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Future Fund's $2B venture portfolio generated over 20% net across 10 years
“And we've done about 30 or so of them, as I said, and that portfolio has delivered You know, really strong over 20% net returns over 10 years now, which is very satisfying considering what's been happening in the world.”
Arndt: Future Fund Halted Equity Investing in 2007 on Negative Risk Premia
“And David Neal, when he was hired as CIO and the person who was in the head of strategy role at the time, Tony Day, came on board before I joined. And the very first thing they did was look at markets and say, we're not sure what's going on, but we think the e…”
Future Fund held 80% of its portfolio in cash when Lehman collapsed
“Fortuitously, and through some good decisions made by the people who were here before me, we were sitting with about 80% in cash when layman's went broke.”
Arndt: Future Fund GFC Credit Allocations Returned Above 20%
“It was probably about 15 to 20% of the portfolio into credit over about three months. So it was quite a big decision, and clearly that decision paid off very well. Those initial investments returned above 20%.”
Future Fund holds over 15% in cash to preserve flexibility
“And so that's why you see us sitting with sort of a bit over 15% in cash, and why we manage our illiquid asset pool carefully, because while you would hope you get an illiquidity premium from those assets, it also means your portfolio isn't as flexible as it m…”
Future Fund trials pre-canvassing IC votes to reduce dominant-voice bias
“So we've transitioned to a model now for some of our committees, and it's in trial where we canvas views the day before the meeting. Whether people are inclined to vote for or against something, and why, and then the chair of the meeting gets that information.”
Arndt: Future Fund Quantitative Bonuses Are Solely Based on Total-Fund Three-Year Returns
“But the quantitative performance measure, and the more senior you are, the more important that is, is solely based on the rolling three year whole of fund performance in an absolute sense.”
Future Fund holds significant onshore Chinese exposure in private equity
“So we've been playing them A little bit in the equity market we're working on some further strategies there, but significantly in our private equity program, where we have quite a bit of onshore Chinese exposure, really playing those themes.”
Arndt: 50-year macro drivers like debt cycles and demographics won't continue
“There's a whole lot of things over the last 50 to 80 years, a huge leveraging cycle, a huge demographic boom post-war, that have meant that certain things behaved the way they did, that I just don't think are likely to continue. So I think we have to go back t…”
Arndt: Post-COVID Stimulus Forced Future Fund to Overhaul Portfolio
“So when COVID happened and government started to stimulate, we sort of got really interested in whether the world was changing, and I felt like we had to reposition not just the portfolio, but the mindset of the organisation around the world being different no…”
Arndt: Millennials and Gen Z Expect Different Policy Due to Scarring
“People who are, say, under 45 today, millennial and Gen Z, really have a very different lived experience, partly because of how old they were when the financial crisis happened, and what sort of jobs they got, what that felt like for them, whether they could a…”
Arndt: Modern Financial Models Over-Rely on Post-WWII Data
“Most of the data we have comes from the era post-World War II, and in many cases, really only the last 30 or 40 years. And so we've been in a particular part of the cycle during that period.”
Arndt: Credit Looks Attractive Following Broad Market Repricing
“Credit actually looks pretty attractive because it has repriced.”
Future Fund Added Rare Earths and Metals to Hedge Stagflation
“We think commodities are one of the few things that have worked through stagflationary periods and inflationary periods, and we see no reason to think the future will be different, but you've got an added tailwind now that in the decarbonized economy, a lot of…”
Arndt: Real Estate Credit Is Attractive Due to Capital Shortages
“Right now, real estate credit, for example, looks pretty interesting. There's a shortage of capital, and so our real estate teams and our credit teams are working together on that.”
Future Fund Quintupled Tech Team to Build Custom Data Capabilities
“And we just couldn't buy it off the shelf, what we wanted. So our technology team, I think, quintupled over the period of four or five years.”
Arndt: Asset Owners Learn Best From Peers, Not Flattering Fund Managers
“Fortunately or otherwise, when you're an asset owner, most people you speak to either work for you, and so it's always hard to know if they're really telling you what they think, or want a mandate off you. And so usually they agree with you wholeheartedly. I'm…”
Arndt: Future Fund's Expert Board Avoids Quantitative Reference Benchmarks
“We have a board appointed by government, but the board are all industry experts. They're not a lay board. They can engage in quite a sophisticated way, and they've always been aligned and supportive, but they've always been close, and by that I mean we have mo…”
Arndt: Build Back Office and Custody Before Hiring Investors
“Very wisely made the decision that it was better to build the back office and the custody system and the legal approach first before you start hiring investment people, because, believe it or not, investment people want to start investing straight away.”
Future Fund Measures Risk Through Three-Year Rolling Cumulative Drawdowns
“And then secondly, we think about risk in terms of the cumulative drawdown over a three year rolling period, because we think as a public fund, we've got a responsibility to the public and to the taxpayer and the tolerance for bigger drawdowns over longer time…”
Arndt: Implied equity risk premium reliably predicts 10-year returns
“We can take the long bond rate or some forecast beyond that and say, disaggregate that and say, what is the implied equity risk premia? And that's actually a pretty good predictor of future returns over 10 years so.”
Future Fund's 20 Active Equity Mandates Canceled Out to Beta
“When we aggregated up All of the maybe 20 or so mandates we had across that portfolio, by and large, they canceled each other out at the whole portfolio level, and I would have expected we would end up with something like beta less fees. Now, actually, as I sa…”
Arndt: Top-performing venture capital managers demonstrate rare performance persistence
“Firstly, our research showed that unlike almost any other asset class, the strongly performing managers tend to be persistent.”
Arndt: 80% of Venture Capital Managers Fail to Return Capital
“I think the data we saw at the time was something like 80% of venture Managers don't return capital and only six or seven percent return enough capital to justify their existence.”
Future Fund's Venture Capital Portfolio Generated Over 20% Net Across Decade
“And that portfolio has delivered, you know, really strong over 20% net returns over 10 years now, which is very satisfying considering what's been happening in the world.”
Future Fund Held Approximately 80% in Cash When Lehman Brothers Collapsed
“Fortuitously, and through some good decisions made by the people who were here before me, we were sitting with about 80% in cash when layman's went broke.”
Future Fund Deployed 20% Into Credit During 2008 Crisis, Returning 20%
“It was probably about 15 to 20% of the portfolio into credit over about three months. So it was quite a big decision, and clearly that decision paid off very well. Those initial investments returned above 20%.”
Arndt: Future Fund holds over 15% of portfolio in cash
“And so that's why you see us sitting with sort of a bit over 15% in cash.”
Future Fund CIO Focuses on Culture and Process Over Investment Decisions
“My job actually is much more about team structure and process and strategy and most importantly, culture than about making investment decisions.”
Future Fund Bonuses Depend Solely on Rolling Three-Year Total-Fund Returns
“So obviously we get base salaries, but we also have a bonus arrangement, which is linked to some extent to personal goals, which might be about the team or the individual responsibilities. Ah, and they're assessed by the managers, but the quantitative performa…”
Arndt: Big funds internalizing real assets will force industry-wide change
“What's happening in infrastructure and properties, the big funds, rather than doing that, they're internalizing, as you pointed out, and that is creating pressure on the industry. And that will force change.”
Arndt: Past investment regimes cannot be assumed to continue into the future
“One is just people who assume the future will be like the past, and I don't think that's a valid assumption. You know, there's a whole lot of things over the last 50 to 80 years, a huge leveraging cycle, a huge demographic boom post-war that have meant that ce…”
Arndt: Future Fund launched with A$60B, including A$50B cash
“Well, if you include all the inflows over a year or so, it was about sixty billion Australian dollars, of which about fifty billion was in cash, and about ten billion was in Telstra shares that were still in escrow, and were not allowed to be sold for two year…”
Arndt: Australia's Future Fund benchmark is inflation plus 4% to 5%
“We do have a benchmark from the government of inflation plus four to five percent over the long term that they've given us.”
Future Fund Invests in US Aged Care and Millennial Infill Housing
“We're doing aged care development in the US at the moment because the demographics are such that there's just a definite need for more facilities in that space, or infill housing in places where, because of the impact of the financial crisis, people stayed at …”
Future Fund equity book is 50% developed, 25% EM, 25% Australia
“The equity exposure overall is about 30% of the fund. And that's roughly about half developed market equities and a quarter each of emerging market in Australian equities.”
Arndt: Future Fund holds ~12% in PE, half in venture and growth
“Private equity is probably about 12% of the portfolio at the moment, and about half of that is venture and growth equity.”
Arndt: Future Fund relies on separate accounts to manage hedge funds
“They're mostly actually sort of fund to fund separate account type mandates because we don't have the bandwidth in our team to track 30 or 40 underlying managers.”
Arndt: Future Fund's 7-8 person PE team writes $300M-$400M checks
“For the larger managers, we could write a three or four hundred million dollar check to a fund, and ideally, that's what we would do, because we've got only seven or eight people in our profit equity team, and they've got a lot of managers to get across”
Arndt: Future Fund holds over $2B in venture exposure
“We've worked very hard to slowly build the portfolio to the point where today it's about a bit over two billion dollars of exposure, which is meaningful to some extent at the fund level, but more importantly, it's also very diversifying from the rest of the fu…”
Arndt: Future Fund achieved a 10-year Sharpe ratio of 1.3
“And so, we sort of think about volatility, but also Sharpe ratio, and it's a hard thing to measure, and there's all sorts of debates you could have about it, but in terms of our 10 year Sharpe ratio, it's about 1.3, which we think for a fund like ours is, is p…”
Future Fund Crowdsourced 10 Macro Shifts via Organization-Wide Wiki Survey
“So the next thing we did was a wiki survey across the whole organization, as in from the receptionist up, and we said, what do you think's changing in the world? What's important? We came up with a bit over 70 ideas, and we tried to group them, and ultimately …”
Future Fund Finances One-Third of All Australian Medical Research
“We don't just invest the Future Fund, which helps strengthen the Commonwealth Government's balance sheet and help to support the economy through COVID, but we also manage the Medical Research Future Fund that funds about a third of medical research in Australi…”
Future Fund Spent Six Years Building Look-Through Private Market Data System
“We've spent more than a half a dozen years now building a system that can look into the portfolio, look through the private funds to understand the underlying assets that we can ascribe our own information onto any assets that we own in terms of what currency …”
Future Fund Copied Day-One Onboarding Practices From Disney University
“I think they're great at imbuing culture through their organization, and so I started to investigate And they actually have a thing called the Disney University, and they do this culture induction on the first day, and I've been fortunate enough to meet with t…”
Future Fund started with A$60B including A$10B in escrowed Telstra shares
“Well, if you include all the inflows over a year or so, it was about sixty billion Australian dollars, of which about fifty billion was in cash, and about ten billion was in Telstra shares that were still in escrow, and were not allowed to be sold for two year…”
Future Fund invests in US aged care development and infill housing
“For example, we're doing aged care development in the US at the moment because the demographics are such that there's just a definite need for more facilities in that space, or infill housing in places where, because of the impact of the financial crisis, peop…”