2018, to a total asset valuation of $201.4 billion. The total-fund net return was 6.3% for the first six months of the year.

“Our focus is on achieving stable results that help deliver financial security to our members through a variety of market conditions,” said Mock. “Our balanced portfolio approach is delivering strong returns that are in line with our long-term objectives.”

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Tags: Janice Dunn Lee, Ontario Teachers' Pension Plan, Rosemarie McClean, United Nations Joint Staff Pension Fund