August 28, 2019 / 5:09 AM / 18 days ago

Australia's sovereign fund posts double-digit returns on emerging markets bets

SYDNEY, Aug 28 (Reuters) - Australia’s A$162.6 billion ($109.8 billion) sovereign wealth fund on Wednesday said it more than doubled its target return for the year, as it boosted investments in emerging markets.

The fund, known as Future Fund, posted returns of 11.5% for the year ended June 30, the highest since September 2015 and also beating its self-imposed 5.6% target, helped by a 2.7% increase in its exposure to emerging markets.

The fund, however, said it was not taking higher risks and warned future returns were likely to be lower.

“This return is particularly impressive on a risk-adjusted basis given the level of risk taken by the Fund,” Chairman Peter Costello said in a statement.

“The Board continues to see long-term returns as unlikely to replicate the strong returns of recent years and is cautious of the risks for investors.”

The fund, established in 2006 to cover escalating pension liabilities for public servants, raised its allocation to global equities by 3.3 percentage points to 35.5% during the year.

It trimmed its cash and debt holdings by 3.1% to A$33.6 billion as of June 30.

The Future Fund was set up with contributions of A$60.5 billion from government surpluses and proceeds of the privatisation of telecommunications operator Telstra Corp Ltd .

It aims for returns of 4% to 5% above inflation.

$1 = 1.4806 Australian dollars Reporting by Paulina Duran and Swati Pandey; Editing by Sriraj Kalluvila

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