SWFs Seek Unusual Sources of Yield in Fixed-Income Markets

February 20, 2014 by Loch Adamson

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Chiswick Park office complex in London. AT THE BEGINNING of 2013, David Neal, CIO of the Future Fund, Australia's A$97 billion ($85 billion) sovereign wealth fund, began to reassess the portfolio's credit exposure. Yields were collapsing across a range of fixed—income securities — and risks were becoming more acute. Gradually, over the following months, he and his team began reallocating capital from debt to equities, reducing the fund's total fixed-income exposure in 2013 from 19.1 percent of the portfolio in January to 12.2 percent by year-end and raising the fund's total exposure to global equities from 23.4 percent to 33.1 percent during that same period. "At the beginning of last year, the significant opportunity that we'd previously identified in credit had largely played out, and equities looked to us to be the more interesting asset class," said Neal, who discussed the Future Fund's calendar—year performance at a press conference on…

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