Australia’s sovereign wealth fund cuts cash holdings, buys stocks

By Lewis Jackson

SYDNEY, April 27 (Reuters) – Australia’s sovereign wealth fund cut exposure to cash and private equity and expanded positions in domestic and global equities in the March quarter, according to quarterly results published on Thursday.

Cash holdings at the A$200 billion ($132.48 billion) Future Fund fell to 10.6% in the first quarter from 11.8% a quarter earlier.

Developed market equities rose to 17% from 15.9% over the same period, while private equity dipped slightly to 16.4%, from 16.9%.

For the first time, the fund is also looking to buy small cap equities, Chief Executive Raphael Arndt said in a separate speech in Sydney the same day.

Set up in 2006 with the proceeds from the privatisation of the telecommunications network, the fund has delivered an average annual return of 9.1% over the past decade.

But future returns were likely to be “substantially” lower, said Chair Peter Costello in a statement accompanying the results.

The fund returned 1.1% in the twelve months to March, versus a 0.1% increase for the ASX/S&P 200 local benchmark and a 7.7% decline for the S&P 500.

Costello said that while some banks have paused interest rate hikes, “it is unlikely the cycle of rising rates to control inflation is finished.”

The Reserve Bank in April left rates on hold to wait and see the full effects of the preceding 10 consecutive hikes.

The fund flagged in December that it would raise its exposure to gold, commodities, private equity and infrastructure, warning the future will echo the low-growth, high-inflation era of the 1970s.

($1 = 1.5097 Australian dollars)

(Reporting by Lewis Jackson; Editing by Kim Coghill)

((lewis.jackson@thomsonreuters.com; Reuters Messaging: @lewjackk))