Australia's sovereign wealth fund buys gold, commodities as shadow of 1970s looms | Inquirer Business

Australia’s sovereign wealth fund buys gold, commodities as shadow of 1970s looms

/ 02:45 PM December 19, 2022

SYDNEY  – Australia’s A$200-billion ($134.28 billion) sovereign wealth fund is increasing exposure to gold, commodities, private equity and infrastructure as it warns the future will echo the low-growth, high-inflation era of the 1970s.

The Future Fund outlined the changes, which also included widening its currency basket, in a note on Friday that questioned the value of traditional 60-40 portfolios and called for an investing shift to confront a world dealing with war, inflation and climate change.

“In this kind of environment there is a real risk of simultaneous slow growth, high unemployment, and rising prices that has some parallels with the stagflationary period that struck developed markets in the 1970s,” the note said.

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Investors large and small are scrambling to adjust portfolios and philosophies undermined by the simultaneous cratering of equity and bond markets.

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The eight-page note called time on four decades of investment tailwinds including falling interest rates and taxes, energy abundance and growing globalisation driven by China’s rise.

Investors now faced a world corrosive to asset prices: more war, the risk of capital controls and confiscations, bigger government, and the spectre of higher inflation.

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In response the Future Fund is implementing six broad sets of changes, including more focus on dynamic asset allocation and liquidity.

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“There are no simple answers for the investment community. Traditional approaches have delivered strongly, but it is doubtful they are fit for purpose in the future,” it said.

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Report authors argue Russia’s invasion of Ukraine hints at a future of destabilized energy markets as well as higher inflation and taxes as countries prioritize security and resilience over efficiency.

($1 = 1.4894 Australian dollars)

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TAGS: Australia, Commodities, gold, sovereign wealth fund

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