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Australia’s sovereign wealth fund has posted its first annual loss since the global financial crisis, and is holding more cash in preparation for further market volatility.
The Future Fund lost 0.9% in the 12 months ended June 30, the first annual decline since 2009, it said in a statement Wednesday. It’s cash allocation increased to the highest in almost three years in preparation for “what will be a challenging and volatile environment in the future,” Chairman Peter Costello said.
“The factors that have fueled strong performance in the past may not be there any longer,” Costello said in the statement. “We will need to be ever more strategic in how we pursue long-term returns in the future.”
The Future Fund echoed Norway’s sovereign wealth fund, which is expecting more volatility given the coronavirus pandemic isn’t under control. The world’s biggest wealth fundlost 3.5% in the first half of 2020 as the rebound in stock markets wasn’t enough to erase the record decline earlier this year.
The Future Fund’s cash holdings rose to 17% of the portfolio in June, the most since the third quarter of 2017 as it reduced exposure to private equity firms and sold its stake in Gatwick Airport. It made bets in “new infrastructure” such as fiber and data centers, Chief Executive Raphael Arndt said.
Still, the fund declined 0.7% in the three months to June, the second consecutive quarterly loss as its exposure to stocks remained little changed at about one-third of its portfolio.
“For some time we have prioritized portfolio flexibility to ensure we can adjust the portfolio quickly to respond to emerging opportunities and risks,” Arndt said. “We were well positioned to navigate a path through the recent dislocations and are ready to manage through an investment environment which remains uncertain.”
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