It too will fall.
Humpty Dumpty Down Under
“Ironwood” aka Mike E from Australia wrote during the week to take issue with my statement that "The four major Australian/New Zealand banks have already received undisclosed billions in loans and quasi capital injections from the Australian Futures Fund." Mike attached an article from a prominent Australian newsletter writer that bestowed blessings on the Futures Fund for its ostensibly sensible behaviour and said “There is an element of public good in investing bank bills because, as the ABN Amro paper pointed out, interest rates on home loans would probably be higher if Australia's major banks had been forced to obtain more expensive funding offshore. The Future Fund took higher risks shifting its deposits from the risk free RBA (sic Reserve Bank of Australia) into bank bills. But in doing so it acted within the parameters of its directions from the parliament to take an acceptable but not excessive level of risk.” Mike adds “I do not believe that our Future Fund or Reserve Bank are involved in underhand dealings”
Whilst it would arguably have been better to have higher housing interest rates earlier and save some of the poor unfortunates from their own excesses, that is another issue best left for another day. The newsletter writer is a highly skilled financial journalist and commentator and comes across as a lovely guy, but he has approached the whole question of the Future Fund with the benign eye of a gentle observer.
I, on the other hand, am an aged Attorney who spent many years pursuing (and defending) rogues in suits in commercial litigation. I long ago lost faith in men in suits, particularly those who have their snouts in the public purse. I would add to this list women in suits. They are after all, well, women in suits. I prefer my variety in dresses but then again as my children so aptly remind me, I am not only old but old fashioned to boot. Nonetheless in the interests of fairly assessing the weight to be given to the self serving statements that issue from these worthies, let me put the other side of the case.
April 17 (Bloomberg) -- The Australian government's A$60 billion ($56 billion) Future Fund is among the least transparent in the world, the Australian Financial Review reported, citing a ranking of sovereign wealth funds. The Fund was ranked 9th among 10 sovereign pension savings businesses that failed to meet Washington-based Peterson Institute of International Economics' standards of governance.
AAP on Senate estimates committee-22 February 2008. David Neal, the fund's chief investment officer, said Australian share values had dropped about 15 per cent in recent months, knocking $600 million to $700 million off the value of its local share portfolio. He was unable to give an immediate accurate loss of the international equity portfolio because it was complicated by the currency element. Mr Neal said the fund also invested in global property trusts during two transactions in late October and early November. The property trusts break down to 50 per cent in US assets, 30 per cent European and 20 per cent Asian, Mr Neal said the US trusts were predominantly in commercial property, which was not as badly hit as the residential market following the collapse of the US sub-prime market.
SYDNEY, June 12 (Reuters) - Cash-strapped Australian banks are tapping the country's sovereign wealth fund to raise new finance as traditional sources of funding dry up in the ongoing global credit crisis. Australia and New Zealand Banking Group Ltd (ANZ) Australia's third-biggest lender by assets, has raised about A$500 million ($472 million) in term funding from the Future Fund, an industry source said on Thursday. "My understanding is that all Australian banks have done transactions with (the Future Fund). If you want debt in your portfolio, having some bank term debt is not a bad option, particularly given that you are getting more attractive spreads," said one industry source, who declined to be identified.
ABC News-The $51 billion in the Federal Government's Future Fund will be managed by a foreign bank with no base in Australia. Northern Trust will manage the Future Fund's money from its regional headquarters in Singapore using staff in Bangalore, India. That simple task will generate Northern Trust about $30 million in annual fees.
Wed Apr 23, 2008, April 23 (Reuters) - Australian sovereign wealth fund the Future Fund, which has A$60 billion ($57 billion) in assets, said on Wednesday it was eyeing private transactions and debt markets amid the current stock market turmoil. General Manager Paul Costello told a business lunch the fund was a cashed-up supplier of liquidity that was operating in a market currently short of providers of funds. Costello said the fund's private markets team was looking at infrastructure, private equity and real estate investments. Costello said debt strategies were also attractive in the current investment climate, and there were plenty of opportunities outside of the stock market.
Future Fund billions help banks ride credit storm The Age. July 14, 2008. The Federal Government's Future Fund and the Reserve Bank have quietly propped up the banks through the global financial turmoil of the past year, ABN-Amro economists have revealed.
