Australia Future Fund returns 9.8 pct as equities focus stays

SYDNEY, April 29 Mon Apr 28, 2014 10:52pm EDT

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SYDNEY, April 29 (Reuters) - Australia's state pension fund returned 9.8 percent in the year to March 31, growing to A$97.57 billion ($90.38 billion) with a large chunk of money stacked in equities.

Future Fund Chief Investment Officer said on Tuesday that while the portfolio benefited from buoyant share markets, sustainable future returns needed to be underpinned by better economic growth.

The fund, created in 2006 by the federal government to pay state employees' pensions, has increased its portfolio from A$85.17 billion a year ago.

Established with contributions of A$60.5 billion, the fund has made a return of 6.8 percent a year, just shy of its long-term target of 7.2 percent.

Over the past five years the fund has generated 11.2 percent a year.

The fund, which returned a record 17.2 percent in 2013, has built its equity exposure at the expense of debt securities.

Its allocation to global equities, both developed and emerging markets, increased to 32.4 percent of its total assets at the end of March 2014 from 23.7 percent a year ago. Debt securities accounted for 11.8 percent of the assets, down from 16.6 percent.

"Markets are relatively buoyant and valuations across most sectors are now looking fairly full," said David Neal, the fund's chief investment officer.

($1 = 1.0796 Australian dollars) (Reporting by Swati Pandey; Editing by Stephen Coates)

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