Australia’s Future Fund has paid A$7 million (€4.8 million; $5.5 million) to AustralianSuper, the country’s biggest industry super fund, to settle a long-running legal battle over its purchase of a stake in Perth Airport.
The move puts an end to a two-year long dispute that saw the A$117 billion sovereign wealth fund accused of offering to pay over the odds to deter existing investors, which included AustralianSuper, from exercising pre-emption rights to increase their stake in the hub. Future Fund disbursed A$875 million for a 30 percent stake in Perth Airport three years ago, as part of a A$2 billion auction for The Australian Infrastructure Fund, which held stakes in several Australian airports.
The decision to settle the fight seems to have been taken on pragmatic grounds, with the institution not admitting any liability for the way it chose to bid for the asset.
“The Future Fund has always maintained that it has acted appropriately and properly at all times,” a spokesperson for the organisation commented by email. “The Future Fund has chosen to settle the lawsuit for purely commercial reasons, to avoid ongoing legal costs and to enable the Fund’s management to fully focus on the important task of continuing the strong growth of the Fund for the benefit of all Australians.”
In a statement, AustralianSuper said it was “very pleased” with the payment, “the majority of which” it reckoned would compensate for the alleged losses incurred by its members as a result of the Future Fund’s conduct. The A$7 billion sum includes a contribution to the pension’s legal costs.
“AustralianSuper will always robustly defend its members’ rights, insist on appropriate transparency in all its commercial dealings and promote high standards of corporate behaviour,” the fund argued.
The settlement comes a few months after Wendy Norris succeeded Raphael Arndt at the head of Future Fund’s infrastructure and timberland unit. In an exclusive interview with Infrastructure Investor, Norris said the institution’s strategy would only evolve incrementally under her direction, with the fund developing its internal capabilities but still relying on manager relationships to deploy money.
Her words were recently echoed by David Neal, managing director of the Future Fund, who told the British Chamber of Commerce earlier this week in Melbourne that the organisation had no plans to fully internalise investment processes.
“We focus on leveraging strong partnerships with managers under arrangements that are as cost-effective and well aligned as possible,” he was reported to have said.
He still complained that owing to insufficient competition, the margins extracted by fund managers were too high and their alignment with investors too low. “If the investment management industry don't address these twin issues, they will find that they are increasingly replaced by their clients. This is a long-term and powerful trend.”
The Future Fund paid about A$500 million in fees in the last financial year, according to the organisation’s 2013-2014 annual report.
Infrastructure fund managers the Future Fund currently works with include AMP Capital, Corsair Infrastructure Management, Global Infrastructure Partners, Highstar Capital, Morrison & Co, Starwood Energy, Campbell Group and UBS Global Asset Management.
Co-investment rights are set to remain an integral part of the institution’s efforts to create alignment and foster transparency in its relationships with managers, Norris said earlier this month.