Fund sees future in move to safer assets

The $73 billion Future Fund said it will cut its exposure to domestic and international shares from 37.4% of the portfolio to 32.5% and raise its cash holdings from 8.8% to 10%.

The fund cited a bleak global outlook: slower growth in big developing countries and the effects of Europe and the US tackling debt problems. It said market uncertainty will undergo significant structural adjustments, so it is taking a more defensive stance.

According to the fund's annual report, the sell-down of domestic and international shares is targeted to be completed by June.

The move has prompted debate about whether Australian super funds are too heavily weighted to shares. The article notes the shift to safety highlights risks of high equity exposure and may encourage investors to review their own asset allocation.

Chant West reported that the typical growth fund lost 5.1% in the turbulent September quarter, illustrating the kind of equity volatility that is driving the Future Fund's more cautious positioning.

David Murray, who is serving his final year as chairman of the Future Fund, said uncertainty in financial markets will undergo significant structural adjustments over many years, leading to below‑trend growth in many developed economies while emerging markets may offer healthier but riskier growth prospects.

Yes. Operating costs rose to $444 million in the year to June from $266 million a year earlier. Costs as a proportion of assets under management also increased as the fund spent more on investment managers.

The fund acknowledged emerging market economies may offer healthier growth prospects, but stressed these come with their own risks — which is part of why it is temporarily reducing equity exposure and increasing cash.