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Australia's Future Fund misses qtr target trimming exposure to bonds

Published 24/10/2017, 11:27 am
© Reuters.  Australia's Future Fund misses qtr target trimming exposure to bonds

By Paulina Duran

SYDNEY, Oct 24 (Reuters) - Australia's A$134.5 billion ($105.07 billion) sovereign wealth fund on Tuesday posted a below-target return for the September quarter, citing the increasing likelihood of global interest rate rises, but remained ahead of target on an annual basis.

The 11-year-old Future Fund's 0.8 percent return in three months to Sept. 30 was significantly below the targeted 1.4 percent as it trimmed exposures to bonds in favour of global equities. For the full year to end-September, it posted a 7.9 percent return, above its 6 percent target.

Citing uncertain conditions, the fund earlier this year lowered its return target by half a percentage point, and now seeks to achieve returns of 4 percent to 5 percent above inflation. markets have continued to strengthen, supported by improving economic conditions," Future Fund Chairman Peter Costello said in a statement.

"Around the world there is still a degree of uncertainty over the timing of interest rate rises, although such are looking increasingly likely."

Costello said the fund would continue to balance "positive returns with our focus on avoiding excessive risk."

The fund's allocation to global developed equities increased to 16.8 percent, from 15.2 percent, with a similar decrease in debt securities to 9.9 percent.

The Future Fund was set up in 2006 with contributions of A$60.5 billion to cover pension liabilities for public servants. ($1 = 1.2801 Australian dollars)

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