Australia’s sovereign wealth fund delivered 6 per cent in the financial year ended June 30, falling just short of its 6.9 per cent a year target and 8.8 per cent average return over the past decade. It also fell short of the 8.5 per cent return reported by the median balanced fund in the APRA-regulated superannuation sector for the year.
However, the fund, which manages a pool of assets contributed by the Australian government, saw its overall assets under management grow to a record $256.2 billion.
Chair of the Future Fund Board of Guardians Peter Costello, who as federal treasurer in the Howard government was a driving force behind the fund’s establishment in 2006, described the period as a challenging one for investors.
“As interest rate hikes took effect the global and Australian economies slowed and new challenges emerged for long term drivers of growth,” Costello said.
“Inflation persisted through the financial year and while there are signs it may have passed the peak, it remains elevated and well above the 2-3 per cent range targeted by the Reserve Bank of Australia.
“Data shows wage and price pressures that contribute to inflation remain strong, leaving open the possibility that inflation will continue and the path to lower interest rates remains a way off.”
Costello said the fund continues to hold the position that downside risks pervade the sharemarket, despite a “surprisingly strong” second half of the financial year.
He warned that persistent higher inflation meant “real returns to investors will remain below those of the past decade”, managing market and community expectations.
The comments are in a similar vein to those made by former chief investment officer Sue Brake and CEO Raphael Arndt over the past two years. “We reduced our risk settings to below neutral… on the basis that world markets were not pricing in longer term interest rates that match our longer-term view,’’ Brake said in February last year.
Arndt said the fund would be focusing on “less liquid and more skill-based investments”, leaning heavily on its external manager relationships.
The results follow the appointment of Ben Samild to the permanent CIO role earlier this month.
“Having spent a significant amount of time leading the research and strategic orientation on the impact of contemporary global challenges to the investment environment, I am very excited to be able to steward the portfolio at this critical juncture,” Samild said at the time