The Future Fund has dumped cash in favour of alternatives as it moves towards its planned long-term asset allocation.

According to the fund's portfolio update for the quarter ending 31 December 2009, the level of cash in the portfolio (excluding the fund's Telstra holding) fell from 32 per cent to 15.5 per cent.

"Over the quarter the level of cash fell ... this has been primarily allocated to a diverse range of strategies in the alternatives program, where skilled managers are able to take advantage of opportunities arising from capital scarcity, as well as strongly performing listed equity markets," Future Fund board of guardians chair David Murray said.

The allocation to alternatives rose from 4.6 per cent for the quarter ending 30 September 2009 to 11.4 per cent for the most recent quarter.

According to Murray, the Future Fund has also taken up opportunities in debt, property and infrastructure markets.

This strategy was first detailed in the 2007/08 annual report and reiterated in the most recent 2008/09 annual report. The fund's intention was to build towards a 15 per cent allocation in the alternatives program.

Meanwhile, the portfolio update also reported that the Future Fund's return for the quarter (ex Telstra) was 2.9 per cent. This was down from 5.6 per cent for the quarter ending 30 September 2009.

According to SuperRatings, the median balanced super fund returned 9.27 per cent to the end of September and 2.39 per cent for the quarter ending 31 December 2009.

The Future Fund's Telstra portfolio returned 4.8 per cent for the quarter.