SYDNEY, Oct 19 (Reuters) - Australia's sovereign wealth manager, the Future Fund, said on Monday it returned 0.5 percent in the September quarter, marking slower growth for the fund which has returned an average 11.1 percent annually over five years.
The fund, which has consistently outperformed its target return since it was set up in 2006, also fell short of its July-September target of 1.6 percent.
Future Fund Chairman Peter Costello reiterated that returns were likely to decline amid a large correction in Australian equities and increased volatility generally.
Australian shares fell about 8 percent in the three months to September, the worst quarterly performance since 2011, largely due by fears about slowing growing in China and uncertainty about the timing of U.S. interest rate hike.
"Our approach looks through this short term volatility and focuses on the long term," Managing Director David Neal said in a statement. "We continue to have the portfolio positioned with a somewhat lower level of risk than in the past few years."
The Future Fund was set up in 2006 with contributions of A$60.5 billion ($43.9 billion) to cover pension liabilities for public servants.
The nearly A$118 billion ($85.7 billion) fund has 15.1 percent of its portfolio in cash and 12.7 percent in debt securities. About a third of the portfolio is in equities - both Australian and global - down from 43 percent a year ago.
The fund returned 15.4 percent in the year to June 30, higher than its three- and five-year returns of 13.8 percent and 11.1 percent respectively.
By comparison, Australia's A$1.7 trillion pension funds have, on average, returned 7.1 percent over the past five years, according to government data. ($1 = 1.3770 Australian dollars)