Future Fund lifts returns, flags risks ahead

The news: Australia’s sovereign wealth fund has delivered a positive full-year return thanks to a run-up in global equity markets but has warned of significant risks ahead.

The numbers: The Future Fund reported a positive return of 6% for the year to 30 June, compared to a minus 1.2% return during a difficult 2022 financial year. The return was below its 10% target for the year, but the fund is ahead of longer term targets, with a 8.8% return over 10 years. Total funds under management rose to $206.14 billion.

The context: Future Fund chairman Peter Costello attributed the improved performance to the portfolio’s wider diversification across international markets and private assets. He said share markets were surprisingly strong through the second half of the financial year, but warned of “risks on the downside”. Chief executive Raphael Arndt also said markets have been under-pricing significant economic and geopolitical risk.

What they said: “We are yet to see the full impact of higher rates work their way through developed economies and continue to see the risk of a recession in developed economies as central banks remain vigilant in bringing inflation down,” Future Fund chairman Peter Costello said.