Telstra drags down Future Fund result

The fund's annual report reveals that excluding the legacy Telstra shares it was required to hold when the telecommunications giant was privatised, it lost a mere 4.2 per cent IN 2008-09. It's Telstra holding cost it 11.4 per cent.

In the first quarter since the reporting date, its non-Telstra assets have returned 5.6 per cent, reversing the 2008-09 loss.

The chairman, David Murray, said the fund's annual non-Telstra return from its inception in 2006 to the middle of this year was minus 1.4 per cent. Its mandate requires it to target an average return of at least the consumer price index plus4.5 to 5.5 per cent.

Mr Murray believed that over time the fund could meet the target "given that withdrawals from the fund are highly unlikely before 2020 and the board has ample time to apply its dynamic approach to asset allocation to maximise returns".

The fund was set up to meet the Commonwealth's superannuation liabilities for public servants and defence personnel.

It now also manages three new nation-building funds: the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund. These have safer investment strategies and performed better, earning an annualised 3.5 per cent.

Mr Murray said "recognising changed market conditions" there would be no pay increase for senior executives this financial year and no performance-related pay.

Only 27 per cent of the fund's non-Telstra investments were in equities at June, well below the 60 per cent typical of Australian superannuation funds, and only 8.3 per cent in Australian equities. Cash and bonds accounted for 64 per cent of the fund's assets.