A solid 8.4 per cent return by the Future Fund over 2015 disguises a difficult past six months as it adjusted to the prospect of lesser returns and volatile financial markets.
The fund grew by just one per cent in the second half of last year.
"We have been saying for sometime that returns would get harder in the immediate future than they have been in the immediate past," the fund's chairman Peter Costello told reporters in Melbourne on Wednesday.
Managing director David Neal said the fund has sold $15 billion of assets to reposition into new investments as it took a more conservative approach.
While there had been much discussion about China's economy and oil prices, there was also a focus on the US economy after the US Federal Reserve raised interest rates in December, as well as the economic and political impact of the refugee crisis in Europe.
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While it was not unusual for markets to be concerned about such issues, what made the fund more cautious this time was that "policy firepower" to deal with a potential downturn was rather more limited than in the past.
"Interest rates are already extremely low ... and perhaps fiscal policy more restrained across the globe, the ability to deal with a downturn is lower," Mr Neal said.
The fund balance now stands at $118.4 billion, having grown by $57.9 billion since it was created in 2006 on top of the original federal government contribution of $60.5 billion.
Mr Costello introduced the fund when he was federal treasurer to cover the future superannuation liabilities of commonwealth public servants.
The government can start drawing down from the fund to fund those liabilities from July 2020.
Mr Costello is already in discussions with the federal government to ensure the fund has a permanent life beyond 2020.
