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Future Fund shows benefits of alternatives, but it’s a crowded field

Logging only a 1.2% decline over the past year is good going for Australia’s sovereign wealth fund, testament to a policy to build an inflation-ready portfolio relying heavily on private markets.

Photo: iStock

Australia’s Future Fund is among the fastest sovereign wealth vehicles to report its performance, which makes it a useful leading indicator of the way that these vital institutional engines are performing in changing conditions.

All funds are of course different, with variety in mandate and approach, but most face the same challenges of investing at scale for the very long term while riding out the changing conditions of the short term.

On August 31, the Future Fund reported on its year to June 30 – one that covered the end of the stock market rally around the world – the emergence of most nations from most pandemic restrictions and the reappearance of inflation and rising rates for the first time since the global financial crisis of 2008.

All things considered, the fund did well: a 1.2% decline over the year. Since global equities and global bonds both fell by more than 10% apiece over the same period of time, the fund has a right to be pleased with its efforts.

“To preserve the value of the fund in that environment is exactly what we would look to do,” says Raphael Arndt, chief executive officer.

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