Key Takeaways
- • Future Fund allocates A$135 billion ($101 billion) across a distinctive "barbell" portfolio structure with 18.9% in cash and 15.4% in hedge funds and alternative risk premia assets as of September 30, 2017—significantly above local superannuation fund averages of 6.9% and 10.9% respectively.
- • The combined cash, debt, and alternatives allocation totals A$45 billion, representing 44.2% of the fund's total portfolio, positioning the institution to capitalize on market corrections while generating alpha through liquid alternatives.
- • Craig Dandurand, director of debt and alternatives, joined the Melbourne-based fund nearly four years ago from California to lead the strategic rethink on portfolio structuring and manager value extraction under the oversight of David George.
- • The Future Fund employs approximately 30 external fund managers in hedge funds and liquid alternatives, including Arrowgrass Capital Partners, emphasizing that alternative allocation serves dual purposes: risk management and alpha generation beyond traditional beta-driven asset classes.
- • The fund's alternatives strategy explicitly strips out beta exposure and focuses on absolute-return strategies to enhance overall portfolio resilience beyond performance drivers from listed equities, credit, and property.
Summary
The Future Fund, Australia's A$135 billion sovereign wealth fund, maintains a portfolio structure distinctly different from its peer superannuation funds through an intentional "barbell" approach to asset allocation and risk management. As of September 30, 2017, the fund held 18.9% of assets in cash and 15.4% in hedge funds and other alternative risk premia strategies. This contrasts sharply with local superannuation fund averages of 6.9% in cash and 10.9% in hedge funds and alternatives, underscoring a fundamentally different philosophy toward portfolio construction and opportunity management.
The combined allocation to cash, debt, and alternatives totals A$45 billion, or 44.2% of the fund's total portfolio. The substantial cash position serves a strategic purpose: maintaining liquidity and dry powder to exploit buying opportunities should market corrections materialize. This approach reflects a disciplined stance on market timing and capital deployment rather than remaining fully invested at all times. Craig Dandurand, who relocated from California to Melbourne approximately four years prior to assume the role of director of debt and alternatives, has been instrumental in executing this strategic rethink on how the fund structures its portfolio and extracts greater value from its external manager base. Dandurand reports to David George, the fund's head of debt and alternatives.
The allocation to hedge funds and liquid alternatives—which the Future Fund refers to as "alternatives"—represents a calculated shift away from traditional beta-driven asset classes such as listed equities, credit, and property. The magnitude of this allocation may appear unconventional to observers, but the fund's leadership emphasizes that the strategy serves dual objectives: managing risk through diversification and generating alpha through absolute-return strategies. By deploying approximately 30 external fund managers in hedge funds and liquid alternatives, including Arrowgrass Capital Partners, the fund explicitly targets alpha generation while stripping out broad market beta exposure. This approach enhances overall portfolio resilience and aligns with the fund's mandate to optimize risk-adjusted returns across its total portfolio framework.
The combined allocation to cash, debt, and alternatives totals A$45 billion, or 44.2% of the fund's total portfolio. The substantial cash position serves a strategic purpose: maintaining liquidity and dry powder to exploit buying opportunities should market corrections materialize. This approach reflects a disciplined stance on market timing and capital deployment rather than remaining fully invested at all times. Craig Dandurand, who relocated from California to Melbourne approximately four years prior to assume the role of director of debt and alternatives, has been instrumental in executing this strategic rethink on how the fund structures its portfolio and extracts greater value from its external manager base. Dandurand reports to David George, the fund's head of debt and alternatives.
The allocation to hedge funds and liquid alternatives—which the Future Fund refers to as "alternatives"—represents a calculated shift away from traditional beta-driven asset classes such as listed equities, credit, and property. The magnitude of this allocation may appear unconventional to observers, but the fund's leadership emphasizes that the strategy serves dual objectives: managing risk through diversification and generating alpha through absolute-return strategies. By deploying approximately 30 external fund managers in hedge funds and liquid alternatives, including Arrowgrass Capital Partners, the fund explicitly targets alpha generation while stripping out broad market beta exposure. This approach enhances overall portfolio resilience and aligns with the fund's mandate to optimize risk-adjusted returns across its total portfolio framework.
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