The Future Fund of Australia has reported an impressive 11.9% return for the year ending September 30, 2024, resulting in a portfolio increase of $24.4 billion, bringing the total to $229.7 billion. CEO Dr. Raphael Arndt attributed this success primarily to strong performance in US markets and a strategic focus on alternative investments. The portfolio is diversified with 27% in global equities, 14.7% in alternatives, 10.9% in credit, and 9.9% in infrastructure.
Despite these positive results, the Future Fund remains cautious about ongoing inflationary pressures and geopolitical risks. Chief Investment Officer Ben Samild highlighted significant changes made to the portfolio, amounting to $100 billion from 2020 to 2024, aimed at adapting to the evolving inflation landscape. This proactive approach reflects the Fund's commitment to navigating the complexities of the current economic environment while seeking sustainable returns [107229ec].
In the broader context of investment performance, bond funds in the US have shown mixed results in the first quarter of 2024, as reported by the Morningstar US Core Bond Index, which fell by 0.8%. Long government bond funds, particularly those investing in long-dated Treasury bonds, experienced a notable decline of 3.1%. Conversely, bank-loan and high-yield bond funds managed to gain 2.3% and 1.7%, respectively. Noteworthy performers in the bank-loan category included Eaton Vance Floating-Rate Advantage and Fidelity Advisor Floating Rate High Income, while TCW Core Fixed Income and Invesco Core Bond struggled [231c0db6].
The Dodge & Cox Income Fund's Q1 commentary indicated that longer-term US Treasury yields rose as market expectations for interest rate cuts diminished. The investment-grade corporate bond sector outperformed comparable-duration Treasuries, prompting the Fund to adjust its holdings, including trimming positions in AT&T and Ford Motor Credit, while maintaining a diversified portfolio of Agency mortgage-backed securities [e4df3c3b].
Meanwhile, hedge funds also faced a mixed performance landscape in early 2024. Caxton Associates reported flat returns, while Bridgewater Associates' flagship fund rose 14.4% through June 26. The HFR Global Hedge Fund index gained 2.89% in the first half of the year, with some multi-strategy hedge funds achieving double-digit returns. However, many hedge funds struggled to keep pace with the MSCI's world stock index, which rose approximately 11% [ce6729be].
Overall, the Future Fund's cautious stance on inflation, coupled with its strong performance, highlights the importance of strategic investment management in a volatile economic climate, while the mixed results in bond and hedge funds underscore the challenges investors face in navigating current market conditions.