The Federal Government has sought to assure fund managers that it will play a largely hands-off role in the investment decisions of its $16 billion Future Fund, but has acknowledged that it will insist on some restrictions, including in relation to certain property and infrastructure investments.
Minister for Finance and Administration Senator Nick Minchin said last week the fund would be restricted from investing directly in infrastructure or property, although this did not rule out investments in these sectors through funds or listed trusts.
He said the fund would also be barred from taking a controlling interest in companies, while the Government would examine whether the fund should be constricted from investing in Commonwealth securities.
Outside these limits, explicit investment decision would be left to the Future Fund’s board, Minchin said.
“Our role will be to set the broad parameters of the investment mandate,” he said.
“We are about to appoint consultants to assist us in formulating that broad investment mandate… But we have already outlined some of the restrictions that will apply to the fund’s activities.”
Senator Minchin also sought to allay fears that the size of the fund would overwhelm the funds management sector in Australia and crowd out other investments.
“Firstly, the initial $16 billion injection into the fund represents 2 per cent of funds under management in Australia. It is roughly the equivalent of the growth in managed funds in the March quarter,” Minchin said.
“At this size it would not rank in the top 10 funds. So while it will be large, it will not be an 800 pound gorilla.
“But I do not want to understate its potential impact either. We want this fund to grow to the desired level of $140 billion by 2020, so I will not pretend that it will have no impact on your industry.”
Plans for the Future Fund, which has been instigated to pay off the Government’s burgeoning public sector superannuation liabilities, were revealed as part of this year’s May budget.
Minchin said criticism that the Government should play no role in setting up an investment mandate for the fund, and instead leave all decisions to its board, was misplaced.
“We can not simply hand over $16 billion plus to a group of individuals and provide absolutely no guidance to them as to what they should do with it,” Minchin said.
“Not only would that be grossly irresponsible, it would be unfair to taxpayers and unfair to the Board members.”
