Euromoney, March 2016
If the smartest money invests for the longest term, then recent evidence suggests that its managers got ahead of the market downturns that have blighted the start of the year.
Sovereign wealth funds that have reported their year-end allocations for 2015 – that is, not many of them yet – show a clear reduction of risk appetite. Australia’s Future Fund, with A$118.4 billion ($85.3 billion) under management at the end of 2015, made big reductions in stocks last year. By December 31 only 6.5% was in Australian equities, compared with 8.8% a year earlier; only 17.2% was in global developed market equities, compared with 20.9%; and 7.3% in emerging market equities, compared to 9.4% a year earlier. All told, the fund pulled just under $6 billion out of stocks, most of it going into cash, with other increases in debt securities and private equity.
“We have gradually reduced the level of risk in the portfolio through 2015, reflecting our view of the investment environment,” said David Neal, managing director of the Future Fund, when announcing the numbers. He added that the fund has rebalanced its private equity portfolio, “locking in some of the strong gains which had been achieved”, and lifting cash holdings to 20.6% of the fund.