Statement by David Neal, Managing Director of the Future Fund, to the Senate Finance and Public Administration Committee
Supplementary Budget Estimates, 20 October 2015, Parliament House, Canberra
I would like to provide the Committee with a brief update on the investment program. In September we released an update on the various portfolios to the end of the financial
year, 30 June 2015.
The Future Fund enjoyed another strong year, generating a return of 15.4% for the year and adding $15.6 billion to the value of the Future Fund. At financial year end the Future Fund was valued at 117.2 billion.
The three Nation-building Funds and the DisabilityCare Australia Fund had a combined value of $11.3 billion. Yesterday we released a further update on the portfolio for the period to 30 September 2015.
Despite significant volatility during the quarter, the Future Fund had grown further to $117.8 billion.
During the quarter we took on responsibility for the Medical Research Future Fund which was seeded with a transfer of just over $1 billion from the Health and Hospitals Fund.
The combined value of the three Nation-building Funds was $7.8 billion, while the DisabilityCare Australia Fund was valued at $3.4 billion.
Total funds invested by the Board of Guardians at 30 September 2015 stand at $130 billion. In our public statement yesterday we noted that the Future Fund is designed to generate strong risk-adjusted returns over the long-term, growing well in strong markets and moderating the impact of market falls. We are pleased with how the portfolio has operated during a period when there was a large correction in Australian equities and increased volatility generally.
The global impact of US monetary policy has been a source of volatility as the US Federal Reserve inches closer to starting to raise interest rates. Events in China added to the uncertainty and raised doubts for many about how successfully the Chinese government will manage a transition to a more sustainable economy.
However, given our mandate we look through this short term volatility and focus on the long-term. That said, these recent events are consistent with our expectation of lower long term prospective returns which we have discussed regularly here and elsewhere.
We continue to have the portfolio positioned with a somewhat lower level of risk than in the past few years, but we are working hard to identify and exploit interesting opportunities.