The Future Fund said it continued to pursue investments that provide inflation protection, along with greater local currency exposures, as it revealed solid double-digit returns for the 12 months to September 2024.

In its latest portfolio update, the sovereign wealth fund reported a return of 11.9 percent for the year to Sept. 30, adding $24.4 billion and bringing the fund to $229.7 billion.

Dr Raphael Arndt, the fund’s chief executive, attributed the result to strong global equity markets, particularly in the US, alongside investments in alternatives.

"This was a strong 12-month result which adds to the Future Fund's strong long-term performance," he said.

“Listed equity markets rose for most of the year, driven largely by the strength of the US economy. The Future fund benefited from this and also experienced a positive contribution from its alternatives, credit and infrastructure holdings.”

As of September 30, 2024 the fund held about 27 percent in global stocks, while 14.7 percent of the portfolio was in alternatives. Another 10.9 percent is held in loans and 9.9 percent in infrastructure and forests.

However, the chief executive warned of economic challenges ahead, explaining that inflation, while easing across much of the developed world, "remains higher and more volatile than investors are used to".

In light of this, the fund is looking to strengthen the resilience of its portfolios to deal with these inflationary pressures, he said.

“Central banks around the world are in an easing cycle, which is positive for risk assets. The path to lower rates will not be easy, however, as ongoing geopolitical risks and major economic stimulus, including defense spending, the energy transition and deglobalization, are inflationary,” Arndt noted.

Highlighting the fund's latest position paper, Geopolitics: the foundation of the new investment orderin which he noted higher inflation and interest rates among the key drivers for the need to diversify across geographies and asset classes, the CEO said the Future Fund's investment activities are focused on mitigating risk and building resilience.

"Our activities have been focused on continuing to build resilience and flexibility into the portfolio as we seek attractive risk-adjusted returns," said Arndt.

"We continued to look for investments that provide greater exposure to the local currency and protection against higher inflation."

The portfolio is positioned towards the middle of its risk settings, he added.

Earlier this year, Future Fund CIO Ben Samild also highlighted inflation and inflation volatility as the "big changing thing" on the fund's radar, explaining that it had made about $100 billion worth of portfolio changes between 2020 and 2020. and 2024 in the face of a changing investment landscape that was predicted to become more inflationary.

Appearing on a Bridgewater Associates podcast in September, Samild explained: "We've tried to think about the kind of inflation we're concerned about, what we can do, how much spending we're willing to take on, what kind of event style issues that ultimately lead to to inflation.

"We're not going to predict and we're not going to manage the portfolio too specifically, but we'd just like to make sure we can survive them and ideally thrive on the other side of them."