FUTURE Fund chairman David Gonski has sought to defend the fund's social and environmental credentials, responding to criticism of its contentious stake in the tobacco industry.
Mr Gonski, one of the best-connected businessmen in corporate Australia, also said he had bolstered the fund's handling of conflicts of interest since he began running the $80.5 billion investment giant in March.
In a rare appearance before a Senate committee in Canberra, Mr Gonski last night said the taxpayer-owned fund took a "very active" approach to environmental and social concerns.
The fund - which last week revealed it was reviewing the $219 million worth of tobacco shares - had not set out specifically to invest in cigarette makers, he said. Instead, it bought the shares through its investment in fund managers, which often had a mandate to own top-performing stocks.
"The Future Fund does not invest specifically in particular companies," Mr Gonski said in Canberra.
"Our investment in tobacco comes from the fact that we have invested in a number of managers," Mr Gonski said.
Aside from tobacco investments, which have been slammed by the Greens and health groups, the Future Fund has also sparked criticism for investing in the nuclear arms industry.
Mr Gonski, the chairman of Coca-Cola Amatil and Investec Bank, also said he had made governance a top priority at the fund since he took over, launching a dedicated conflicts committee.
Before every board meeting, directors who may have a conflict were told so they could exclude themselves as needed, he said.
"I think I've spent my life, my 35 years as a business person, being very much involved in governance and very much involved in working out how conflicts and so on should be handled," Mr Gonski said.
"If I have an expertise, I think it's in that."
The Future Fund has a long-term investment mandate of 5 per cent above inflation, but this goal has been hampered by global market volatility.
Since its inception in 2006, the fund's average return is 5.2 per cent a year, and it continues to expect sluggish global growth.
The government's fund-raising arm, the Australian Office of Financial Management, yesterday said in its annual report there was "little prospect" of an end to the volatility on global financial markets in the short to medium term.
Frequently Asked Questions about this Article…
What tobacco holdings does the Future Fund have and why is it under review?
The Future Fund revealed it was reviewing about $219 million worth of tobacco shares. Chairman David Gonski says this exposure came indirectly through the fund’s investments in external fund managers, rather than a deliberate decision to buy shares in cigarette makers.
How does David Gonski defend the Future Fund’s social and environmental credentials?
Gonski told a Senate committee the Future Fund takes a “very active” approach to environmental and social concerns. He emphasised the fund did not set out to invest in specific companies like cigarette makers and pointed to governance and oversight steps taken since he became chair.
What governance and conflicts-of-interest changes has the Future Fund made under Gonski?
Since taking the chair, Gonski made governance a priority by launching a dedicated conflicts committee. Before board meetings, directors who may have conflicts are identified so they can exclude themselves as needed.
Does the Future Fund directly invest in individual companies such as tobacco or nuclear firms?
According to Gonski, the Future Fund does not invest specifically in individual companies. Its tobacco and other controversial exposures have arisen through mandates given to external managers, some of whom own top-performing stocks.
How have community groups reacted to the Future Fund’s investments in tobacco and other industries?
The fund’s tobacco holdings have been criticised by the Greens and health groups, and the Future Fund has also faced criticism for investments linked to the nuclear arms industry.
What is the Future Fund’s long-term investment mandate and how has performance measured up?
The Future Fund has a long-term mandate to earn 5% above inflation. Since its inception in 2006, the fund’s average return is 5.2% a year, but global market volatility has made meeting the mandate more challenging.
How big is the Future Fund and when did David Gonski start as chair?
The Future Fund is an $80.5 billion taxpayer-owned investment fund, and David Gonski began running the fund in March (as reported in the article).
What is the short-to-medium-term outlook for market volatility and how might that affect the Future Fund?
The government’s Australian Office of Financial Management said there is “little prospect” of an end to global financial market volatility in the short to medium term. That persistent volatility is one reason the fund expects sluggish global growth and finds its long-term mandate harder to meet.
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