The Future Fund Is Now Worth $149 Billion

  • Oct 22, 2018 AEDT
  • Team Kalkine
The Future Fund Is Now Worth $149 Billion

Future Fund is a sovereign wealth fund that are owned by the general government which is what makes its sovereign and are known as special purpose investment funds or arrangements. To achieve financial objectives and for macroeconomic purposes they are usually created, as they hold, manage, or administer assets and inculcate various types of investment strategies.

Future fund received its initial and only contributions of $60.5bn on more than a decade ago and was set up in 2006. The fund’s contributions include a small slice of the proceeds of privatization of the telecommunications company, Telstra and of Budget surpluses. The Future Fund has made the Government $88bn as this $60.5bn has grown to just under $149bn. Since inception of 7.9% per annum, this represents investment returns. Particularly those associated with an ageing population in response to the assessment that Australia faced emerging costs, the Future Fund was established.

Individuals do not contribute into the Fund, as the money in the Future Fund is not owned by any individual they cannot draw it. It is known an intergenerational fund with contribution from the taxpayers of 2006 to future generations. To appoint the Future Fund Board of Guardians, Legislation sets out the responsibilities of Ministers, and for investing the assets of the Future Fund, guardians in turn are responsible. 

Up from the original $60.5 billion in 2006, The Future Fund is now worth $149 billion, with returns running at 10.7 per cent in the 12 months to September 30, 2018. However, the returns in the three months were just 2.1 per cent ending September 30, 2018. Now worth a collective $181 billion, the Board of Guardians manages five public asset funds. 10-year return of 9.2% pa exceeds benchmark target of 6.5% pa, the fund while managing risk levels exceeds benchmark return across all time periods.

The Future Fund’s latest portfolio update shows is reallocating assets from hedge funds, cash and equities into property and private equity. While 'alternative' assets dropped from 15.4 per cent to 15 per cent, Cash dropped from 15.1 percent to 14 percent of the fund. Meanwhile, private equity jumped nearly $22 billion from 14.1 per cent to 14.8 per cent. Also, between June and September the property assets increased from 6.4 per cent of the fund to 7 per cent. In developed economies the fund's single biggest asset type is global equities and owns $26.7 billion worth of shares.

As at 30 September 2018, Future Fund Board of Guardians released its portfolio update. Delivering decent returns without excessive risk, the Future Fund portfolio continues to operate as intended. Delivering a return of 9.2% pa over the last 10 years, as at 30 September 2018 the value of the Future Fund was $148.8bn.

Global economic growth remains steady, Chair Peter Costello said. Markets continue to respond to rising interest rates while inflationary pressures are building in the US. The short-term economic outlook remains reasonably positive, for the longer-term outlook the impact of trade tensions, geopolitical and the potential for shocks to markets.

The asset allocation of the future funds as at September 30, 2018 is as follows:

future fund

Asset Allocation of Future Fund, Source: Company Reports

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