The following is an excerpt from an article voiced by Clime CIO, John Abernethy, that appeared in the Australian on Wednesday 1st February.
The core of the article was the assertion that both the investment strategy AND the number of consultants employed were not in the best interests of the holders of the Fund.
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“The fund just keeps buying everything, spreads its investments too widely and hopes,” John Abernethy, the executive director of Clime Investment Management, said yesterday.
“Once you start doing that you are going to get mediocre returns.
“Why don’t they just try to invest and select stocks without buying the index?
“It is just another big pension fund being mismanagement by asset consultants.”
Mr Abernethy’s comments come after the $73 billion Future Fund released details of its portfolio as at the end of last year.
Its latest portfolio update shows the fund has substantially increased its holding of cash, from 8.8 per cent at the end of June to 13.8 per cent at the end of December.
It has cut back its stake in property from 6.5 per cent in June to 6 per cent at the end of December and its holding of debt securities from almost 20 per cent of the portfolio in June to 17.8 per cent.
The total value of the fund has fallen from just over $75bn at the end of June last year to just over $73bn at the end of last year, with its exposure to Australian equities down from 11.2 per cent to 10.8 per cent at the end of last year.
Its total return fell from 12.4 per cent over the year to June to only 1.6 per cent for the calendar year 2011, following a negative performance of 3.1 per cent in the last six months of 2011.
Mr Abernethy said the fund should employ its own in-house investment staff who bought shares directly rather than relying so heavily on such a wide range of different fund managers.
The fund’s latest statement shows it now has 14 different advisers for equities, 20 different advisers on private equity, 10 advisers for its property investments, seven advisers on infrastructure investments, 13 advisers for debt investments, 19 advisers for alternative investments, two advisers for its cash investments and five advisers for its “overlay strategy”.
“If it was a proper future fund for Australia it would not be making index-type decisions, it would be making investments in resources and infrastructure for the benefit of Australia,” Mr Abernethy said.
Mr Abernethy said the latest figures also highlighted the fact that the fund should not have dramatically cut its stake in Telstra.
“Selling Telstra was a pretty awful decision. They hammered the Telstra share price down. Now they have finished selling, the price is moving up.”
The fund had 2.1 billion shares in Telstra in February 2007. It held almost $1bn in Telstra shares as of June last year, a holding of about 320 million shares.
On August 15, it announced it had reduced its holding to what it calls a “market weight” of only 100 million shares.
Telstra shares were down to $2.60 in March last year, but have recovered in recent months to close yesterday at $3.33.
UBS head of investment strategy George Boubouras said yesterday that the move to a higher weighting in cash was in line with what most other superannuation funds had been doing in the last half of last year.
“It is indicative of a retail and pension industry in itself, which ties into a more cautious consumer post the global financial crisis,” Mr Boubouras said.
UBS funds were currently at 12.5 per cent cash for moderate investors, but he said it might be time this year to start moving some of the cash into equities and corporate bonds.
(The Australian, Wednesday 1st February 2012)
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…the approach might be indicative of the industry at large, but is it right?!!!
