Future Generation Australia proves there’s no need to forgo performance for charity with the right structure and portfolio.
In the last year, Future Generation Australia (ASX: FGX) returned 14.8% and outperformed its benchmark. It has also offered a grossed-up dividend yield (that includes franking) of 7.6% this year. This is no one-off success: the listed company has generated double-digit annualised returns over the last 10 years and has outperformed its benchmark since inception.
This, in itself, would be enough to take a closer look at the strategy, but Future Generation Australia also offers a unique point of difference. Alongside this performance, it has donated $49 million to social enterprise partners since its inception in 2014, debunking the myth that you lose returns for social impact.
The key to its success lies in a few factors, according to Lee Hopperton, Chief Investment Officer at Future Generation.
“We pick the best fund managers and construct the portfolio with the right balance. Then we are able to support not-for-profits due to our unique structure, where fund managers forgo their fees and we instead donate 1% of the average monthly net assets to selected social impact partners,” Hopperton says.
It’s the same approach Future Generation takes with its other two investment strategies – Future Generation Global (ASX: FGG) and Future Generation Women (only launched a year ago as an unlisted trust).
He highlights that Future Generation has come a long way since its more humble beginnings – their success means they have their pick from the crème of Australian funds management. There’s no lack of interest in involvement and they even have a ‘bench’ of managers they’ve assessed for future use in the portfolios.
In this interview, we discuss how FGX has been positioned for success over the last few years and going forward, along with the social impact it has made.
Construction for the market and tilts for opportunities
FGX invests in Australian equities and offers a broadly balanced portfolio invested across fund managers.
Fund managers and portfolio allocations are selected using a combination of fundamental research by the Investment Committee (IC) and quantitative tools provided by asset consultants linked to the Committee.
To say the portfolio line-up reads like a who’s who would be an understatement.
The 16 current fund managers in the portfolio include Bennelong Australian Equity Partners, Centennial Asset Management, Cooper Investors, Eley Griffiths Group, Firetrail, Lanyon, L1 Capital, Paradice Investment Management, QVG Capital, Regal Funds, Sage Capital, Sandon Capital, Smallco, TenCap, Vinva and Wilson Asset Management.
Though the aim is to remain broadly balanced, Hopperton notes that the Committee will monitor specific market opportunities and tilt the portfolio to capitalise on them.
“We’ve had a deliberate tilt towards small and mid-cap managers. Small caps have been long-term underperformers, and we saw an opportunity here. This area has really started to accelerate performance over the last few months and been one of the strong drivers of returns this year,” Hopperton says.
The S&P/ASX Small Ordinaries has risen 14.72% in the last year to 8 December 2025; by contrast, the S&P/ASX 200 – despite reaching record highs- has returned 2.22% in the last year. Themes such as technology, healthcare and gold have dominated, with companies like Codan (ASX: CDA), Regis Healthcare (ASX: REG) and Capricorn Metals (ASX: CMM) bolstering the index’s performance.
FGX has been underweight Australia’s largest companies, with the biggest active tilt just shy of 20% towards companies outside of the S&P/ASX 300.
“The investment committee observed that markets had run quite hard for the past few years and the performance had been highly concentrated. In Australia, the big banks have been drivers of that so we moved underweight to this as part of the tilt towards small caps,” he explained.
Unsurprisingly, this also means the portfolio is underweight financials, instead favouring industrials, technology, consumer discretionary and communication services sectors.
Alongside the tilt towards the smaller end of the market, Hopperton highlights that fund manager styles have influenced returns, with strong performance from quantitative managers.
Positoning for 2026
“We are avoiding large bets because there’s so much uncertainty. Our focus is on a balanced and sensibly diversified portfolio while taking smaller opportunities, like the small caps tilt which has recently accelerated in Australia,” Hopperton says.
The IC still has concerns about market concentration risks in Australia and globally, so it is maintaining a diversified portfolio heading into the new year, favouring small caps given the ongoing growth and returns in this space.
Hopperton points out the portfolio has shifted over time, though the IC maintain a diversified and balanced focus with the aim of offering income.
“We’re active within set tolerances for short-term positions in the fund, but over the life of the fund, we’ve made larger strategic decisions. We introduced quantitative managers, reduced the exposure to market neutral managers and added more small-cap managers based on what we see across the macro environment,” says Hopperton.
He explains that, based on strategic views, managers might rotate in or out of the portfolio to ensure a good fit and to ensure that strategies within FGX are complementary and achieve what is needed.
“We like active, boutique managers that offer something additive to the portfolio in terms of their risk-return profile. If we deploy any cash, it will go to a specific opportunity that blends well with the existing portfolio or is a better alternative to a current position,” Hopperton says
Making money. doing good
“An investment product needs to make sense and be of value to investors, but because of our model, we can also donate to social enterprises,” Hopperton says.
FGX donates 1% of average monthly net assets to social impact partners, with fund managers working pro bono and waiving management and performance fees. FGX has donated $49 million since its inception in 2014, including over $12 million this year alone. Across all its strategies, Future Generation has donated $100 million – five years ahead of target!
FGX focuses on not-for-profits that support vulnerable young Australians facing adversity. Not-for-profit partners are selected by application.
“We look for organisations where there’s a particular opportunity for us to really make a difference. They might be underfunded or supporting a part of the community that ties with our agenda. We don’t stipulate how the money is spent, and we make the commitment to donate annually on a multi-year basis,” Hopperton explains.
There are 11 social impact partners for FGX.
Some examples are Raise, which offers an early intervention youth mentoring program for children and KidsXpress, which uses play-based neuroscience-backed therapy to help young children who have experienced trauma, while also supporting caregivers with tools to further assist children.
Investment-minded for the future
FGX is currently trading at a 10% discount to NAV – not surprising given a large portion of the LIC market is trading at a discount.
Hopperton highlights that the discount has been narrowing and he is confident that FGX will continue to narrow the discount over the next few months – “this could be an opportunity for investors to buy at a discount to intrinsic value at the moment.”
Going into 2026, the IC will continue to focus on managing the portfolio for the market, aiming for the share price to increasingly reflect the portfolio’s intrinsic value.
“We want to ensure we are delivering great risk-adjusted returns for our investors and close the discount to NTA, while progressively growing the social impact we can have,” Hopperton says.
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