POWERED BY MOMENTUM MEDIA
Deloitte questions implications of government’s Future Fund changes
Deloitte Access Economics has raised concerns about the government’s recent changes to the Future Fund’s investment mandate, questioning the necessity and implications of the reforms.
The updated mandate, announced last week, introduces requirements for the sovereign wealth fund to consider national priorities such as the energy transition, housing supply, and infrastructure development.
While the government insists that the fund’s core obligations to maximise long-term returns remain unchanged, Deloitte has argued in its latest Budget Monitor report that the rationale for the changes is unclear.
“If having regard to these national priorities can be consistent with maximising returns, why has the Future Fund not invested more in these areas in the past?” Stephen Smith, partner at Deloitte Access Economics, said.
“Equally, if the new investment mandate doesn’t change the benchmark risk or return, and doesn’t strictly require investment in a specific area – in other words, if it changes nothing – then why was it published?”
Deloitte also said that the changes could erode the Future Fund’s independence, as the mandate shifts from allowing the fund’s Board of Guardians to determine strategy solely based on risk and return to considering external priorities.
“Until now, the Future Fund Board of Guardians has had sole responsibility for determining the investment strategy, as well as the asset and geographic allocation of the portfolio. That is now changing, and the Future Fund is becoming less independent as a result,” said Smith.
“That is true even though the wording of the new investment mandate makes clear that having regard to these national priorities does not require the Future Fund to deviate from its obligations to maximise returns over the long term.”
Smith further said that balancing risk and return while incorporating national priorities could result in adjustments that undermine the fund’s high-performance track record.
Ultimately, he said that while Australia’s economic institutions like the Future Fund should not remain static, “any changes need to be justified and made for a specific reason”.
“Where an institution is, like the Future Fund, performing well, the bar for making changes should be set very high,” he said.
“It is not obvious that the federal government’s new investment mandate and statement of expectations for the Future Fund meets that threshold. In fact, the changes raise more questions than they answer.”
He further said that Australia’s superannuation sector already offers sufficient capital for investments aligned with the national priorities outlined in the Future Fund’s updated investment mandate.
On Thursday, Treasurer Jim Chalmers unveiled a new “statement of expectations”, directing the sovereign wealth fund to prioritise Australia’s key national goals, including supporting the energy transition, the supply of residential housing, and infrastructure.
The shadow treasurer swiftly called a press conference, vowing to reverse any changes to the Future Fund if the Coalition is elected to government next year.
“Let’s be clear about this, the Future Fund is Australia’s money. It’s not the Treasurer’s money, it’s not the Prime Minister’s money. It’s not there to invest in their pet projects,” Angus Taylor said.
Responding to this on Friday, Treasurer Chalmers described the Coalition’s response to the Future Fund announcement as “unhinged and ill-informed”.
“What we heard from the Coalition yesterday was really, I think, a pretty frank admission that they don’t want to see more investment in housing, cleaner and cheaper energy, or more resilient infrastructure, and that’s what this is really about,” Treasurer Chalmers said.
“Now there will always be predictable partisan hyperventilating from predictable partisan people, and we’re just saying the usual suspects.”
According to Treasurer Chalmers’ statement issued on Thursday, the sovereign wealth fund’s new investment mandate will require the fund to consider national priorities in its investment decisions, where feasible, and aligned with strong returns.
AUTHOR
Maja Garaca Djurdjevic
Recommended for you
Super funds had a “tremendous month” in November, according to new data.
Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion.
APRA has raised an alarm about gaps in how superannuation trustees are managing the risks associated with unlisted assets, after releasing the findings of its latest review.
Compared to how funds were allocated to March this year, industry super funds have slightly decreased their allocation to infrastructure in the six months to September – dropping from 11 per cent to 10.6 per cent, according to the latest APRA data.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.73 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
30.15 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.71 3 y p.a(%)
