The Future Fund went heavily into cash in the closing months of 2014-15 as global volatility rose on the back of the start of the sell-off in China in mid-June.
At the same time, the fund sold down its holdings of Australian and developed market shares, lightened its holdings of debt and boosted holdings of private equity.
The Future Fund’s June 30 quarter and financial year updates, released yesterday, show a $5 billion rise in the amount of cash on hand in the June quarter, from the previous three months. In fact the fund all but doubled its cash holdings from June 20, 2014 to June this year.
In yesterday’s portfolio update, the fund’s cash balance doubled to $22 billion since June last year, when the Future Fund held $11.2 billion. The June 30 level was 19.5% of the entire portfolio of more than $117 billion, up from a 11% share a year earlier.
The Future Fund delivered a strong 15.4% return for the financial year to June 30, or $15.6 billion. Investment returns since 2006 (when it started modestly) are now $56.7 billion, pushing its June 30 assets up to $117.2 billion.
And the fund’s 8% growth rate is now tracking ahead of its target return of 7.1%.
That cash was boosted by cutting total exposure to all equities from 50.5% at June 30, 2014 (when the fund was $101 billion) to 44.6% of the $117 million in assets at June 30 this year.
The absolute holdings in Australian shares fell from $9.565 billion a year ago to $7.957 billion at June 30 this year, while total holdings of developed market equities (in the US, Europe, Japan, etc), dropped to $20.629 billion from $23.451 billion a year earlier.
Holdings in emerging markets listed shares though rose to $11.034 billion (despite the big sell-off in the sector this year), while private equity investments jumped by 50% to $12.609 billion from $8.8481 billion.
Among other investment classes, the amount invested in property rose to $6.98 billion, or 6% at June 30 this year from $5.475 billion, or 5.4% of the total portfolio a year ago.
In a note in the fund’s presentation, it said that exceptional policy actions could not be sustained indefinitely as policy makers "juggle monetary setting against a backdrop of significant economic, political and geopolitical issues".
Combining the various other public asset funds for which the Board is responsible, (Education Investment Fund, Building Australia Fund, Health and Hospitals Fund and DisabilityCare Australia Fund), the fund now controls $128 billion.
Fund managing director David Neal however warned in the update that while “naturally pleased with the 2014/15 result, we are conscious that prospective returns will likely be harder to achieve given the run up in asset prices and a somewhat mixed global economic and market outlook".
