"The big issue is a stagflation...what can we do in that world? We think commodity exposure, gold and other inflation pass-through assets are quite attractive at the moment,” Arndt said. Ardnt said whether or not interests rates have peaked is an ongoing debate but bond markets are pricing in a recession. “Bonds are more attractive than they have been," he added. ($1 = 1.5131 Australian dollars) (Reporting by Praveen Menon Editing by Shri Navaratnam)
praveen.menon.thomsonreuters.com@reuters.net; Twitter: @Journopraveen)) By Praveen Menon
SYDNEY, April 27 (Reuters) - Australia's sovereign
wealth fund, the Future Fund, is looking to buy small cap
equities for the first time as traditional investments like blue
chip firms and real estate are no longer safe, the CEO said on
Thursday.
Raphael Arndt said investments like office buildings or
shopping centres offer less safety, and a large cap company
could be split up, regulated or its markets disrupted.
"There are no set-and-forget investments any more," he said
at the AFR Alpha Live 2023 conference in Sydney.
"Markets are constantly changing and we must evolve our
strategy in response. For example, changes in domestic markets
have made small cap equities attractive to us for the first time
and we have commenced a new program to invest in them in recent
months," Arndt added.
The roughly A$250 billion ($165.23 billion) fund reported a
negative return in calendar 2022, saying the response by central
banks to high inflation by rapidly raising interest rates drove
down asset prices and investment markets. The fund has also flagged that it would raise its exposure
to gold, commodities, private equity and infrastructure, warning
the future will echo the low-growth, high-inflation era of the
1970s.
Ardnt said inflation is expected to remain high with
stagflation -- an inflationary world with low economic growth --
becoming a major issue.
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