🚀 ProPicks AI Hits +34.9% Return!Read Now

Australia's sovereign fund flags challenging outlook after target-beating year

Published 23/04/2018, 12:59 pm
© Reuters.  Australia's sovereign fund flags challenging outlook after target-beating year
TLS
-

By Paulina Duran

SYDNEY, April 23 (Reuters) - Australia's A$141 billion ($108.1 billion) sovereign wealth fund on Monday said rising global interest rates eroding asset values make its long-term outlook challenging, after the fund exceeded its return-on-investment goal for the year.

In its quarterly update, Future Fund Chairman Peter Costello said the fund had raised its interest in overseas equities and maintained substantial investment in safe-harbour cash.

"Looking forward, the board remains alert to a range of uncertainties and risks, including the response of central banks to the changing economic environment, international political tensions and the potential for shocks to investment markets," Costello said in a statement.

The fund, established in 2006 to cover escalating pension liabilities for public servants, posted an 8.6 percent return for the year through March 31, beating its 5.8 percent target.

Its allocation of money to equities in developed economies increased 0.9 percentage point to 19.5 percent in the three months through March, mainly at the expense of its cash allocation, which was down 1.6 percentage point at 14.8 percent.

The fund said it had been prepared to take risk in recent quarters given improved global growth, but that there were now longer-term reasons to be cautious as central banks around the world end their expansionary monetary policies.

"Looking at the investment environment, sustained economic growth across the major advanced economies is positive for the near-term, although the longer-term outlook remains challenging," Costello said. "Interest rates globally are poised to begin rising as the world works through surplus capacity."

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 TLS.AX .

It seeks returns of 4 percent to 5 percent above inflation.

($1 = 1.3041 Australian dollars)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.