Sovereign Wealth Fund Institute

According to the Sydney Morning Herald, “The taxpayer-backed Future Fund is turning its sights to the troubled British banking industry, investing in the country’s largest new lender to start up since the global financial crisis.  The fund joined the high-profile financiers Lord Rothschild and Sir Ronald Cohen in a deal to invest €450 million ($633 million) in Haymarket Financial, which will specialise in lending to medium-sized businesses, London’s Sunday Telegraph reported.

Investors have tipped a total of €1 billion into HayFin, as the new lender is known. The bank will target businesses worth between €100 million and €500 million.”

Read more: Sydney Morning Herald

Tony Day

Tony Day, a leader helping shape the Australian Future Fund’s investment strategy is finishing up his time at the sovereign wealth fund.  He was initially hired to assist building the fund’s investment capability.  The Future Fund recently is involved in a myriad of different asset classes. 
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According to Reuters, “Australia’s sovereign wealth fund, the Future Fund, is considering buying Macquarie Group’s 23.2 percent stake in airports fund MAP Group, an Australian newspaper reported on Monday.

Macquarie is rumoured to be looking for a price of around A$1.5 billion ($1.36 billion) for the stake in the fund that it managed until last year, The Age newspaper said.

Macquarie Group declined to comment on the report, and a spokesman for the Future Fund was not immediately available. MAP shares rose 1.6 percent to A$3.13 after the report, outpacing a 0.3 percent gain in the broader market. At that price, a 23.2 percent stake in the fund, the world’s only infrastructure fund dedicated to airports, would be worth A$1.3 billion.”

read more: Reuters

According to the Australian, “Future Fund boss Paul Costello has performed well in his three years at the helm but still seems blissfully unaware of the fund’s impact on the stockmarket. In a luncheon address at the Melbourne Financial Services Symposium, Costello noted some of the recent weakness in Telstra’s stock price was sheeted back to the fact that the fund is now free to sell more its 11 per cent stake in the company.

He added: “I frankly doubt that.”

Granted he wouldn’t be the only reason with uncertainty over federal government regulation and the fact the company has gone ex-growth being more to the point, but one assumes the Future Fund holding would add to the negative pall hanging over the stock. Then there was last year’s disclosure that the fund was considering joining Canadian Pension Plan and Ontario Teachers proposed bid for Transurban.

Costello confided he made the disclosure because there was media comment he might join a rival bid and wanted to set the record straight but added any further comment remained the responsibility of either Transurban or the Canadians. Having broken his silence in a situation which would compel few other companies to speak up, one might think Costello could explain where he sits now especially after Transurban couldn’t find the Fund’s name on its share register given it is behind an HSBC nominee.

That aside the fund is travelling well with financial year-to-date returns of 9 per cent, well ahead of its mandate to achieve CPI plus 4.5 per cent.

Costello also flagged a move into timber investments and said it would release some time soon a guide to just how it voted its Australian shares now it has taken corporate governance issues in house. Separately, amid concern expressed by Lend Lease chair David Crawford that some funds were outsourcing their voting obligations by using advice from Risk Metrics et al, Costello said the funds took advice from various parties on its voting.”

read more: The Australian

Australian Business reports, “In 2020, the Future Fund will be Australia’s biggest property landlord as the $67 billion listed property trust sector cedes its dominance to big sovereign wealth funds and super fund investors. Among other big trends, the property industry will be grappling with population growth, an ageing population, climate change and the challenge to supply infrastructure. In Australia, the annual population growth rate doubled in the past 10 years to 443,000 in the year to June. At the same time, the country attracted 290,000 migrants in net terms.

“I don’t think that will significantly ease up,” demographer Bernard Salt says.

This month, Prime Minister Kevin Rudd announced state governments and local councils will have to agree to better standards of planning in capital cities to qualify for future federal infrastructure funding to ensure they can properly handle growth, with the population set to reach 35 million by 2049. In the corporate world, analysts expect big superannuation funds and the increasingly dominant sovereign wealth funds to become landlords of much more property. The race is already on for Australian property companies to snag these big-ticket investors as partners. Lend Lease chief executive Steve McCann and his team are in the box seat as retail property fund manager for Australia’s $64 billion Future Fund with a joint bid to take over ING’s unlisted $1.4bn retail fund.”

read more: Australian Business

According to Bloomberg, “Australia’s sovereign wealth fund said it may join two Canadian pension funds in a A$6.8 billion ($6.2 billion) bid for toll-road owner Transurban Group after an initial offer was rejected five weeks ago. The A$64.3 billion Future Fund is in talks with Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan, the Australian fund said today in a statement. Australia’s biggest toll-road company rejected an A$5.25 offer on Nov. 5, which was 20 percent higher than the previous closing price.

Canada Pension and Ontario Teachers, with almost $200 billion of assets, already own a combined 28 percent of Transurban, according to Bloomberg data. Even with the Future Fund’s potential backing, a higher offer may be needed to win support from Transurban, which owns toll roads including the Pocahontas 895 in Virginia and the Hills M2 in New South Wales.

“It gives more firepower to the bid,” said Andrew Chambers, an analyst at Austock Group Ltd. in Melbourne with a “buy” rating on Transurban. “We wouldn’t be telling people to accept a bid of A$5.25, regardless of who’s offering it.”

No commitment or understanding has yet been reached by the Future Fund with the Canadian funds, and discussions are preliminary, Will Hetherton, head of public affairs at the fund, said in the statement.”

read more: Bloomberg

Nick Sherry

According to the Government of Australia – Assistant Treasurer, “The Assistant Treasurer, Senator Nick Sherry, has today released a consultation paper on the proposed changes to the income tax law to formalise the existing tax practice of exempting certain income earned by foreign governments.

“Currently, there are around 50 sovereign wealth funds around the world with approximately US$3.8 trillion under management and it’s expected that this will rise to around US$10 trillion by 2015,” said the Assistant Treasurer.

“The Rudd Government wants to provide certainty to these funds when they’re considering investing in Australia, and this measure will greatly assist in delivering that outcome.”

“The proposed changes will make Australia a more attractive destination for sovereign investment and will also contribute to the Government’s financial hub strategy.”

The consultation paper seeks comments on the broad legislative design principles of the proposed changes, including:

“We are strongly committed to close consultation with industry on tax measures. We will undertake a further consultation on the draft legislation, which is expected to be introduced in the first half of 2010,” said the Assistant Treasurer.”

read more: Government of Australia – Assistant Treasurer | Consultation Paper

Australia’s sovereign wealth fund will be investigated by the nation’s regulator over the sale of Telstra Corp. shares less than a month before a government threat to split the company, said Senator Steve Fielding. The Future Fund said it didn’t have access to private information.

The Australian Securities & Investments Commission will investigate whether the Future Fund was “tipped off” on the proposed separation of the country’s former phone monopoly, Fielding said in an e-mailed statement today.

The Future Fund, whose assets were worth A$64 billion ($59 billion) at Sept. 30, sold A$2.37 billion of Telstra shares on Aug. 20 under what it called a previously stated strategy of reducing its stake. On Sept. 15, the government said Telstra must separate its fixed-line assets from its consumer business or face curbs on mobile-services expansion.

read more: Bloomberg

Press Release states, “The Future Fund Board of Guardians (the Board) has sold 684.4 million Telstra shares at a price of $3.47 (gross proceeds $2.37 billion) through an underwritten sale to institutional investors. The sell-down is in line with the Board’s previously stated plan to reduce the portfolio’s holding in Telstra in an orderly manner over the medium term and to build a portfolio consistent with its long term mandate and strategy.

The sale reduces the Future Fund portfolio’s holding in Telstra from 16.4% of the company to 10.9%. The sale price represents a discount of 4.9% to the day’s closing price and the volume sold represents approximately 13 days of average trading volume in the stock.

The Board took the view that current market conditions were conducive to a partial sell-down of the holding. The proceeds of the sale will be integrated into the broader portfolio in line with the long term investment allocation currently being implemented.”

read more: Future Fund Press Release

Apax Partners has secured deals to sell holdings in its management company to two Asian-Pacific investors after protracted discussions with three parties. The sale should buttress the private-equity firm at a time when fund-raising is at a low and portfolio valuations are coming under pressure.

GIC Special Investments, the private-equity arm of sovereign-wealth fund Government of Singapore Investment Corp., and the A$59.6 billion Australian national retirement plan, Future Fund, took less than 10% of Apax’s management company. A potential third party, believed to be a Japanese investor, has used corporate vehicle CN Advisory to express its interest in joining Apax’s membership–-the formal way of owning a stake in the firm that is a limited liability partnership.

In a statement, Future Fund said the deal involved investors purchasing a stake of “around 10%” of the Apax Partners management company and performance fees, called carried interest, in Apax’s funds. The undisclosed net proceeds of Apax selling a stake were being reinvested in a permanent capital vehicle in which Future Fund would have a 10% stake and would have a principal objective to invest in future Apax funds.

read more: The Wall Street Journal

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The Australian states, “Australia’s $64 billion Future Fund is unlikely to reduce its asset allocation in shares, despite the volatility in global equity markets, and is seeking further investments in the banking sector.”

read more: The Australian

Portfolio Update at 6/30/2008

Following completion of the audit process for 2007-08, the Future Fund Board of Guardians has issued a portfolio update for the year.

The Future Fund (ex Telstra) produced a return of 1.54% ($652 million) for the period 1 July 2007 to 30 June 2008. The Chair of the Board of Guardians, Mr David Murray AO, said: “The positive result in the current investment environment reflects our decision to slow the purchase of equities in the first half of the year due to concerns about pricing. This allowed us to benefit from a substantial cash component in the portfolio. Our focus moved to taking advantage of changed credit conditions, while developing our capabilities in private markets, including property, private equity and infrastructure. This is part of our program of building our long term target portfolio.”

read more: Future Fund