Australia’s sovereign wealth fund misses performance target, lags pension sector

AUSTRALIA’S sovereign wealth fund missed its return target for the year to June and clocked lower returns than pension fund rivals, as the fund positioned itself more conservatively and warned that markets were underpricing geopolitical and economic risk.

The A$206 billion (S$180.3 billion) Future Fund returned 6 per cent in fiscal 2023 compared with a target return of 10 per cent. Australia’s similarly sized two largest pension funds, AustralianSuper and Australian Retirement Trust, returned 8.2 per cent and 10 per cent, respectively, over the period.

The Future Fund cut its allocation to developed market equities and added cash in the three months to Jun 30. Global share markets rose over those three months, with the US benchmark S&P 500 index up 10 per cent.

“Markets have been underpricing the significant economic and geopolitical risk that we have anticipated,” chief executive officer Raphael Arndt said in a statement.

“We have made significant changes to the portfolio over the past two years, and this means that our holdings and returns will look increasingly different from those of other asset owners,” he added.

The fund expects persistently higher inflation to keep real returns lower than the 8.8 per cent averaged over the past decade.

SEE ALSO

Australia's central bank warns climate change adds uncertainty to policy

National Australia Bank set to cut 10% of market-unit jobs: AFR

Australian treasurer warns of economic risk from China slowdown

Asean Intelligence

Get insights into businesses across South-east Asia

Get the free report

The Future Fund was established in 2006 to cover escalating pension liabilities for public servants, and rivals Australia’s largest pension funds in size. REUTERS