future fund, page-4

From AIO thread:

Picking through asset rubble for good buysClancy Yeates
March 5, 2009
THE taxpayer-backed Future Fund is considering taking bigger stakes in battered asset classes that many investors have abandoned, including property, infrastructure and hedge funds.

In an insight into the strategies of the $60 billion fund, its general manager, Paul Costello, revealed yesterday that assets in these distressed markets had been barely on the sovereign fund's radar, but that could change.

At the end of December the fund had 1.3 per cent of assets in property and 1.9 per cent in infrastructure - stakes Mr Costello described as "very modest".

Several heavily geared companies in both sectors have been forced to offload assets into what is unquestionably a buyer's market because they have been unable to repay their loans or refinance debt.

"From our organisation's point of view this is a very interesting time in those areas," Mr Costello said.

"We have been extremely cautious in terms of making commitments right now, and that area is under very active study."

The Future Fund aims to return 4.5 per cent a year above inflation to meet about $150 billion in public service pension payments from 2020, but last year it lost 8.49 per cent as markets plunged.

Mr Costello did not give details of any deals under consideration, and said buyers and sellers were yet to agree on the appropriate prices in these two asset classes.

There are a swag of infrastructure funds looking to sell stakes in their assets, including Babcock and Brown Infrastructure, B&B Power, and Macquarie Infrastructure Group.

It has been rumoured the Future Fund is looking at assets belonging to the highly geared port and rail operator Asciano.

The Australian commercial property market is also awash with $20 billion of property up for sale, such as GPT's tourism properties, which could fetch up to $900 million.

The fund did not deny a January report that it was buying one of the main shopping centres outside London, for £200 million ($420 million).

Mr Costello also revealed the fund was doing "a lot of thinking" about activity in the hedge fund market, which was a high flyer in the boom years but is undergoing consolidation as the weaker players are weeded out.

"We're very pleased to have been on the outside of that, and we're applying a very disciplined eye to what's left as a result of that," he said. "We're trying to pick the best organisations that survive that and will meet our definitions of a partner relationship with an appropriate amount of transparency and alignment."

The Future Fund does not operate hedge funds, but 3.7 per cent, or $1.9 billion, of its portfolio is invested in "alternative assets", which Mr Costello said included a "hedge fund-like" investment program.

Hedge fund profits have been battered because of the sector's dependence on high levels of debt and heavy falls in most asset classes.

At December 31 the Future Fund held almost half of its assets in cash and 28 per cent in shares around the world, including a 17 per cent stake in Telstra.

Source: The Sydney Morning Herald

any others?