Euromoney, November 2017
The chief investment officer of Australia’s sovereign Future Fund says its groundbreaking private equity allocation has reached maturity, in a model that other sovereign vehicles around the world are watching closely. “There has never been a more important time for a long-term investor to have a meaningful exposure to private equity,” says Raphael Arndt.
The private equity team at the Future Fund stands out for two reasons. The first is a model through which, increasingly, the fund will co-invest alongside the managers it works with, though it will not make direct private equity investments completely on its own.
The second is its scale. Most sovereign funds invest little or nothing in private equity and even the two considered the most visionary for their use of alternative assets only allocate between 2% and 8% (Abu Dhabi Investment Authority), and 9% (Government of Singapore Investment Corporation) in the asset class. But at the Future Fund on June 30 the figure stood at 10.4%, reflecting $12.8 billion of investment.
This is part of the highest allocation to alternative assets in the sovereign wealth world: on the same date the Future Fund had 13.7% in what it calls alternatives (by its definition, hedge funds), 6.7% in infrastructure and timberland, and 7% in direct property. That totals 37.8% of the portfolio in illiquid or alternative asset classes; at ADIA the maximum is 33% (and the minimum just 13%), and at GIC stood at 16% on March 31 2015, the most recent reported date.
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