The Future Fund has recouped COVID-19 losses but warns that the low interest rate environment means the ability to generate strong returns in the future is likely to be challenged.
More lockdowns, uncertain pathways to unwinding fiscal stimulus and the potential for further market turbulence or economic shocks meant the fund was set at neutral levels of risk, chief executive Raphael Arndt told a Senate estimates hearing on Tuesday.
“The fund has now more than recovered losses incurred as a result of the COVID pandemic,” Dr Arndt said.
“While we have seen significant economic stimulus boost markets with encouraging signs across economies in many parts of the world as vaccines are deployed, we also recognise the challenges that remain.”
Powering Australian Renewables, in which the Future Fund holds a 40 per cent stake, and Mercury New Zealand, agreed last week to buy Australasian wind farm operator Tilt Renewables.
Dr Arndt said the acquisition would increase the fund’s exposure to renewable energy to $1 billion.
Overall, the fund stood at $171 billion as at December 31, its highest ever value, having returned nine per cent per annum over the last 10 years against a target of 6.2 per cent.