Australia’s A$122.8 billion ($94 billion; €86 billion) sovereign wealth fund, Future Fund, is looking to ramp up investments in technology start-ups, it said in its latest annual report published on 27 October.
“We are attracted to investing where genuine innovation and wealth creation are occurring,” Future Fund head of private equity Steve Byrom said in the report. “We believe we are in the midst of a multi-wave innovation cycle driven by empowering the consumer, cloud computing, big data, machine learning and mobile connectivity.”
Venture capital and growth equity investments accounted for 46 percent of the fund’s private equity programme in 2015/16, compared with 40 percent the year before. In its report, the Future Fund said its area of focus remains the funding of innovation, disruptive business models and small company growth across both developed and emerging markets. It also said it has invested in “a small number of venture capital fund managers” and co-invests alongside them.
In August this year, the fund reportedly led the $50 million round of financing for San Jose, California-based data and analytics specialist MapR Technologies alongside Google Capital, Lightspeed Venture Partners and a few other venture firms.
“In a challenging global economic and market environment, investments that aren’t correlated to traditional equity or debt market returns are particularly attractive,” Byrom points out. “That is why the role of private equity and particularly venture capital and growth equity in the Future Fund’s portfolio is more important now than it has ever been.”
There was, however, a marginal decrease in Future Fund’s allocation to private equity. The asset class accounted for 10.4 percent or around A$12.8 billion of the fund’s overall portfolio, compared with 10.8 percent in the previous year, as the fund targeted investments in the secondary markets and increased its focus on co-investments.
Invested capital in private equity increased from A$12.6 billion to A$12.8 billion over the course of the year, reflecting A$2.6 billion of capital calls, A$4 billion of distributions and A$1.6 billion of unrealised asset value appreciation.
As of 30 June 2016 the Future Fund had A$20.5 billion of invested and committed capital in 29 private equity managers. Four new managers received commitments of A$600 million while existing managers got A$2.3 billion more in fund commitments and co-investments. The fund has made commitments to several general partners including Advent International, Apax Partners, Bain Capital, and Quadrant Private Equity, it said in the report.
The Australian sovereign wealth fund invests across several asset classes. Cash makes up the lion’s share of its portfolio at 21.7 percent, followed by global market equities at 15.2 percent. The Future Fund also invests 13.7 percent in alternative assets, 11.6 percent in debt securities and 10.4 percent in private equity. Emerging market equities, infrastructure and timberland, Australian equities, and property each receive about 7 percent.
Since its inception in May 2006, the Future Fund has returned an average 7.7 percent per annum, above its target return of 6.9 per cent, and has more than doubled the initial investment of A$60.5 billion.