Future Fund will overweight Aussie shares

The Future Fund has flagged its intention to overweight its exposure to Australian equities in its annual report tabled in Parliament last week.

The report states that while Australian equities are a small component of the global opportunity set, they are especially attractive as a full credit for the company tax on dividends is receivable. “This clearly encourages us to overweight our exposure to Australian equities relative to global market capitalization, but this benefit needs to be balanced against the concentration risk in a relatively small market,” it said. At June 30 the Fund had $1.85 billion of its then $52.32 billion invested in Australian stocks (excluding 2.1 billion Telstra shares worth $9.74 billion). A further $2 billion was invested in international shares. Both allocations were with a passive manager who could not be named, according to the Fund’s chief executive Paul Costello. The exclusion of other asset classes as at June 30 was simply because listed equities were seen as “a natural sector with which to commence the investment program”, which was due to start investing by June 30. “Similarly the split between the Australian and international equity markets should not be seen as indicative of our policy. Rather it reflects opportunistic buying in the short window of time between commencing investing and the end of the financial year,” the report said. The Fund is now just over $60 billion since receiving a $7 billion injection from the 2006/07 federal budget surplus in August. Apart from a payment due mid next year following the second installment of approximately $6.6 billion from the T3 Telstra sale, the fund is not expected to receive any further contributions. Its target is to offset the Government’s $140 billion in unfunded public sector superannuation liabilities by 2020.