Australia's second largest pension fund reduces holdings of US Treasuries over concerns about US risks

Due to concerns that Washington's policies may trigger inflation, Australia's second-largest pension fund is becoming increasingly pessimistic about U.S. Treasury bonds.

Jimmy Louca, Senior Portfolio Manager at Australian Retirement Trust Pty, said in an interview last week that the company has reduced its holdings of U.S. Treasuries through a dynamic asset allocation strategy. ART manages 330 billion Australian dollars (216 billion U.S. dollars) in assets.

Louca, who leads the fund's multi-asset dynamic asset allocation division, said that the UK and Australia offer more value. He added that despite Federal Reserve Chairman Powell's recent dovish turn, the expanding U.S. fiscal deficit and the impact of Trump's trade war could intensify price pressures.

"From a cyclical perspective, the Federal Reserve is indeed in an easing cycle, but considering fiscal-related issues, there are also risks later on," Louca said. "From a structural perspective, if U.S. fiscal spending remains strong and the Federal Reserve is more willing to maintain full employment, the overall environment tends to intensify inflation."