Australia’s A$165.7 billion sovereign wealth fund on Monday said its return for the three months to September fell 3.4 percentage points to 1.9%, its lowest quarterly gains since December, as it warned of a subdued long-term investment outlook.
The Future Fund said its annual return of 11.3% was also slightly lower than the 11.5% it reported the previous quarter, but it still beat its self-imposed return target of 5.6%.
“The board remains alert to the uncertain outlook for global growth and the potential for shocks to markets while recognising that accommodative monetary policy continues to support asset prices,” Chairman Peter Costello said in a quarterly statement.
“The global economy remains challenged by factors including demographics and debt levels. Adding to this, prospective long-term returns remain lower than in recent years.”
Its 10% return over the past 10 years had fallen just 40 basis points during the quarter, but it had continued to beat its 6.5% target and was 1.2 percentage points higher than a year earlier, the statement shows.
The fund showed it had shifted cash out of infrastructure investments and into Australian and developed shares. It trimmed its cash holdings by 3.1% to A$18.9 billion as of Sept. 30.
The fund, established in 2006 to cover escalating pension liabilities for public servants, raised its allocation to global developed equities by 1.8 percentage points to 26.3% during the year.
The Future Fund was set up with contributions of A$60.5 billion from government surpluses and proceeds of the privatisation of telecommunications operator Telstra Corp Ltd .
It aims for returns of 4% to 5% above inflation.