In an annual portfolio update, the fund announced returns of 7.1 per cent per annum over five years and 10 per cent per annum over three years to 30 June – ahead of the base target return of 6.8 per cent per annum, the fund stated.
The fund generated a return of 15.4 per cent over the 2012/2013 financial year, and 4.4 per cent in the final quarter. The fund grew $11.9 billion to $88.9 billion over the year.
As a percentage of the fund’s assets, Australian equities slipped slightly from 10.4 per cent to 9.7 per cent, but global equities grew from 22.5 to 30.9 per cent. This was made up of developed market equities (23.8 per cent, up from 17.5 per cent) and emerging market equities (7.1 per cent, up from 5.0 per cent).
Private equity was up from 6.4 to 7.3 per cent and property slipped slightly from 6.4 to 6.0 per cent. Debt securities exposure dropped from 18.3 per cent to 15.6 per cent and alternative assets also dropped, from 19.0 per cent to 16.6 per cent.
Cash exposure dropped significantly, from 10.6 per cent to 5.8 per cent.
The fund’s managing director, Mark Burgess, said the year saw the fund adjust its portfolio to benefit from greater exposure to equity markets while reducing the scale of its debt program.
“The Fund continues to hold approximately 70 per cent offshore, of which 28 per cent is unhedged. We have also been able to refresh the portfolio by realising a number of investments, while continuing to find new opportunities,” he said.
“With cash yields near record low levels, we remain of the view that investors should assess their desired risk profiles at this time in preparation for the investment environment over the next three to four years.”
Mr Burgess said the fund remained optimistic that global growth would continue to recover, but also needed to recognise that asset prices have become more expensive.
