Future Fund’s infra holdings nudge up

Australia’s Future Fund reported an increase in its infrastructure, real estate and private equity holdings in the three months to June 30. However, Its overall return for the quarter slid 3.3 percent to 0.6 percent, excluding its holding in Telstra, the Australian telecommunications company.

The infrastructure, real estate and private equity holdings of Australia’s Future Fund increased marginally in the three months to June 30, the state fund revealed today.

The fund, which was established in 2006 to assist the Australian government in meeting the cost of public sector superannuation liabilities, said in its portfolio update for the quarter that its infrastructure assets increased 0.5 percent to A$2.9 billion ($2.96 billion; €2.07 billion). Its private equity holdings also grew by 0.5 percent to A$3.91 billion whilst real estate assets increased by 0.4 percent to A$4.8 billion.

Overall, Future Fund said its assets had grown in value to A$75.15 billion, up marginally from A$74.62 billion three months ago.

In its update, Future Fund said its return had dipped 3.3 percent in the final quarter to just 0.6 percent. Despite the dip, however, the fund returned 12.4 percent in the year, more than twice its average return over the past three years of 6 percent and 5.2 percent which it has generated on an annual basis since its formation on May 5, 2006.

Future Fund chair David Murray said the positive returns of 2010-11 reflected “the careful construction of the portfolio since the fund’s inception”. He said the “extremely difficult global economic environment over the last few years has and would continue to present challenges going forward and that the fund would continue to position the portfolio to best provide some protection in weaker markets”.

Part of that strategy has been the fund’s gradual sell-off of its holdings in Telstra, the Australian telecommunications company, the value of which now stands at A$939 million, a fraction of what it used to be. Murray said: “the reduction in the holding of Telstra shares has continued in line with the board’s long-stated strategy to reduce the holding in an orderly way over the medium term and without untoward market impact.” Future Fund originally held 17 percent of the shares of the company.

At the end of last month, Future Fund bought a 5.05 percent stake in MAp Airports, the majority owner of Sydney Airport, for some A$188 million, MAp told the Australian Stock Exchange. 

The move prompted speculation in the Australian media, with one newspaper, Business Spectator, saying “there is talk that the operator of Sydney Airport may become a takeover target, with speculation that the Future Fund and the Abu Dhabi Investment Authority (ADIA) could join forces to make a joint acquisition”. The newspaper also says that ADIA owns a 5 percent stake in MAp.

MAp hit the headlines recently thanks to an asset swap agreement signed with the Ontario Teachers’ Pension Plan Board (OTPP), a Canadian pension fund. The deal called for OTPP to exchange its 11 percent stake in Sydney Airport for MAp’s 39 percent holding in Brussels Airport and its 30 percent interest in Copenhagen Airport, plus a cash payment of A$791 million.