Australia's Future Fund published its 2025-26 Annual Report in October, together with a Year in Review and its first full Climate Statement. The headline figures were already known from August: a 14.8 per cent return for the year to 30 June, A$37.4 billion added and a fund now worth a record A$289.7 billion. The documents themselves say more about how that return was earned, what it cost and where the A$356 billion group of public funds is moving next.
The most telling table sits on page 73 of the annual report. Direct costs rose to A$656.72 million from A$628.31 million, although the direct cost ratio fell to 0.245 per cent of average net assets, from 0.265 per cent a year earlier and 0.335 per cent in 2023-24, because the fund grew faster than its bill. Look-through costs, the management and performance fees charged inside external vehicles, moved the other way: 1.40 per cent, up from 1.17 per cent and 1.03 per cent over the two previous years.
The board attributes the increase to growth and stronger performance, which raised performance fees, and notes that most accrued performance fees are paid only when an investment is realised, so not all may ultimately be paid. The look-through figures are unaudited estimates, but they sit on top of the direct cost ratio, so most of what the fund pays now goes to external managers.
Alternatives were 14.9 per cent of the portfolio at 30 June, or A$43,070 million, the largest single sleeve after developed market equities at 29.1 per cent. Private equity stood at 12.1 per cent, infrastructure and timberland at 11.5 per cent, credit at 8.1 per cent and cash at 5.4 per cent. The Year in Review names alternatives first among the contributors to the year's result, ahead of equities, venture capital and infrastructure.
Yet the same document describes a whole-of-portfolio review of the alternatives programme that ended with capital concentrated among the highest-conviction managers and a rebalancing away from strategies that duplicated exposures elsewhere or whose expected contribution had declined. The fund also kept building vehicles designed to supply capital in periods of market stress, and used the private equity secondary market on both sides, as buyer and seller.
Changes across listed equities, interest rates, currency and commodities totalled around A$26 billion during the year. The fund says it continues to rely less on global interest rate exposure to diversify the whole portfolio, turning instead to alternatives, commodities and currency. Its commodity holdings, it reports, provided meaningful downside protection during the conflict around Iran. Rates volatility was used to add a small amount of interest rate exposure as valuations moved.
Active management is being extended in Asia. The fund appointed Northcape, an Australian emerging markets manager, to run an active emerging market equity mandate, on the view that inefficiencies there are better captured by skill than by passive exposure, and it increased emerging market currency exposure after reviewing its emerging market debt strategy. It added private equity managers in Japan and Europe, set up dedicated private equity co-investment vehicles with core managers and gradually expanded co-investment in private credit.
The Climate Statement models a Net Zero 2050 scenario cutting the Future Fund's long-term valuation by 5.3 per cent, against 7.6 per cent for a simple liquid reference portfolio, and attributes the gap mainly to Australian infrastructure positioned for the energy transition. Under a Current Policies "hot house" scenario the fund fares slightly worse than the reference portfolio, at minus 5.5 per cent against minus 5.2 per cent. Its renewables platform Tilt Renewables now has 2.3 gigawatts of capacity in operation or under construction.
For pension and sovereign funds across Asia-Pacific that are lifting private market allocations, the report offers two practical reference points. First, a sovereign fund with a large internal team is paying more in external fees as returns rise, which makes fee terms, high-water marks and claw-backs a live governance question rather than a footnote. Second, Australia's largest public investor is pruning its alternatives roster while keeping the allocation, and is treating commodities and currency, rather than bonds, as its main portfolio ballast. Managers pitching new alternatives mandates should expect a higher bar for showing that a strategy adds something the existing book does not.
The full report, Year in Review and Climate Statement are published on the Future Fund's website.