“Looking ahead we expect returns will be harder to achieve, with ongoing fragility and disruption to global markets and economies combined with rising inflation continuing as key themes for some time to come,” he said.

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The Future Fund has returned 8.1 per cent per year since it was formed in 2006, though it slipped into the red this quarter. The fund is responsible for a number of government-owned investment schemes, including the Medical Research Future Fund, Aboriginal and Torres Strait Islander Land and Sea Future Fund, Future Drought Fund, Emergency Response Fund and the DisabilityCare Australia Fund. Each of these funds returned between negative 0.1 and negative 1.5 per cent for the March quarter.

The Future Fund has 8.5 per cent allocated to Australian equities and 22.4 per cent in global equities. The sovereign wealth fund was one of the first financial institutions to commit to divesting from Russia following the Kremlin’s invasion of Ukraine in February. The fund’s total exposure to Russia was around $200 million and Costello said divesting had been difficult.

“Sanctions on Russia and the closure of the Moscow stock exchange to foreigners have hampered efforts to sell. We will wind down the holdings as market conditions allow,” Costello said.