(Feb 5): Australia’s sovereign wealth fund is tilting its investment focus to domestic assets, as it seeks inflation protection and rides out a global trend towards protectionism.

The Future Fund is focusing more on local investments such as infrastructure, private credit and data centres, chief executive officer Raphael Arndt said in an interview. Australian assets are looking cheaper than in the past, he said. 

“For a long time, we thought Australian assets were expensive — at the moment, we think they are fair,” he said. 

The fund posted a 12.2% return for 2024, as it reaped the benefit of increasing positions in international equities, according to a statement on Wednesday. Its assets climbed to a record A$238 billion (US$149 billion or RM659.42 billion) after adding A$26 billion last year, and chief investment officer Ben Samild said the strength of the US economy helped deliver an “extremely pleasing result”.

In November, the government updated the Future Fund’s investment mandate, requiring it to consider investing more in national priorities, such as housing, energy and infrastructure projects. The government also said it would defer any withdrawals from the fund until at least 2032-33, by which time it is projected to be worth A$380 billion. 

“We expect a lot of noise and smoke and volatility, as economies and markets readjust to whatever new policy settings emerge,” Arndt said of the current investment environment. “Medium- to longer-term inflationary pressures haven’t gone away.” 

Arndt said there were small- and medium-sized businesses in Australia with growth opportunities. “I think that’s an asset class in Australia that’s underserved,” he said. 

“And we think that the trends to global trade reducing or protectionism is unlikely to change, and so we have been tilting the portfolio back domestically,” he said. “We have been more focused on particularly Australian assets that have some sort of inflation protection.” 

The Future Fund’s other investments during 2024 included a stake in a toll road and student accommodation. The 10-year return of 8.1% exceeds the target of 6.8% per annum, according to the statement. 

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