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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

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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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