Where Australia's sovereign wealth fund is investing
The Future Fund – the third largest investment vehicle in Australia – now invests more than a third of its capital in listed equities due to favourable conditions for risk assets in the year to March 311.
The fund’s latest portfolio update shows its allocation to global equities rose by a hefty 4.2% to 27.1% in that period – the largest single increase in any asset class.
Global equities are the major single asset allocation for several big institutional investors (including Australian Super and Australian Retirement Trust), though allocations vary depending on their fund objective, risk tolerance and what they are seeking in terms of returns.
The fund also increased its exposure to Australian equities by 1.3% to 10.1%.
Future Fund Asset Allocation2
| Asset class | March 31 2024 (%) | March 31 2023 (%) | Change (%) |
|---|---|---|---|
| Australian equities | 10.1 | 8.8 | +1.3 |
| Global equities | 27.1 | 22.9 | +4.2 |
| Private equity | 15.0 | 16.4 | -1.4 |
| Property | 5.7 | 6.5 | -0.8 |
| Infrastructure & timberland | 9.5 | 9.4 | +0.1 |
| Credit/debt securities | 11.0 | 8.2 | +2.8 |
| Alternatives | 14.7 | 17.1 | -2.4 |
| Cash | 6.0 | 10.6 | -4.0 |
Source: Future Fund 29 April 2024
The fund posted a 10.1 per cent return for the year to March 31, beating its government-mandated target return by 2.5 percentage points. Media reported this quarterly asset growth was entirely due to surging share markets, which were buoyed by hopes of central bank rate cuts3 4.
“Conditions for risk assets continued to be favourable through the quarter, with growth and inflation stronger than had been expected,” says Ben Samild, Chief Investment Officer of the Future Fund. “Over the past year we increased our risk exposure to take advantage of those conditions.”
“We are conscious of the potential for a significant deterioration marked by conflict, geostrategic competition and supply issues,” Samild added. “Our activities have focused on ensuring the resilience of the portfolio to a range of scenarios while continuing to seek positive long-term returns.”
Retail demand spikes higher
Appetite for global equities is also evident in the recent trading behaviour of financial advisers and retail investors.
Brett Grant, Head of Product, Marketing & Customer Experience at AUSIEX, notes there was a 7.68 per cent increase in the value traded of on international (ex-Australia) exchange traded funds (ETFs) through AUSIEX in the March quarter 2024.
Overall, $100 billion was invested in global equity ETFs at March 31 – a touch over half the market capitalisation of all ETFs available on the ASX, according to Betashares.
Local investors added $2.65 billion into global equity in the first quarter, according to Vanguard, which again represented half of the total inflows into locally-listed ETFs over that period5.
Direct access to global equities
For those advisers and wholesale investors seeking to directly trade international shares, AUSIEX (along with Saxo Australia) provides an integrated international trading solution which provides access to international equities and exchange traded funds (ETFs) across multiple markets and in multiple currencies.
Mr Grant adds, “being able to trade directly in international equities enables advisers to better service investors, strengthen their client propositions, and improve practice efficiencies.”
“It has never been more important for investors to diversify their holdings across geographic regions and asset classes,” he says.
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1 https://www.superreview.com.au/news/superannuation/aussie-funds-years-global-top-300
2 https://www.futurefund.gov.au/en/investment/investment-performance/portfolio-updates
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