The $66 billion Future Fund has halved its 30 per cent allocation to cash in three months - with alternative assets getting the biggest boost in allocation following the move.

The Future Fund's allocation to cash in September stood at 31.6 per cent, but has since dropped to 15.5 per cent by the end of December.

The fund's cash holding was reduced from $18.9 billion to $9.6 billion during that period.

Meanwhile investments into alternative assets - credit and distressed debt and multi-strategy hedge funds - were topped up from $2.8 billion at end September to over $7 billion by December 31.

Alternatives now make up 11.4 per cent of the fund.

Investment managers in the Future Fund's alternatives portfolio include Oaktree Capital Management, Bridgewater Associates, Canyon Capital Advisors and Makena Capital Management among others, according to its 2008/2009 annual report.

David Murray, chair of the Future Fund Board of Guardians, said the increased investments in the sector allowed managers to "take advantage of opportunities arising from capital scarcity and market inefficiencies, as well as to strongly performing listed equity markets."

"We have also taken up attractive opportunities in debt, property and infrastructure markets as we build towards target exposures," said Murray.

Meanwhile Australian equities allocations have increased from 10.9 per cent to 12.7 per cent by end December, while international equities also experienced top ups - jumping from 22.8 per cent to 27.6 per cent.

Overall, the Future Fund's return for the quarter (excluding the Fund's Telstra holding) was 2.9 per cent and for the six months of the financial year, it was 8.7 per cent.

Since the start of the fund's investment program on 1 July three years ago, the return (ex-Telstra) was 2.3 per cent per annum.