Gold and Commodities Purchased by Australia’s Sovereign Wealth Fund as the Shadow of the 1970S Looms

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The Australian Government Future Fund, Australia’s A$200 billion ($134.28 billion) sovereign wealth fund, has significantly enhanced its portfolio’s resilience by increasing exposure to gold and commodities.

This comes in response to fears of an economic downturn similar to the one experienced during the 1970s when inflation spiralled out of control and markets became volatile.

The Future Fund has outlined a broader strategy that outlines a more diversified range of investments across asset classes and geographies, with greater emphasis on sustainability. This strategy seeks to mitigate risk and take advantage of opportunities in different global markets as they arise.

In a note released on Friday, The Future Fund highlighted their commitment to delivering sustainable long-term returns for its investors through this diversified investment approach.

The note said, “In this kind of environment, there is a real risk of simultaneous slow growth, high unemployment, and rising prices that has some parallels with the stagflationary period that struck developed markets in the 1970s.”

Gold and commodities have historically been seen as safe-haven investments during volatile times, providing investors with a more stable option than stocks and bonds. In addition, these investments tend to appreciate when other assets depreciate.

The Future Fund has said that the move is part of its long-term sustainability and risk management strategy.

“There are no simple answers for the investment community. Traditional approaches have delivered strongly, but it is doubtful they are fit for purpose in the future,” it said.

Russia’s invasion of Ukraine in 2014 has been a major cause of concern. Many argue that it could be a harbinger of destabilized energy markets and more significant inflation and taxes as countries prioritize security and resilience over efficiency.

The rising concern over global economic stability has prompted the Future Fund to proactively protect its investor’s wealth. By increasing exposure to gold and commodities, the fund is seeking both resilience and greater efficiency in its mission to deliver superior long-term returns.

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