Future Fund: ‘PE plays an important role in portfolio’

The Australian sovereign wealth fund has been shifting its private equity strategy to invest in Australia’s growing start-up sector.

Australian sovereign wealth fund Future Fund said in its latest portfolio update that private equity continues to play an important part in its portfolio, as it ramps up investments in the domestic start-up industry.

The Future Fund oversees about A$141 billion ($108 billion; €88 billion) in investments, of which 12.8 percent or about A$18 billion is in private equity, which includes venture capital, growth capital, buyout and distressed debt.

In response to the challenging investment landscape, the Future Fund has, in recent years, expanded its exposure in private equity, infrastructure and other alternative assets.

Future Fund chief executive David Neal said in the fund’s latest portfolio update released on 23 April: “The private equity programme continues to play an important role in the Future Fund’s portfolio. Earlier this year we established a new strategy with existing manager Greenspring Associates, focused on Australian venture capital, and capital was allocated against that strategy last month.”

The investor has been vocal about the importance of technological disruption in investments and is known to back offshore venture capital funds. Earlier this month, Future Fund reportedly made its foray into domestic venture capital investing by participating in Sydney-based Blackbird Ventures’ A$225 million fundraise.

Quadrant Private Equity, Apax Partners and Bain Capital, as well as growth capital-focused managers CDH Investments and FountainVest Partners, are among the private equity firms Future Fund has backed in the past, according to PEI data.

Based on its portfolio update for the first quarter of 2018, the Australian sovereign wealth fund beat its return target, delivering a return of 8.5 percent per annum over the last 10 years, against a target benchmark return of 6.7 percent per annum.

The fund’s asset mix remains largely unchanged from the previous quarter. As at 31 March 2018, global equities made up 27 percent of its overall holdings, followed by alternative assets at 15.5 percent. and cash at 14.8 percent. Private equity accounted for 12.8 percent, infrastructure and timberland at 7.8 percent, property at 5.8 percent, debt securities at 10 percent and Australian equities at 6.3 percent.