Australia’s Future Fund gives first clue to sovereign wealth resilience through 2020
Diversification has insulated Australia’s sovereign wealth fund through a difficult year.
The Australian Open in the tennis, the Australian Grand Prix in the Formula One; Covid notwithstanding, Australia has a habit of providing the curtain-raiser to a new calendar year.
And so it is with sovereign wealth funds, with the country’s Future Fund the first notable institution to provide a transparent snapshot of exactly what happened in 2020.
The A$171 billion ($132 billion) fund – or A$218 billion, including all of the six mandates that are managed by the same board and team – can be pleased with its performance in a difficult year. Its one-year return, embracing the market shocks that started in March, was positive at 1.7%, meaning it made back everything it lost from the impact of the pandemic.
That perhaps looks modest, relative to the stock market bounce that characterized the later part of 2020.
However, sovereign funds much prefer to look at the long term, and in that respect the fund looks stellar: a 10-year return of 9% per year, against a target of 6.2%. Of that A$171 billion, A$110 billion has come from investment returns. It hasn’t received any capital contributions since the A$60.5 billion that was used to establish it.