Australia’s sovereign wealth fund delivered a six per cent annual return in the six months to June 30, returning to growth but underperforming its target of a 10 per cent return.

The Future Fund grew a record $206.1 billion, invested across a portfolio of Australian and global equities, private equity, property, infrastructure and timberland assets, cash and other assets.

In 2021/22, the fund delivered a return of negative 1.2 per cent, a result the fund called pleasing in the context of a 10 per cent drop in global equities.

For comparison, the ASX200 rose 10.7 per cent in the 12 months to June 30, 2023, and the MSCI World Index gained 15.3 per cent.

“We have made significant changes to the portfolio over the past two years and this means that our holdings and returns will look increasingly different from those of other asset owners,” said Future Fund CEO Dr Raphael Arndt.

The Future Fund is positioned moderately below neutral risk settings given the economic outlook and the direction of inflation and interest rates, Dr Arndt said.

Peter Costello, chair of the Future Fund Board of Guardians, said over the past decade the fund has delivered an annual rate of return of 8.8 per cent, against a target of 6.9 per cent.

Mr Costello said that share markets were surprisingly strong in the second half of 2022/23 and appeared to be pricing in a “Goldilocks” scenario.

“Whilst this would be a welcome outcome we see risks on the downside,” he said.

Dr Arndt said while risk assets were under-pricing some of the risks that the board sees, higher interest rates would make it easier to generate meaningful returns from the fund’s diversified range of assets.

The Future Fund was founded in 2006 with an initial contribution of $60.5 billion, derived from government surpluses and income from the privatisation of Telstra.