Fund managers worried over Future Fund volumes

An executive at a leading Australian funds management organisation has expressed concerns about the impact the Government’s Future Fund will have on investment markets in relation to capacity, currency and competitive advantage issues.

Speaking at a Fidelity Australian Equities Summit, Victorian Funds Management Corporation (VMFC) head of investments Jeff Rogers said: “The main question in terms of Australian equities is how quickly the money for the fund will be placed.”

The Future Fund currently has $18 billion of funds at its disposal and is expecting an additional $14 billion before the end of the year.

Rogers was less concerned with the component of the fund allocated to offshore investments, apart from the currency implications these funds would create.

“The issue of offshore investing, other than the appetite for the currency market for dealing with money flows offshore in terms of hedging, seems to be more of an offshore issue,” he explained.

However, Rogers did highlight his organisation’s worries as to the unfair advantage the Future Fund may have when it comes to investing in property. To this end, he was concerned about the fund’s potentially unfair ability to invest in any property it chooses to without being troubled by issues such as stamp duty.

In response to this unease, Future Fund chair David Murray said the fund could not buy property directly and would have to do so through an investment vehicle.

Furthermore, he emphasised the positive influence he thought the fund would have on the local equities market.

“The only undertaking we’ve been given as part of our mandate is that we will not invest in the market in a way that will cause abnormal volatility. So I’d say volatility no, but positive longer-term influence yes,” Murray said.

He reiterated that the place and effect of the fund in the market would not be seen for another 12 months.

“The reasons for that are very deliberate. We don’t want to employ a general manager and deliver them a whole set of decisions that have already been made, and secondly, we’re very concerned that our objectives are clear and our investment policy is properly established,” he explained.