By Lewis Jackson
SYDNEY (Reuters) -Performance at Australia’s sovereign wealth fund rebounded in the final quarter of 2023 buoyed by the rally in global equity markets, results showed on Tuesday, although it cautioned against expecting aggressive rate cuts in Australia this year.
The A$212 billion ($139 billion) Future Fund, returned 8% in the year ended Dec. 31, narrowly missing its target return of 8.4%. In the December quarter it returned 3.2% versus a target of 1.9%.
Chair Peter Costello, who retires next month, said while there were signs inflation in Australia was beginning to moderate, it was too early to call a peak in interest rates.
“We think equity markets have priced in a peak and maybe a fall in interest rates already and they may have done that a little too early,” Costello, who was Australia’s Treasurer from 1996 to 2007, said on a call with reporters.
“We hope that there will be some interest rate relief through the course of this year. We just think it’s far too early to call.”
Markets are wagering the RBA will not cut rates until November, expecting total easing this year of a modest 34 basis points.
The result follows a choppy patch for the sovereign wealth fund, which has repeatedly missed its return targets, in part due to being positioned for inflation and interest rates to stay higher for longer.
The fund returned 6.3% over the 12 months ended Sept. 30, but declined 0.5% in the September quarter.
Designed to cover pension liabilities for public servants, the Future Fund was set up in 2006 with the proceeds from the privatisation of state telco Telstra (OTC:) and today rivals Australia’s largest pension funds in size.
($1 = 1.5223 Australian dollars)