Future Fund’s RE holdings nudge up as three-month return dips

Australia’s Future Fund reported an increase in its real estate, private equity and infrastructure holdings in the three months to 30 June. Its overall return for the quarter however slid 3.3 percent to 0.6 percent, excluding its holding in Telstra, the Australian telecommunications company.

The real estate, private equity and infrastructure holdings of Australia’s Future Fund increased marginally in the three months to 30 June, the state fund revealed today.

The fund, which was established in 2006 to assist the Australian government in meeting the cost of public sector superannuation liabilities, said in its portfolio update for the quarter that its real estate assets had increased in value to A$4.8 billion (€3.4 billion; $4.86 billion), reflecting a 0.4 percent increase to 6.5 percent of total assets. Meanwhile, its private equity holdings and infrastructure holdings each increased by 0.5 percent to A$2.9 billion and A$3.91 billion, respectively. The two asset classes now reflect 3.9 percent and 5.3 percent of the fund’s total assets, respectively.

Overall, Future Fund said its assets had grown in value to A$75.15 billion, up marginally from A$74.62 billion three months ago. In its update, Future Fund said its return had dipped 3.3 percent in the final quarter to just 0.6 percent. Despite the dip, however, the fund returned 12.4 percent in the year, more than twice its average return over the past three years of 5.2 percent, which it has generated on an annual basis since its formation on May 5, 2006.

Future Fund chair David Murray said the positive returns of 2010/11 reflected ‘the careful construction of the portfolio since the fund’s inception’. He said the ‘extremely difficult global economic environment over the last few years’ has and would continue to present challenges going forward and that the fund would continue to position the portfolio to best provide ‘some protection in weaker markets’.

Part of that strategy has been the fund’s gradual sell-off of its holdings in Telstra, the Australian telecommunications company, the value of which now stands at A$939 million, a fraction of what it used to be. Murray said: “the reduction in the holding of Telstra shares has continued in line with the board’s long-stated strategy to reduce the holding in an orderly way over the medium term and without untoward market impact.” Future Fund originally held 17 percent of the shares of the company.