Future Fund Ready To Snaffle Bargain Stocks

The Sunday Age

Sunday September 21, 2008

Josh Gordon

THE Federal Government's $64 billion Future Fund is looking to cash in on the chaos gripping financial markets by buying slices of discount companies and bargain shares.

The Melbourne-based fund - set up by the Howard government to cover the cost of public servants' superannuation - has been prowling for bargains with a freshly recruited team of investment experts after emerging from the turmoil relatively unscathed.

Its most recent investment report reveals it grew by 1.5% over the year to June 30, a solid result considering most superannuation funds chalked up significant losses.

That means it is now holding $55.7billion of assets, excluding $8.5billion from the sale of Telstra.

Although its position has probably deteriorated slightly since the end of June, the fund, after investing heavily in cash and fixed interest-bearing assets, remains largely insulated from what is being described by some as the worst financial crisis since the Great Depression.

The Sunday Age understands the fund is busy scrutinising a range of private equity deals, under which it would buy slices of companies not listed on the Stock Exchange. It is also looking to invest in shares and infrastructure deals.

In the past year it has expanded from about 15 staff to 40, with a large team of investment experts recruited from the private sector instructed to pursue any opportunities arising from the financial chaos.

Future Fund general manager Paul Costello hinted at the opportunistic strategy earlier this year, arguing the growing uncertainty could work in the fund's favour.

"As a cashed-up investor, we are well positioned to take advantage of the opportunities emerging in this new environment in both public and private markets," Mr Costello said.

After adopting an initially cautious approach, the fund has slowly been divesting itself of assets regarded as safe, such as cash and fixed interest bearing securities.

It now has around 62% of its money held as cash, compared to 75% a year ago.

The Reserve Bank's annual report released this week also revealed the fund withdrew $40billion it had on deposit with the central bank to free up cash for other investments.

The Reserve said the withdrawal had a significant impact on its bottom line.

© 2008 The Sunday Age

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