Australia’s Future Fund has reported a 12-month return of 13.7 per cent, significantly exceeding its mandated target of 7.3 per cent. This strong performance is attributed to strategic decisions made as early as 2021. The Future Fund is Australia’s sovereign wealth fund, established to strengthen the Commonwealth’s long-term financial position. It invests to generate returns that will help meet the future cost of superannuation payments to public servants.
Chief Executive Raphael Arndt implemented a strategy anticipating higher inflation, increasing populism, de-globalisation, government intervention, and rising conflict. These expectations prompted several key portfolio shifts. The fund began buying gold in 2020 and reduced its exposure to US equities in favour of European and Japanese markets, which have seen year-to-date gains of 19 per cent and 24 per cent, respectively. Crucially, the fund maintained its position in major technology companies and capitalised on the artificial intelligence boom by increasing its holdings in data centres through venture capital investments.
One notable venture capital co-investment was in Databricks, an AI start-up valued at $US940 million when the Future Fund initially invested in 2017. By September, Databricks’ valuation had soared to $US100 billion, making the Future Fund’s stake worth well over $1 billion. Other strategic moves included shifting investments towards inflation-protected infrastructure and away from bonds. Arndt credits this success not only to strategic positioning but also to a cultural shift within the fund, encouraging employees to challenge assumptions and think critically about the evolving financial landscape.
Looking ahead, the Future Fund plans to release a position paper on portfolio resilience, focusing on plausible scenarios and challenging traditional investment assumptions. While the fund acknowledges potential risks such as geopolitical tensions and market corrections, it views any AI-driven correction as a potential buying opportunity, reinforcing its long-term investment horizon.
