Future Fund’s hedge fund stars defy downturn

from the scourge of higher inflation and rising interest rates.

The strong run for hedge funds comes after a long period in which institutions questioned the role of alternative asset managers when stocks and bonds did all the heavy lifting. Whether they’re guided by top traders or smart models and trend-following strategies, hedge funds that could short stocks and bonds and go long commodities profited from the inflationary impulse.The Future Fund has an equally large allocation of $34 billion to private equity and venture capital. But in scanning the roster of managers, the biggest names in the industry are absent. The fund isn’t a fan of buy-out firms that use debt to acquire businesses and resell them medium-term.

Long-term bonds, the US dollar, and the Japanese yen have tended to be reliable exposures for Australian investors against crises. While the yen has detracted In listed equities, of which the Future Fund owns $55 billion, tilts toward value and quality stocks have worked. Where the Future Fund does harbour concerns is in emerging markets, which explains why it cut its portfolio weight from 9 per cent to 5 per cent.intention to reduce exposure.

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