Being born in 2006 has helped the Future Fund in a number of ways. One well-documented benefit – the Fund was not fully invested in equities during the worst run for that asset class in many years. As a result, by the end of the September quarter 2008 the Fund had lost just 0.2 per cent in the fifteen months since making its first non-cash investment, and indeed more than 50 per cent remained in that least-risky asset class. The Fund had the luxury, in Q4 2007, of materially slowing its entry to equities just as many were looking for the exits. Since then it has had the equally fortuitous ability to lend to banks, just when ‘senior bank debt’ is the answer you’re most likely to get when you ask professional investors for their favourite asset class.

The timing of its birth also allowed the Fund to dodge a bullet on securities lending. “The whole regulatory discussion around securities lending coincided with the Future Fund coming on stream, so the most logical and sensible decision for us, given the many other things we had to do, was just wait for the new regulatory environment to emerge and consider our options from there,” Costello says. Given that Future Fund’s global custodian, Northern Trust, is being sued by several of its clients for investing their securities lending proceeds in credit plays that went bad, the Fund is probably glad it had the chance to sit tight.

The cashed-up Fund has also avoided the problems many funds are now experiencing in maintaining their currency hedges, particularly as they pertain to less-liquid assets, after the Australian dollar plummeted from US98c to US60c last quarter. The Fund’s policy that it will be “substantially in Australian dollars” is unaffected, according to a spokesman. (The Fund arranges the hedging itself through Northern Trust.) One policy that’s a work in progress is the stance towards environmental/ social/governance considerations in investing. “The first issue was really to confirm our position on voting. Presently, investment managers appointed by the organisation have the delegation to vote the fund’s interests, and part of the appointment process is confirming that the approach they will take is broadly consistent with a series of principals the Fund itself has established,” Costello says.

“Then later on, as a second order issue, we’ll work out how to complement that with the environmental and social perspectives.” Of course the Fund itself does get to decide how it will vote its Telstra shares. By the time you read this, the Future Fund’s opinion of Donald McGauchie’s chairmanship and Sol Trujillo’s salary package might be better known but when we spoke, the guys were giving nothing away. Prior to joining the Future Fund, Paul Costello ran The New Zealand Superannuation Fund, considered by the Peterson Institute of International Economics to be the world’s most transparent sovereign wealth fund. Costello is working towards a similar level of transparency for his new employer, but no matter how much scrutiny is placed upon the Future Fund, its success probably depends on some things remaining secret.