Australia's sovereign wealth manager, the Future Fund, said on Tuesday it returned 14.3% in the year to Dec. 31, its highest annual return since 2015 thanks to booming stock markets, but has raised cash holdings amid overheating fears.
Global equity markets have risen to record highs in recent months, driven by highly accommodative monetary policies and despite sluggish growth and ongoing geopolitical concerns.
Future Fund Chairman Peter Costello said the fund was now being careful in assessing "which asset values are supported by earnings as opposed to those supported merely by cheap money".
"Global debt levels and demographic pressures will shape economies and markets over the medium to long term."
The A$168 billion ($115 billion) fund has returned an average 9% return over the last five years, it said. In 2018, it returned 11.3%.
In the last year, the fund trimmed its exposure to infrastructure, debt and alternative assets by 4.2% to A$48.8 billion, while increasing its allocation to global equities 6.6%.
Cash holdings increased A$1.7 billion during the year to A$23.07 billion, largely driven by a 2.3% increase in the three months since Sept. 30.
"We maintain our long-held view that prospective returns will be lower than recent returns," Costello added.
The Future Fund was set up in 2006 with contributions from a A$60.5 billion from government surpluses and proceeds of the privatisation of telecommunications operator Telstra Corp Ltd <TLS.AX>.
It aims for returns of 4% to 5% above inflation.
(Reporting by Paulina Duran in Sydney; Editing by Lincoln Feast.)
