Australia’s sovereign wealth fund, the Future Fund, is bullish on private equity and renewable energy, but admitted it will find it “extremely difficult” to achieve its mandate of CPI plus four per cent over the next five to ten years.

The director of the Future Fund’s CIO office, Craig Thorburn, said he and his colleagues are believers in…higher-than-expected, stickier inflation” in the near term. 

“Our big concern is actually hitting that mandate over a consistent five to ten-year period, is going to be extremely difficult,” Thorburn told the Investment Magazine Fiduciary Investors Symposium in the NSW Blue Mountains last month. 

As a result, the fund has repositioned its portfolio against “a raft of different structural changes,” Thorburn said. Around $50 billion has been moved to a range of new strategies and sub-themes, such as alpha-seeking investments in private equity. 

“We’re still attracted to private equity, we’re still attracted to the co-investment program that we’ve developed through that, and enhancing that co-investment activity across other asset classes, like private credit, infrastructure…as well as listed equities, to name but a few,” Thorburn said. 

The Future Fund is the “second biggest investor in the renewable energy space in this country, behind [Andrew] ‘Twiggy’ Forrest,” Thorburn said. “There is a huge pipeline of opportunities coming in terms of this space, we’re really excited about it, and it is something that we really want to own a lot more of, not just in the context of renewables in general, but particularly Australian renewables.” 

The fund has also done a lot of work on “correlation caution,” concerned about a positive correlation between stocks and bonds in the years to come. In the 1970s when the correlation was also positive, “it was a pretty bad period for risk assets, I think a 60/40 portfolio lost on average two percent a year for ten years,” Thorburn said. 

Internalising investments

Alexandra West, chief strategy officer for investments at industry fund Cbus, told the same panel session that the fund had reduced fees by 24 basis points on the investment side and delivered over $500 million to members in benefits as part of an ambitious five-year strategy.  

The fund also increased internally managed assets from 9 per cent, made up predominantly of property and cash, to now 38 per cent across a wider range of asset classes. Cbus has seen large Australian funds and other global peers increasingly internalising capabilities, West said. Funds are also positioning for returns in a more challenging investment environment which means looking at different asset classes including emerging markets. 

Craig Thorburn, Georgina Dudley, Colin Tate and Alexandra West.


West said Cbus currently has no plans to launch offshore offices, but she noted international funds are “evolving their modes of access” to sometimes include “establishing platform entities and partnering with entities that might not be considered traditional partners, to access more investment opportunities.” Harnessing data and tech continues to be a major focus, she said. 

“All of those themes and our choices around that run through our next five-year strategy,” West said. “That’s what’s going globally. We’re a global investor and increasingly in absolute dollar terms, will be investing more offshore.” 

Cbus does not plan to be a mega fund and has “extracted economies of scale and economies of scope” at around $85 billion in assets under management, West said. 

Having merged with Media Super and EISS Super, the fund remains open to other deals, West said, but this is less likely than it was five years ago and the focus will remain on organic growth, with the fund enjoying net positive cash flows of $3 billion a year.   

“The option suite of potential candidates has certainly reduced, and we’re pretty picky about who we want to bring in, we’ve got plenty of scale, plenty of cash flow to compete successfully.”


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