27 Nov

Future Fund's annual report for 2014/2015

The Future Fund’s annual report for the 2014/15 year recently tabled in Parliament.

This year’s annual report provides a comprehensive overview of the organisation and the positioning of the Future Fund portfolio, as well as the various other public asset funds for which the orgnisation is responsible.

At 30 June 2015, the Future Fund was valued at $117.2bn having added $15.6bn over the year with a return of 15.4%.  Since the Fund was established in May 2006 the portfolio generated a return 8.0% pa, exceeding its benchmark target return of 7.1% pa.  Investment returns since inception have added $56.7bn to the original contributions from government of $60.5bn.

During the year they took on responsibility for managing the assets of the DisabilityCare Australia Fund (“DCAF”) which will enhance the government’s ability to meet expenditure in relation to the National Disability Insurance Scheme and so help better support Australians with a disability and their carers.  The DCAF received contributions of $2.5bn during the year and continues to receive regular inflows from government.

Legislation to establish the Medical Research Future Fund (“MRFF”) was passed by Parliament after the end of the financial year.  They have now begun investing the initial $1bn seed money for this important and exciting initiative with the fund intended to grow to $20bn.  The Act that established the MRFF requires that capital contributions be preserved in the fund, with the earnings made available to help fund world-leading initiatives in the areas of medical research and innovation.

These new portfolios add to the Future Fund and the existing Nation-building Funds which we have managed since 2006 and 2009 respectively.

Bringing all of these public asset funds together, today the organisation invest over $130bn on behalf of the Australian government.

Their role is to seek to maximise returns in accordance with the investment mandate directions from government.  They are proud and privileged to be investing for the benefit of future generations of Australians and we are honoured that successive governments have entrusted our organisation with the investment of additional portfolios.

With interest rates around the globe seemingly stuck at remarkably low levels, relatively full asset valuations across most markets and economic growth in many part of the world tepid, it is hard not to be anxious about the prospects for future returns.  There are risks in making the necessary transition to more normal policy settings, which could have meaningful long-term consequences for investors.

They have responded to this by sharply focusing on positioning the portfolio to be as robust as possible to a wide range of plausible scenarios and are working harder than ever to uncover attractive opportunities, while being careful to maintain discipline.

Supporting this effort they have been incrementally adding resources across investment and support areas.  During the year, Raphael Arndt and Stephen Gilmore as Chief Investment Officer and Chief Investment Strategy & Risk Officer respectively, have been working hard with their teams to refine their investment model and find ways to be more nimble and invest more efficiently.  This is evolution, not revolution, but it reflects the desire to always strive to find ways to do things better.

The full report can be downloded here.

Source: David Neal, Managing Director, Future Fund

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