New rules which will force the Future Fund to reveal its investment holdings have been welcomed as a “first step” by the Responsible Investment Association Australasia (RIAA).
But RIAA executive manager Dean Hegarty told InvestorDaily that portfolio holdings disclosure is “really the bare minimum expectation” of funds like the Future Fund.
“It’s a completely logical development and one RIAA has called for previously,” he said.
“Leading practice globally has established that transparency is a key requirement of effective financial management, and holdings disclosure is really the bare minimum expectation.”
Under the new rules, the Future Fund board must publish information on the amounts of cash held in financial institutions, the amount and value of shares invested in companies, and the level of investments in properties and infrastructure every six months.
According to Minister for Finance Katy Gallagher, the rules are “broadly consistent” with the portfolio holdings disclosure regime that applies to superannuation funds.
Mr Hegarty suggested that sovereign wealth funds such as the Future Fund arguably have an even greater obligation to disclose their holdings and practices compared to other funds since investments are being made on behalf of the entire country.
“You only need to look at the New Zealand Super Fund, who have used transparency as a way to remain accountable to the citizens they serve but there are countless examples globally,” he stated.
“We are a long way behind on this and hopefully, holdings transparency is just the first step.”
The total funds invested by the Future Fund board grew to $256.2 billion at the end of the June quarter, including $206.1 billion in the main Future Fund.
The board currently discloses the Future Fund’s asset allocation and returns in quarterly updates. More detailed information on asset class exposures are included in its annual report.
The Future Fund has previously been criticised for investments revealed under freedom of information laws, including holdings in companies linked to the manufacturing of weapons.
In Mr Hegarty’s view, there is an “incredible opportunity” for the Future Fund to become a key tool in driving a more prosperous and sustainable future.
“All of the work being done to meet our government commitments on net zero, transitioning our energy sector, and solving social challenges require capital investment,” he said.
“We’re already seeing it happen in the retail and industry superannuation space, and in the Future Fund, we have a $250+ billion sovereign fund that should be aligning its investment to support these critical priorities, while maintaining strong returns we can all benefit from.”
Despite this apparent opportunity, calls to liquidate the Future Fund have ramped up in recent months, with proposals suggesting that the proceeds be used to pay down Australia’s debt or be put towards renewable energy and public housing, among other issues.
In response, Future Fund chair Peter Costello has asserted that the sovereign wealth fund is a “once-in-a-century asset” that can only be spent once.
“After that, it is gone. The government will borrow more and run up more debt, renewables will require continuing subsidies, housing and dams will always be needed, but once the Future Fund is spent, it is no more. The asset ceases,” he wrote in an opinion piece for The Australian Financial Review in August.
