Australian Future Fund

[redwing]

I thought I'd check out how the Australian Future Fund was going

Since the first contribution to the Future Fund on 5 May 2006, the Fund has generated a return of 4.2% per annum.

The Future Fund’s return for the calendar year 2011 was 1.6%. The return for the quarter to December 2011 was minus 0.2% and for the first six months of the financial year it was minus 3.1%.

$73.07 billion Future Fund assets as at 31 December 2011

 

[Andrew_A]

Interesting, haven't been following this so thanks for the update. So tracking inflation give or take since inception, could be worse!?

 

[Belbo]

It's useful to be reminded also why it was created -

Given that private companies are compelled by law to fully fund their superannuation liabilities, at the very least you would think the federal government would provide a big enough Budget allocation to keep the liability stable.

That wasn’t the approach adopted by Peter Costello who in his first 10 Budgets allowed unfunded super to blow out by $29 billion to $98 billion. As Crikey pointed out at the time, this rort meant that Costello effectively over-stated the cumulative surplus across his first decade by $29 billion.

As the China boom started delivering big surpluses, the Howard government handed out meaningful personal income taxes and committed to belatedly plug the unfunded superannuation liability by establishing the Future Fund.

read more

 

[Aaron Sice]

it's great to see investments lagging inflation.

 

[redwing]

Update to 31st March 2012

Since the first contribution to the Future Fund on 5 May 2006, the Fund has generated a return of 4.9% per annum.

The Future Fund’s return for the quarter to 31 March 2012 was 5.4% and for the financial year to date it was 2.2%.

At 31 March 2012 the value of the Building Australia Fund was A$6,701 million, the Education Investment Fund stood at A$4,563 million and the Health and Hospitals Fund stood at A$3,921 million.

 

[redwing]

The Future Fund adds some backbone

Maybe next they can look at the Commonwealth Bank & Telstra?

The Future Fund adds some backbone

Earlier this week the Future Fund was part of a consortium that agreed to buy the South Australia Government’s forestry plantations for more than $600 million. Today it announced it had entered a conditional arrangement to acquire all the assets of the Australian Infrastructure Fund for $2 billion.

Do two asset deals in a week constitute a pattern of behaviour or illuminate a strategy? Yes, although there’s nothing particularly novel or unexpected about what the Future Fund is doing.

If the proposal is followed through to a completed transaction, the Future Fund would acquire Australian Infrastructure Fund’s interests in a portfolio of airport assets, including Melbourne, Perth, Queensland regionals, the Northern Territory and a 40 per cent interest in Hochtief AirPort Capital, which itself has interests in Sydney Airport, Dusseldorf, Hamburg and Athens. The Future Fund itself has an existing 16.8 per cent interest in Melbourne Airport.

The deal is subject to due diligence and will almost inevitably change shape to some degree given that the Australian Infrastructure Fund (AIX) portfolio of investments will be riddled with pre-emptive rights held by third parties.

cont...

http://www.businessspectator.com.au...ian-inf-pd20120824-XG6VL?OpenDocument&src=sph

 

[Aaron_C]

I got offered a job there last time...would've been fun to work on these type of things!

 

[evand]

Good result considering the last few years. Its hard to get decent returns on that amount of money, with tracking inflation an ok result.

 

[topcropper]

Yeah, I reckon it's a pretty good result too considering the time period.


See ya's.

 

[oracle]

Maybe next they can look at the Commonwealth Bank & Telstra?

The Future Fund adds some backbone



http://www.businessspectator.com.au...ian-inf-pd20120824-XG6VL?OpenDocument&src=sph

Future fund did hold big stake in Telstra. Guess when they sold most of that stake? When Telstra hit it's all time low of $2.6. To me it seems just when the Future fund sold, Telstra shares shot up to $4 within no time . Very bad investment decision IMHO by Future Fund.

The fund’s investment mandate is to achieve real, or CPI-plus, returns of 4.5 per cent to 5.5 per cent a year in the long-term. To achieve that, particularly in this post-crisis environment, it needs stable long-term income flows from assets that have either formal or effective inflation-plus returns.

Assuming inflation runs at 4%, we are talking of total return around 9.5%. Why not just run the fund as a low cost index fund? Historical returns around 11%.

May be mix it up with some percentage invested in index funds in other countries like US and some emerging economies.

Cheers,
Oracle.

 

[Aaron Sice]

can i ask why - o why - people think that 1.6% is a good return?

that's less than the 90 day call option premium on BHP - let's call this "black".

if they'd have stuck it all on "black", they could have done 1.7% per quarter and if exercised, done so for further profit.

but no, funds have to BUY derivatives, not be party to writing them. why?

to keep the bottom feeding predators like Citi and GS (sorry, CBA) in the money. hell, lets make it a law too.

investing my a*r*s*e - they're just doing stuff so they can blind you with activity in the hope you mistake it for progress.

SMSF FTW.

 

[Aaron_C]

Funds can't write options because there is unlimited downside, without looking at the risk of that downside. It is just theoretically unlimited.

 

[topcropper]

can i ask why - o why - people think that 1.6% is a good return?

.

Well it's not a good return is it? But for the time period, and a 4.2% return per annum since May 2006, it's not too bad in my opinion. That's with the share market hitting an all time peak globally just 18 months later, followed by the big bust and shares being pretty flippen poor ever since, I can't see any reason to be too critical.

But I'm sure someone will be able to show heaps of other ways that returns might have been better with hindsight?


See ya's.

 

[redwing]

May be mix it up with some percentage invested in index funds in other countries like US and some emerging economies.

Cheers,
Oracle.

Apparently Index Funds in older markets such as the UK, Germany, US etc perform better than Emerging Markets?

 

[redwing]

Just having a look at Australias Future Fund again for Australia (population 22,620,600 - 2011)

Facts at a glance

$79.98 billion

Future Fund assets at 30 September 2012

$4.26 billion

Education Investment Fund assets at 30 September 2012

$5.91 billion

Building Australia Fund assets at 30 September 2012

$3.28 billion

Health and Hospitals Fund assets at 30 September 2012

I went back to check on Australias Future Fund as I was reading about the Sovereign Wealth Funds of Norway (population 4,952,000 - 2011) link

The Government Pension Fund – Global (Norwegian: Statens pensjonsfond – Utland, SPU) is a fund into which the surplus wealth produced by Norwegian petroleum income is deposited. The fund changed name in January 2006 from its previous name, The Petroleum Fund of Norway. The fund is commonly referred to as The Oil Fund (Norwegian: Oljefondet). As of the valuation in June 2011,

As of 30 September 2012 its total value is NOK 3.7trillion[1] ($654 billion), holding one percent of global equity markets.[2] With 1.78 percent of European stocks,[2] it is said to be the largest stock owner in Europe.[3

Interestingly the Government Pension Fund of Norway has also excluded a large number of companies from its portfolio due to activities in breach of the ethical guidelines

There's a list of the worlds largest sovereign wealth funds here

Australias place below (China has several funds)

1. Norway
2. United Arab Emirates - Abu Dhabi
3. China
4. Saudi Arabia
5. China
6. Kuwait
7. Hong Kong
8. Singapore
9. Singapore
10. Russia
11. China
12. Qatar
13. Australia

 

[redwing]

Havens

Good haven! Even the government does it

Did you know the Future Fund has no fewer than 43 subsidiaries in foreign tax havens? It is a little-known yet ironic state of affairs.

A perusal of Note 17 to the most recent financial accounts for Australia's Future Fund board of guardians will show 35 entities in the Cayman Islands, four in Luxembourg, two in Jersey and one each in Ireland and the British Virgin Islands.

There are two salient points to be made here: one, the British Virgin Islands has done a slap-dash job of winning Australian government business, whereas Grand Cayman has furthered its claim to win the title of BRW Australian tax haven of the year. Two, what the blazes is the Australian government doing malingering about in the Cayman Islands? Is it avoiding paying tax to itself?

Quis custodiet ipsos custodes? The guardians may be guarding the assets of the Building Australia Fund, the Education Investment Fund, and the Health and Hospitals Fund, but who is guarding the guardians?

Cont...

 

[redwing]

Unlike Sovereign wealth funds above, the Future Fund was established to assist future Australian governments meet the cost of public sector superannuation liabilities

Future Fund performance

Over the five years and three years to 30 June 2013 the Future Fund has generated returns of 7.1% per annum and 10% per annum respectively. These returns exceed the baseline long-term target return of 6.8% per annum for both periods

The Future Fund has achieved a return of 6.2% per annum since it was established in May 2006 growing to $88.9 billion at 30 June 2013. The Fund was established with total contributions from government valued at $60.5 billion.

The 2012-13 financial year saw the Future Fund generate a return of 15.4%, including a return of 4.4% during the last quarter. As a result of this performance the Future Fund grew by $11.9 billion over the financial year.

The Future Fund has generated rolling three year returns above the mandated target of CPI+4.5% per annum since September 2011.

 

[datto]

Imagine if the FF kept all of its telstra shares.....?

 

[Crabnet]

Imagine if the FF kept all of its telstra shares.....?

One of the reasons that the Telstra share price declined when it did was because the Future Fund were sustained sellers over a long time frame. Every day for months and months they sold down their oversized holding.

The realised funds chased riskier investments in overseas share markets which paid off as a result of the Aussie dollar declining in value.
They also increased their exposure to long term investments like property, infrastructure and timberland investments.
So they rebalanced their portfolio as was always their intention once the Telstra shares came out of ESCROW.

 

[datto]

So the FF was better off by selling its tls shares?