Budget’s Fund good for managers’ futures
By Michael Bailey
THE Commonwealth’s Future Fund represents the biggest pay day for the funds management community since the introduction of compulsory superannuation, but could distort Australian asset markets unless a large proportion was invested overseas, asset consultants have warned.
The fund is the first attempt to address ballooning unfunded liabilities for Commonwealth public servants’ superannuation, which are currently $91 billion and expected to grow to $140 billion by 2020.
The Government has at least given the impression the Future Fund will operate independently, spending $32 million over four years to set up a statutory authority known as the Future Fund Management Agency. Its board will be filled by “eminent Australians” including experts in investment, Treasurer Peter Costello said last week.
Seed funding of $16 billion, which will be topped up with future Budget surpluses and the proceeds of the Telstra sale, will then be awarded by tender to various fund managers, the Treasurer said.
The sheer size of the fund spelt potential danger, according to consultants Russell Investment group.
“A lack of capacity among equity managers and expensive valuations of existing infrastructure will limit Australian investment,” Russell said.
It would be disastrous if the Future Fund were to be politically influenced, according to the Investment and Financial ServicesAssociation deputy chief executive John O’Shaughnessy, as evidenced by pressure from some quarters over the past few weeks for the Fund to concentrate on infrastructure projects or the rural economy.
“We are delighted that the Future Fund appears like it will be unfettered,” he said.
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