Australia's Future Fund think it's time to move up the risk curve to get better returns.
👉 Background: Australia’s Future Fund is a sovereign wealth fund that was established in 2006. The goal of this fund is to strengthen Australia’s long-term financial position by investing in a broad range of assets. Think $193 billion worth of cash, property and even a tidbit of private equity.
👉 What happened: But now, the CEO of the Future Fund has said that the global markets are at a turning point because everything we have relied on for the past 30 years is changing. Think: the forces of globalisation, the rise of the Chinese economy, an energy surplus and the ultra-low interest rates.
👉 What else: This means the Future Fund needs to overturn many of their previous investment assumptions. And it's time to move up the risk curve to get better returns.
💡The risk curve is all about the tradeoff between the risk and the return of different investments.
💡For example, a 90 day US Treasury bill is considered a very safe investment, which is why the return on this investment is extremely low. Whereas, investing in a brand new biotech company, is generally considered very high - but could lead to enormous returns.
💡The Future Fund has now announced that they’ve lifted risk in their portfolio overall to try to get better returns because COVID fundamentally changed politics, economics, markets, and therefore investing.
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