“Privately held investments have grown twice as fast as public markets in the last decade. Private markets now account for more than US$6 trillion of market value — almost 10 per cent of global investment assets,” she said.
“In the venture space, we seek to invest in strategies that we can’t readily access in public markets — innovation and small company growth,” she said.
The fund had to negotiate the risks of investing this way in the current economic climate, she said.
This is because loose monetary policy has meant investors have more money to invest and private markets look more attractive, though the complex global environment makes it challenging to find value and investing in private markets creates less flexible portfolios.
Seeking strong-performing venture capital funds was also a challenge, she said.
“The return dispersion between best and worst performing venture funds is large, and average market performance has been, well, average,” she said.
Ms Norris said the fund searched for long-term partnerships with investment managers that had proven track records.
“Fundamentally, we’ve got to have confidence that the manager stacks up, and seeing the opportunities that they have been able to capitalise on in the past.”
The Future Fund takes a global approach to investment and this includes an interest in China, where Ms Norris said the investment team was taking a “thoughtful” approach to the risks and rewards of the nation’s growing venture capital market.
The Future Fund has returned more than 10 per cent over the past decade and stood at $162.2 billion at June 30.
Its annual return was 11.5 per cent over the past 12 months, despite what the board called “volatile market conditions”.
In June, the fund’s chief executive David Neal said the investment team was prioritising “diversification and flexibility” as it faced a challenging global investment climate.
Australia’s private equity market has billions in capital yet to be deployed: The Australian Investment Council estimated levels of “dry powder” hit record levels in last year, at $US14.8 billion ($21.3 billion).
Emma is the small business reporter for The Age and Sydney Morning Herald based in Melbourne.