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Future fund delivers 10pc over the decade

Emma Rapaport with AAP  |  29 Apr 2019Text size  Decrease  Increase  |  
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Australia’s sovereign wealth fund has lifted its 10-year return to over 10 per cent, helped by strong equity gains, a thaw in global trade tensions and lower US interest rates over the quarter.

However, the Future Fund’s founder and chairman, former Coalition treasurer Peter Costello, has warned that long-term returns will be lower.

Founded in 2006, the fund returned 5 per cent in over March quarter, taking its 10-year performance to 10.4 per cent – exceeding its target by 3.9 per cent.

Costello put the positive returns down to “easing US-China trade tensions” and “the US Federal Reserve's decision to hold interest rates” in a statement on Monday.

Australian and global equities made up 32.9 per cent of the fund in the March quarter – Australian equities 6.5 per cent, developed market equities 17.4 per cent and emerging market equities 9 per cent. This is up from 29.4 per cent in the previous quarter.

However, Costello warned long-term prospective returns will be lower relative to history as the global economy faces structural challenges, including demographic shifts and high levels of debt.

Peter Costello Future FUnd

Future Fund founder and chairman Peter Costello says strong returns this quarter were influenced by easing US-China trade tensions

Costello also noted the Future Fund continues to make good progress on its objective to strengthen the federal government's long-term financial position, helping to reduce government debt and while to its net financial worth.

The strong quarter means the fund now stands at $154 billion, up from $147 billion at the end of 2018.

Comparatively, Australia’s largest superannuation fund AustralianSuper managed more than $145 billion in assets at 12 March 2019.

Overall, the fund has added $94 billion to an initial contribution by the Howard coalition government in 2006 of $60.5 billion.

The Future Fund was set up Costello in 2006 to help cover future superannuation liabilities of public servants.

Future Fund asset allocation comparison – 31-Dec-18, 31-Mar-19

Future fundSource: Future Fund

. Emma Rapaport is a reporter for Morningstar Australia.

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