Victorian Funds Management Corp. lost $1.3 billion in the third quarter after falls in global stock prices.

The Melbourne-based fund is cutting its exposure to stocks and increasing its cash holdings.

“Our portfolio is now more defensive,” the fund said in a statement. “We remain overweight inflation-linked bonds. We expect to maintain a defensive portfolio construction.”

Victorian Funds managed $34.5 billion on September 30, down from $37 billion in June 2008 and $35.9 billion on June 30.

Its Australian equities investments lost 11 per cent in the three months to September 30, its international share investments fell 12.6 per cent.

But its private equity investments rose 7.5 per cent in value, its inflation linked bonds gained 7.1 per cent and its property investments rose 2.5 per cent.