THE DISTILLERY: Future Fund fumbles

Commentators mull over the response to Future Fund's AIX deal, with one homing in on investment community irritation.

The Future Fund has ruffled more than a few feathers with its Australian Infrastructure Fund deal. This morning one commentator says there mightn’t be legal consequences for the battle, but there are consequences, while another looks at the growing interest of Canadian pension funds in our infrastructure that Aussie super funds should pay attention to.

The Australian’s Glenda Korporaal believes that it's highly unlikely that the Future Fund has violated any laws with the AIX deal, but it has irritated more than a few people in the investment community.

"David Hartley, chief investment officer of Sunsuper, has so far been the only unhappy co-investor in the AIX assets prepared to put his name to their complaints… Hartley says the Future Fund has been ‘playing a fairly hard game’ in how it is approaching the deals as it negotiates with the individual asset owners. Other disgruntled co-investors are complaining behind the scenes and, like Hartley, weighing their options with their lawyers. The Future Fund is keeping its head down as the investors in each of the assets partly owned by AIX consider their response to the valuations the fund put on each of the assets last week.”

While the Future Fund is investing in Australian infrastructure, Business Spectator’s Christopher Mason, who is based in Toronto, explains how Canadian pension funds are targeting these reliable, long-term returns in instances where their Australian counterparts often are not.

"For those Australian investors, the infrastructure assets remain a domestic investment serving cost-intensive industries (such as iron ore) to which they are already heavily exposed. In short, at first glance they offer little to an Australian institutional investor looking to diversify their portfolio. Whereas for a Canadian investor, these assets offer exposure to a foreign market that has proven resilient amid global economic uncertainty in sectors (such as iron ore) that don't currently dominate the portfolios of Canadian pension plans. The pension plans themselves have cited Australia's openness to foreign direct investment, its well-established regulatory regime, open business environment and healthy economy as incentives for focusing on Australia.”

Meanwhile, Fairfax’s Adele Ferguson says the Penrice Soda board spill, the first of its kind under the ‘two strikes’ rule, should amount to a storm in a teacup.

The columnist points out not only do shareholders have the right to bring pressure on an individual director if they own more than 5 per cent, but argues that shareholder participation in votes is still unimpressive and companies have received glowing support from shareholders right up until the day they collapse.

"It would be wrong to pin the blame of a company collapse on a few individuals but the number of the directors of failed companies who continue to sit on boards suggests shareholder passivity is alive and well and that the boys club is a much more powerful weapon than track record. In the case of Penrice Soda, its army of retail investors were so fired up about poor performance that they cast enough votes to prevent the re-election of one director. Penrice shows that when investors get together they can bring about change.”

Elsewhere, Fairfax’s Michael Pascoe describes the Obeid family as the new poster child of the tax avoidance industry, taking aim at the tried and true family trust structure.

The Australian’s economics correspondent Adam Creighton delivers a case against Keynesian theorists and argues the Reserve Bank of Australia should resist calls to ‘actively manage’ the economy – cut interest rates.

In company news, The Australian’s Bryan Frith says that if you read between the lines, Discovery Metals looks to be hinting that it might allow Chinese private equity suitor Cathay Fortune to conduct due diligence if it can get some of the conditions on the bid removed.

The Australian Financial Review’s Chanticleer columnist Michael Smith says Newcrest Mining and OZ Minerals are coming under pressure for their acquisition strategies, but for pretty different reasons. Newcrest purchased Lihir, which didn’t pan out well, while OZ hasn’t purchased anything with its warchest.

The Australian’s Barry Fitzgerald argues that the big miners should start emphasising their quarterly tax cheques to the government to counter the perception that they’re not sharing the fruits of our mining boom.

Meanwhile, The Australian Financial Review’s Karen Maley asks whether the Japanese equity market rally is coming to an end.

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