The Future Fund’s allocation to cash is the highest it has been for more than five years, increasing from 12.8 per cent to 15.2 per cent in the past quarter.

The cash allocation has moved between a low of 5.8 per cent in June 2013 and this new high of 15.2 per cent. December 2010 was the last time the $117 billion fund had a larger allocation to cash at 15.8 per cent.

This move towards cash has been a trend over the last three quarters with the allocation increasing from 9.8 per cent to 12.8 per cent and then 15.2 per cent.  With the exception of private equities other asset classes’ allocations – Australian equities, global equities in both developed and emerging markets, property, debt securities, alternative assets, infrastructure and timberland – have all been decreased since December.

The Future Fund has built up its cash allocation partly because of asset sales and partly due to deliberately taking risk off the table due to “considerable uncertainty in global markets” together with a view that prospective returns will be lower than experienced in recent years.

Of funds that provide members with market overview updates, there was agreement with this outlook from Con Michalakis, chief investment officer of Statewide Super.

In Michalakis forecast “materially lower returns from here, as all asset classes look fair to fully valued” in his quarterly report to members.

Consequently, Statewide Super has taken profits from international shares and reduced Australian share exposure. The money has gone into increased cash holdings and new absolute return strategies.

There is international gloom about the prospects growth in investment markets, according to Rob Hogg, senior consultant at Frontier Advisors after a fact finding mission overseas.

Conversations with investors in North America, Europe and Asia reported expectations of low growth and lower expectations for interest rates than a year ago.

Hogg, who leads the capital markets team at Frontier, said: “There seems to be greater consensus about low growth as far as the eye can see.”

There is also a reversal of expectations on interest rates.

“Last year investors had an expectation that interest rates would rise over the coming year, but they went in the opposite direction,” Hogg said. “The consensus is now that rates will be low for a long time.”

He observed that the full impact of low interest rates were not yet priced into unlisted assets.

One investor taking a contrarian view on the bleak outlook is John Pearce, chief investment officer of UniSuper.

The fund is overweight Australian equities and while he acknowledges the reversal in fortunes for resource companies and the difficulty in finding earnings growth across the board currently, he is bullish on other sectors of the Australian market.

In his most recent investment update, he states: “Falling input prices (particularly energy), lower wage growth, and a more competitive currency will also act as tailwinds for many Australian companies.”