Australia's Future Fund has grown to $91.7 billion as its management signals an ongoing shift from debt towards equity investments while the world recovers from the global financial crisis.
However, Future Fund managing director Mark Burgess says the fund's managers are struggling to find attractive investments in Australian agriculture that could match the returns from other asset classes.
A portfolio update, released on Wednesday, shows that the Future Fund kept its Australian equities almost unchanged at 10.3 per cent, down from 10.7 per cent, of total assets at September 30, 2012.
But, the fund increased its exposure to global equities and emerging markets, while cutting its holdings of debt instruments.
Future Fund chief investment officer David Neal said the fund had cut its debt exposure after making substantial gains in the asset class.
"Coming out of the financial crisis we felt that there were substantial opportunities within credit markets to generate very strong risk-adjusted returns," Mr Neal said on Wednesday.
"We essentially felt that we could achieve equity-like returns with substantially lower risk - if you are the lender into a business you've obviously got priority on cashflows over the equity holder.
"That did extremely well for us but, by the end of 2012, that thesis had pretty much played out."
Mr Neal said that with the recovery in credit markets and moves by central banks worldwide to stimulate growth, the fund had decided to increase its equities holdings.
Mr Burgess said the fund had hit the $91.7 billion mark at September 30 and had achieved returns of 8.2 per cent per annum for the preceding five years and 9.7 per cent for the preceding three years.
Growth for the year to June 30 was 15.4 per cent.
Returns for the fund now stand at 6.4 per cent per annum since its inception in 2006 to meet Australia's future public service superannuation costs.
Mr Burgess said that despite the fund having a mandate to seek low-risk, long-term investments and the growing investor interest in agriculture and food production, Future Fund managers had not found significant opportunities apart from some listed equity holdings.
"Certainly, you can think of a number of attractive thematics around food production," Mr Burgess said.
"We have, to date, struggled to find investments that essentially match up to the other opportunities."The update also showed that the Building Australia Fund, established in 2008 to support infrastructure needs, stood at $4.8 billion, the Education Investment Fund stood at $3.9 billion and the Health and Hospital Fund reached $2.7 billion.