The Future Fund has received government approval to internally manage transactions in Australian infrastructure and property, marking a significant shift in its investment approach after nearly two decades of relying solely on external managers.
Chair of the Future Fund, Greg Combet, revealed the development in a speech to the Committee for Economic Development of Australia, describing the move as one that will allow the fund to directly manage assets and better access opportunities that may be difficult or inefficient to pursue through external managers.
“This is a noteworthy change from the long-standing obligation to exclusively utilise external investment managers,” Combet said
“To undertake internal management, the board must obviously be satisfied that we have the right resources, skills, processes and technologies and that such a move is cost efficient.
“But this additional capability is intended to help access new opportunities in Australian infrastructure and property that we might otherwise be unable to access efficiently, or which external managers may not be focused on.”
Combet emphasised that this does not signal a major departure from its hybrid model or long-standing external partnerships.
“We do not anticipate a significant shift away from the way in which we partner with our external managers. We continue to recognise the benefits these partnerships bring in terms of insights and skills and our ability to remain focused on the overall portfolio,” he said.
“But the capacity to be able to make transactions and manage investments internally will increase our flexibility and reinforce our focus on value for money and is a further example of how we continue to evolve the way we invest.”
The internalisation move comes as the fund navigates what Combet described as a “New Investment Order”, shaped by deglobalisation, geopolitical tension, technological disruption and climate change.
The chair said that recent developments – particularly the re-election of Donald Trump as US president – had added “layers of volatility and uncertainty” to global markets.
“Understanding the Trump administration policies, their impact on investment markets and how we adjust our portfolio, is the important priority for the Future Fund at present,” Combet said.
He pointed to rising US tariffs, a retreat from global economic leadership and policies weakening the US dollar’s reserve status as material risks. These changes, he said, make the US “a more risky and uncertain investment destination”, one likely to see a smaller share of capital flows going forward.
“For the Future Fund, these are matters of material significance to our portfolio, especially given that the majority of our physical assets are denominated in US dollars,” Combet said, adding, however, that the fund has already taken steps to hedge against global volatility.
Moves made include increasing exposure to the euro and Japanese yen, adding commodities such as gold and building its domestic asset base. It is also reviewing future allocations, with a closer focus on Europe and Japan.
Noting that the US will “undoubtedly” continue to offer “many attractive investment opportunities”, Combet elaborated that the fund is giving further consideration to the medium- and long-term implications and is allocating “more time and resources to investigating other markets”.
“We are considering the need to build the physical portfolio in a more diversified way,” he said.
“To help our asset teams do this we are reviewing our short and long term scenarios … It seems unlikely that even dramatic reversals of Trump policies would engender a return to a ‘business as usual’ approach from long-term investors now that investor doubt has been sown.
“And the trend towards deglobalisation, greater geopolitical tensions and multi-polarity in world power pre-date President Trump and can be expected to post-date the Trump era. We certainly do not think the dynamics I have spoken of will pass and return the world to the norms of yesteryear.”
Combet added that the fund’s alternatives portfolio is also providing insurance against the volatility that has returned to investment markets.
In the 2024 calendar year, the fund returned 12.2 per cent against a mandate target of 6.4 per cent, adding $26 billion in value. In the months since the end of 2024, Combet said the fund has continued to perform solidly – notwithstanding the volatility generated by the US “Liberation Day” tariffs and numerous other policy-induced disruptions.
