Addressing risks from concentration in the US equity market is hard, as it requires taking a bet on the direction of the technology sector, Future Fund CIO says
Mitigating concentration risks in the US equity market is difficult, because it requires institutional investors to take a bet on the direction of the technology sector and the broader theme of technological innovation, according to the Future Fund.
Instead, the fund tried to manage risk by remaining well-diversified across markets and sectors, Ben Samild, Chief Investment Officer with the Future Fund, told [i3] Insights during a conference call on the fund’s full-year returns on Tuesday.
“The thing that we have in place to mitigate risk is a really extensively well-diversified portfolio. Obviously, the risk within the US, the concentration risk within the US…, it has been so well rewarded, it’s very difficult to step away from,” Samild said.
To step away from that particular concentration, you're sort of stepping away from a particular technology scenario that you need to then take a bet on, and that's actually quite hard. I'm not sure we have a differentiated view to the market on the winners and losers and outcomes of that particular technological innovation
“Thematically, it’s obviously super interesting, because to step away from that particular concentration, you’re sort of stepping away from a particular technology scenario that you need to then take a bet on, and that’s actually quite hard.
“I’m not sure we have a differentiated view to the market on the winners and losers and outcomes of that particular technological innovation,” he said.
It doesn’t mean the fund has been resting on its laurels; the Future Fund made $90 billion worth of changes to the portfolio during the 12 months to 30 June, 2025, which included all sectors as it sought more active returns, regional diversification and enhanced liquidity and flexibility.
But challenging the dominance of the Magnificent Seven was not a decision the fund was comfortable with, Samild said.
“We’ve tried to be very thoughtful about that without being hubristic. Whilst we have taken opportunities all over the capital stack, private and public, in order to diversify across multiple potential future worlds, the actual index concentration isn’t one we have tried to … mess around with,” he said.
Future Fund Posts Double-Digit Returns
The Future Fund reported a return of 12.2 per cent over the full financial year (FY), compared to 9.1 per cent over FY 2024. Over a 10-year period, the fund returned eight per cent, well above its mandated level of 6.9 per cent a year.
For the first time, the fund broke through the $250 billion mark in total funds under management.
“Investment returns of 12.2 per cent … reflect the benefit of our thinking about the New Investment Order since 2021 and the changes we have made to the portfolio as a result,” Raphael Arndt, Chief Executive Officer of the Future Fund, said in a media release.
“We increased the level of structural risk in the portfolio to improve long-term real returns and continued to develop the resilience of the portfolio to a range of scenarios by increasing and diversifying our exposure to developed market currencies and commodities, including gold,” he said.
Future Fund Increases Risk in the Portfolio
The Future Fund steadily added risk to the portfolio since the third quarter of 2020, not long after the COVID-19 market correction that year. It has continued to do so during FY 2025.
“We definitely leaned into risk and increased our equities exposure through the year. And that came as a result of pretty deep thinking about what we thought the political and policy cycle would likely mean for risk assets and equity markets in particular,” Samild said.
“It’s definitely paid off. Obviously, it was a really strong year for equity markets, so it was very, very accretive to returns.”
We thought that there'd be significant volatility coming and we did quite a bit of work in making sure that our portfolio was prepared from a liquidity, protection and diversification perspective for those events
As a result of the fund’s focus on managing risk, the so-called “Liberation Day’, when US President Donald Trump announced a raft of trade tariffs on countries around the world, turned out to be more of an opportunity than a challenge.
“We thought that there’d be significant volatility coming and we did quite a bit of work in making sure that our portfolio was prepared from a liquidity, protection and diversification perspective for those events,” Samild said.
“Liberation Day was a good example of that. The fund and the investment team were very well-prepared for the events of that week and, actually, were able to really lean into risk as markets bottomed, and again that was quite a profitable outcome,” he said.
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[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.