The US has become a riskier place to invest: $240b taxpayer-owned fund
The chair of the $240.8 billion Future Fund, Greg Combet, has warned that the United States has become a riskier investment destination and is likely to attract a smaller share of global capital flows, saying the Trump administration has 'added layers of volatility and uncertainty' to financial markets.
Reflecting on his first year chairing the taxpayer-owned fund on Tuesday, Combet said adjusting the Future Fund's portfolio to the Trump administration's policy changes, including its objective to depreciate the US dollar, was a key priority for the fund.
Combet referred to several factors that the fund is focused on, including the US review of AUKUS, which Combet said 'reinforces the fact that traditional economic and security relationships with the US are now less certain'.
He also cited relations between China and the US; the two countries' intent to dominate artificial intelligence capabilities; the growing US budget deficit; the status of the US Federal Reserve and a section of US president Donald Trump's 'big, beautiful bill' which would drastically increase tax rates for Australian investors.
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Given that the majority of the Future Fund's physical assets are denominated in US dollars, he reiterated a need to increase its exposure to other currencies including the euro and yen, to include commodities such as gold to its portfolio, and finally, to prioritise Australian assets.
'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 doubt has been sown,' Combet told a Committee for Economic Development of Australia lunch in Sydney.
He added he had doubts about relying on possible future Democratic presidencies to reverse the scale of Trump's changes.
Combet, a former senior Labor minister, also underlined the growth in artificial intelligence (AI), saying Australia needed to embrace the changes triggered by the technology. He believes that estimates provided by Goldman Sachs that suggest generative AI could result in productivity growth of 16 per cent in Australia are conservative.
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