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Future Fund sees security in infrastructure

The $80 billion Future Fund has signalled it is looking to splash out on more infrastructure assets, in an attempt to shield its portfolio from further bouts of market volatility.

With global growth expected to be sluggish as much of the world remains crippled by debt, the fund said today that it was eyeing the relative stability of infrastructure.

After announcing $2 billion plans to buy the Australian Infrastructure Fund in August, and investing in overseas airports and power plants in the past year, the fund wants to raise the share of its portfolio held in physical infrastructure to 16.5 per cent, from 12.8 per cent in June.

In the fund’s annual report, it remained confident of finding more infrastructure assets to buy over the coming year.

‘‘Australian assets are of particular interest to us, given the stronger link to domestic inflation and the fact that we do not need to hedge the currency risk,’’ the report said.

As well as targeting infrastructure, the fund also flagged an increase in its exposure to shares – from 39.3 per cent in June to 41 per cent at the end of this financial year.


Despite this increase, the fund said it was still ‘‘cautious’’ about taking on a ‘‘very high’’ level of exposure to equities due to the likelihood of further volatility on global markets.

In the year to June, the fund said its costs had fallen from $446 million to $325 million, due to a sharp fall in performance fees paid to its external managers.

It had opposed 21 per cent of company remuneration reports, and 7 per cent of proposed elections of directors.

The fund’s chairman, David Gonski, said the fund’s return of 2.1 per cent in the financial year showed it had performed well considering market uncertainty, and the fund had reached a ‘‘new stage in its life.’’

‘‘In a little over six years the Future Fund has established itself as a significant and effective institution, starting from scratch and navigating through a historic period of economic and investment uncertainty,’’ Mr Gonski said.