How the Future Fund's model helps it to excel

Our award judges viewed Australia's sovereign wealth fund as setting an example of best practice with its collaborative approach in which its staff compete for capital and best ideas.
How the Future Fund's model helps it to excel

AsianInvestor’s second annual Institutional Excellence Awards were introduced to highlight best practice, with awards handed out in 17 categories.

Moving on to the first award in our markets category, for Australia/New Zealand we selected the Future Fund, viewing its holistic approach to investment where everyone competes for capital and best ideas as best in class. It has refreshed its leadership structure and developed the portfolio management skills internally to be able to work with its bench of external managers as peers.

The winners were announced on October 30 and received their awards at an exclusive ceremony and dinner on December 2 at The South Beach hotel in Singapore. 

We thank all those who contributed their thoughts to these awards. The full list of write-ups appears in the December issue of AsianInvestor magazine, and more details of our decision-making process can be found here.

Market categories
Australia/New Zealand
Future Fund

The phrase that neatly sums up the $118 billion Future Fund is actually printed on the coffee mugs at its Melbourne headquarters: “one team, one portfolio.”

Investment professionals make up fully half of its 100 employees and they seek to channel best ideas collectively, irrespective of asset class. It creates a holistic institution focused on its overall objectives as a fund where everyone competes for capital, best ideas and best practice.

Both innovative and contrarian, the Future Fund boasts a high-calibre governance framework in which its practitioners are involved in the decision-making process.

It takes an unconstrained approach, able to go long into emerging markets given the value opportunity and leveraging its time-horizon to be more absolute-return orientated. It has helped to raise the standards of asset management in Australia.

In the past 18 months the Fund has refreshed its leadership structure, promoting Raphael Arndt to chief investment officer and Stephen Gilmore to lead the investment strategy and risk team, while making former CIO David Neal a managing director. The aim is to strengthen the fund’s ability to interpret the investment environment.

At the same time the Fund's management has delivered speeches and opinion pieces on long-term investing and collaborated on research across Australia and globally.

One of the big trends in Australia has been pressure on fees. In listed equities, debt and alternatives the Fund typically adopts an outsourced model, with the selection and execution of investments fully outsourced to more than 100 third-party managers.

But what the Future Fund has done is develop skills internally to be able to work with its bench of external managers as peers. The team also actively monitors and manages sub-sector strategic exposures.

In private markets, in addition to delegating the fund pursues co-investment in private equity and also invests directly. It made the call to raise allocation to PE and cash and reduce exposure to Australian equities and emerging markets, selling down assets on the understanding that stimulatory policies cannot be sustained indefinitely.

Its approach has been paying off, with the Fund having returning 15.4% last year, 15% over the last three years and 8% per annum since inception, against a target of CPI +4.5% a year over the long term. An excellent institution leading by example.

2015 winners already unveiled:

Reserves manager: Monetary Authority of Singapore

Sovereign wealth fund: GIC

Insurance company (general account): Ping An Life  

Public pension fund: Bureau of Labor Funds

Private pension fund 2015: Jardine Matheson

Why NUS stands out among Asian endowments


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