Australia's Future Fund has money invested in funds based in a notorious tax haven.
Future Fund Management Agency managing director David Neal told a Senate estimates hearing on Tuesday the fund - which stood at $117.8 billion at the end of September - had money invested in funds that used the Cayman Islands.
"We've got a number of vehicles in the Cayman Islands and I think it would be standard practice," Mr Neal said.
Finance Minister Mathias Cormann said the Future Fund did not pay any tax so it would be wrong to suggest the Caymans were being used to minimise tax.
"It's related to their overall risk management strategy not seeking a particular tax outcome," the minister told the hearing.
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The fund yielded a 15.4 per cent return for the past financial year, adding $15.6 billion to its value.
Mr Neal said this came at the time of a "large correction" in the market and uncertainty in China.
The Future Fund is Australia's sovereign wealth fund.
Under questioning from Greens senator Larissa Waters, Mr Neal declined to say what investments the fund held in fossil fuel companies.
Disclosing the fund's entire portfolio of thousands of stocks could impact on its ability to add value, he said.
"We are a large fund - flagging to the world what we are investing in and how that is changing can be detrimental to our ability to manage that portfolio to generate returns to the taxpayer."
However, Mr Neal did say that 2.5 per cent of the fund was invested in international coal, oil and gas companies and one per cent in such domestic entities.
