Trump speeds Future Fund's retreat from US markets
Australia's sovereign wealth fund will seek out more assets in places like Europe and Japan as President Donald Trump makes the US a less attractive place to invest.
Although the diversification from US assets was already in train before Mr Trump's re-election, it has only increased the need for insurance against volatility, said Future Fund chair Greg Combet.
"We are considering the need to build the physical portfolio in a more diversified way," the former Labor MP told a Committee for Economic Development of Australia event on Tuesday.
The fund has already broadened its portfolio, with greater exposure to traditionally defensive currencies like the Euro and Japanese Yen, safehaven commodity gold, and domestic assets to hedge against inflation, higher interest rates and currency movements, Mr Combet said.
"While there are still likely to be compelling opportunities in US dollar denominated asset markets, we will need to devote more time and resources to investigating other markets including Japan and the EU."
On top of increased trade and security tensions as a result of Mr Trump's policies, the president's 'big beautiful bill' also threatens to drastically raise taxes for international investors, including the Future Fund.
"In combination these policies and dynamics are making the US a more risky and uncertain investment destination," Mr Combet said.
Depreciation of the greenback, which has fallen about 10 per cent this year against major currencies, further threatened the fund's investments, given the majority of its physical assets were in US dollars.
The fund still managed a return of 7.9 per cent in the year to March 31, growing its assets to $240.8 billion.
Mr Combet said the fund was continuing to perform solidly, despite the volatility created by Mr Trump's 'liberation day' tariffs and "other policy-induced disruptions".
"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," he said.
"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."
Despite the uncertainty, opportunities remain for the Future Fund, which is hoping to leverage growth in demand for clean energy and data centres as artificial intelligence adoption accelerates.
The fund recently added a 10 per cent stake in Transgrid, a key player in the federal government's push to expand electricity transmission infrastructure, as well as increasing its holding in data centre company CDC.
"We have also committed capital - including long-dated capital expenditure programs - at the intersection of two of the big secular themes of our lifetime: the energy transition and the AI revolution," Mr Combet said.
"Data centres, energy infrastructure and renewable generation all expose the Future Fund to what we will be a sustained growth story in the advancement and adoption of artificial intelligence.
"Our view at the fund is that AI is coming faster than perhaps many anticipate."
In a joint announcement in Seattle on Sunday, Prime Minister Anthony Albanese and global cloud computing giant Amazon revealed the company would increase its investment in Australian data centres over the next five years to $20 billion.
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