Having considered the opportunities of the energy transition, the Future Fund announced this week its investment in Transgrid, the operator and manager of the largest electricity transmission network in Australia.
The Future Fund said its Board of Guardians acquired a 9.995 per cent stake in Transgrid from Canadian pension fund OMERS, which will continue to manage the interest on behalf of the Future Fund while also retaining and managing its own 9.995 per cent stake.
“Our investment in Transgrid is in line with our risk and return objectives and reflects our consideration of the opportunities of the energy transition,” said Ben Samild, chief investment officer of the Future Fund.
“Large infrastructure assets such as Transgrid help us achieve our investment mandate to deliver attractive risk-adjusted returns and protect the portfolio from higher inflation, interest rates and currency volatility.”
Peter McCosker, director of infrastructure at the Future Fund, similarly stressed that this investment would “diversify our portfolio and help deliver on our investment mandate”.
The sovereign wealth fund’s investment mandate was revised late last year to align with national priorities, including the energy transition, housing supply and infrastructure development.
At the time, the changes – which mandated a shift from allowing the fund’s Board of Guardians to determine strategy solely based on risk and return to considering external priorities – faced considerable criticism from economists and industry pundits.
One such critic, Stephen Smith, partner at Deloitte Access Economics, warned the changes could erode the Future Fund’s independence.
“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,” Smith said at the time.
Moreover, Smith suggested that balancing risk and return while incorporating national priorities could result in adjustments that undermine the fund’s high-performance track record.
However, rebutting the critics, chair of the Future Fund, Greg Combet, stressed in November that the Board of Guardians remains independent of government and retains its longstanding duty to maximise returns.
“The board will assess each and every investment opportunity on the basis of its risk and return characteristics and ability to maximise portfolio returns with acceptable risk,” Combet said.
“If there are no investment opportunities in the national priority areas with appropriate risk-adjusted returns that complement the fund portfolio, the board will not invest.”
OMERS backs Transgrid for stable, purpose-driven return
OMERS first invested in Transgrid in 2020 as a seasoned investor in infrastructure having recognised the asset class as one capable of delivering “strong and predictable returns”.
“The assets in our global portfolio – including firms such as Transgrid – have a strong social ethos and a purpose that fits the requirements of delivering for our members, partners and communities in which we invest,” OMERS chief investment officer Ralph Berg said.
“We are very proud to welcome Future Fund, with whom we share similar values and a common mission, into our Strategic Partnership Program, where they are now a co-investor in Transgrid and can access our excellent asset management platform and capabilities.”
OMERS’ infrastructure investment adviser and manager, OMERS Infrastructure, has deployed some $4 billion across Australia via its local portfolio of companies, including Transgrid, Port of Melbourne, FRV Australia, and Waveconn.
