Future Fund Update

The most recent update from the Future Fund, including it's returns and asset allocation. Thought some people here might be interested:

https://gallery.mailchimp.com/73ce8...f505/Portfolio_update_at_31_December_2016.pdf

Interesting to see that it has only has 6.7% currently in Australian equities. I wonder if that's partly because its now 127 billion dollars, and the Australian stock market is quite small and concentrated

 

• 10% pa, 7 years
• 11.8% pa, 5 years
• 9.8% pa 3 years

I want an ETF that tracks that performance!!!

 

Also interesting to note that there is more invested in emerging markets than in Australian equities!

 

Especially impressive given that with it's mixed asset allocation, it's most likely been with lower volatility than an ETF. And holding around 20% cash.

Many active managers and individuals would have done better, but probably not many with such a mixed asset allocation and high cash level.

 

It's also very high in alternative assets (around 40%, if you include property and infrastructure. Private equity definitely counts as alternative).

I'm quite a fan of alternatives, after reading about their outperformance due to an "illiquidity premium." The idea is that a investment naturally gets more expensive once it's listed and becomes liquid, and hence you gain an excess return from owning a similar asset that's unlisted, as long as you don't care about liquidity.

Recently been looking at blue sky's alternative LIC (BAF) and the manager was discussing this. He's talking his own book, of course, but there appears to be something to it. He mentions how the Havard endowment fund is well over 50% alternative, illiquid assets, for this reason.

 

How do you buy into Future Fund? is it available on ASX if so what;s the ticker code?

 

Lol.

Not sure if you asked that in seriousness.

Every Australian tax payer invests in it.

Australian Government Future Fund - Wikipedia

 

Yep, illiquidity and scarcity. Once those investments are on the boards the value is eaten up. These Alt managers are doing value arbitrage when they raise funds to buy these private assets...

Small private business presents some extreme examples of this...i.e. Buying business at PE 3.5x , yield 23% FF, no debt. Put this on the public market its worth 7x.

 

*drools*

 

Ops obviously newbie here, thanks for clarifying this point

 

David Neal, managing director of the $128bn Australian Future Fund. “We don’t pay tax in Australia and have sovereign immunity when we invest overseas"

The Future Fund was set up in 2006 to provide pensions for Australian public servants

 

From the SMH



Since its 2006 inception, Costello's creation has furnished outstanding returns of 7.7 per cent annually, exceeding the 7.4 per cent mid-point of its ambitious target of inflation plus 4.5 per cent to 5.5 per cent.

It's worth emphasising that this decade has covered a staggering sequence of global shocks that have put many absolute return investors out of business.

In contrast, the 100-plus analysts and portfolio managers employed by the Future Fund generated $67 billion of extra wealth above and beyond their initial $60.5 billion endowment.

 

Future Fund posts 11pc return

The Australian government's $166 billion sovereign wealth fund continued its stellar investment performance, delivering an annual return of 11.3 per cent in the 12 months to September 30.