Australia's wealth fund says bond exposure grows

MELBOURNE, Sept 4 (Reuters) - Australia's $50 billion sovereign wealth fund increased its exposure to bonds and alternative assets in the June quarter as it saw opportunities emerge from the market turmoil of the past year.

The government-run Future Fund is the nation's largest single investment fund, and was set up in 2006 to cover future public pension liabilities.

In its latest portfolio update for the three months to June 30, released on Friday, the fund said its substantial investments in credit markets helped it avoid some of the more extreme declines in equities over the past year.

"While the current positive momentum is encouraging, significant issues still need to be worked through across global markets," Future Fund Chairman David Murray said in a statement.

"This presents both challenges and opportunities for investors and we will maintain our prudent approach to building the portfolio," he said.

The fund had A$12.489 billion ($10.5 billion) in debt securities, or 23.1 percent of its portfolio, at June 30, up from 21.9 percent at March 31.

The fund's exposure to alternative assets rose to 5.0 percent in the quarter from 3.9 percent, while Australian equities slipped to 8.3 percent from 9.3 percent.

The fund still has A$22.2 billion, or 41.1 percent of its total assets, in cash, the update showed.

For the June quarter, the fund generated a return of 5.1 percent while for the year to June 30, returns fell 4.2 percent.

The June quarter update predates the fund's sale of about a quarter of its stake in telecommunications company Telstra Corp Ltd (TLS.AX) in August. The stake was given to the fund when the government sold its holding in the former state monopoly. ($1=1.191 Australian Dollar) (Reporting by Victoria Thieberger; editing by Jonathan Standing)