Solid first return for Labor's flagship investment fund

AUSTRALIA’S $15 billion National Reconstruction Fund has booked a bumper return ahead of schedule after selling shares in a lithium miner following a rally in the battery mineral.

Labor's flagship investment vehicle, which provides loans to companies in strategic sectors from shipbuilding to artificial intelligence, made a 7.7 per cent return in 2025/26 in its general portfolio.

Coming in the fund's second year of operation, the result was significantly better than initially budgeted for, the fund's chief executive David Gall said.

"We originally anticipated that we would talk about rates of return on the fund probably five years after the fund established, and we felt that it was important to bring that forward," he said. 

Driving the result was a bumper profit from the one-off sale of shares in ASX-listed lithium play Liontown.

The fund made a $50 million equity investment in the Gina Rinehart-backed company as part of a $266 institutional placement in August 2025, at 73c a share.

Liontown shares subsequently rode a wave of rising lithium prices, more than tripling in price by early 2026.

The NRF seized on the rally and trimmed its exposure, booking in a sizeable profit before shares in Liontown slumped to around 69c a share on Tuesday.

Mr Gall said the fund had played an important role in helping cash-hungry Liontown recapitalise their balance sheet and crowd in additional private investment.

"We believe in the company and remain a shareholder," he said.

"But the share price did perform extremely well for a period, and so it made sense from a portfolio composition perspective to trim our holding."

Mr Gall said for every dollar the NRF invested across its portfolio, it crowded in an additional $2.61 of private capital.

Throughout the financial year, the fund made or committed to 22 investments, amounting to $1.67 billion in total capital - above its investment target of $1.5 billion.

That included $20 million for quantum computing start-up Diraq, which has helped it move to the final stage of a lucrative US Department of Defense research and development program.

Mr Gall was also particularly proud of the fund's investment in medical diagnostic AI tool Harrison.ai, which has since successfully entered the UK and US hospital systems.

"It's not about having the best Australian sovereign models, it's about really understanding where some of the applications of AI can make a real difference," he said.

The fund's Economic Resilience Program, set up in the wake of the Middle East oil crisis to bolster Australia's fuel and fertiliser supply chains, has provided more than $558 million in zero interest loans to more than 470 businesses, as of October 20.

While the fund's general portfolio is required to achieve a return rate of around six to seven per cent over a five-year timeframe, the program has no return mandate.

Its net zero and forestry sub funds also have return mandates below government borrowing costs, which critics have warned could incentivise the fund to back loss-making investments.