Towards the end of 2021 the Future Fund published a paper positing that the world was entering a new investment order, and that the investment thinking that had delivered strong returns over recent decades needed to be updated.
It followed up with a paper in mid-2024 outlining why it believed geopolitics would be the bedrock of this new investment order, and that “an increase in geopolitical risk is one of the core reasons why holding a traditional 60:40 investment portfolio seems unlikely to be appropriate for investors going forward”.
Since then, geopolitics has heavily influenced investment outcomes across asset classes and geographies.
At the Investment Magazine Fiduciary Investors Symposium (FIS) in the NSW Blue Mountains next week, Future Fund chief investment officer Ben Samild will take delegates on a deep dive into how the now-$241 billion fund manages its developed market currency exposures.
He will outline some of the Future Fund’s current views and research, including why FX might be the most important lever in the portfolio; why the stability of the post-Bretton Woods II institutional framework may be fracturing; the heightened challenges this poses for portfolio construction, particularly when investors are faced with “a menu of unsatisfactory choices” to meet their needs; and whether the global savings flywheel is reversing.
Where the Future Fund’s portfolio goes next and how it performs against its mandates and benchmarks will be keenly watched – it invests within a different set of parameters to APRA-regulated super funds. Samild’s presentation will illustrate how the fund has put into practice the 2021 paper’s conclusions.
The paper said success in the future would require “a new approach that tests long-held assumptions and questions the conventional wisdom that has guided institutional investors over recent decades”.
At the time, the Future Fund said it could not be certain how the changes it observed would ultimately play out, but “preparation and monitoring the investment environment, and testing our thinking and the assumptions on which it is built, are the best ways we can position our investment program to generate strong returns, with acceptable risk, over the long-term”.
In the 12 months to the end of March this year the Future Fund returned 7.8 per cent, representing $17.8 billion of capital growth over the period, and chief executive officer Raphael Arndt said the performance reflected “the work we have been doing for the past four years to ensure the portfolio is resilient and flexible to a range of scenarios”.
“We are seeing consequential changes in geopolitical, economic and market environments at the moment and that is causing volatility and uncertainty for investors,” he said.
“Our expectation is that these conditions will lead to higher inflation and bond yields for an extended period. These are the conditions for which the portfolio has been built over the past five years, and it has behaved to our expectations in recent months.”
At FIS in the Blue Mountains Samild will walk delegates through how all of these factors influence how the Future Fund thinks about FX in its portfolio construction process and how it incorporates geopolitics into its allocation decisions.
Register for the 2025 Investment Magazine Fiduciary Investors Symposium here.
