Future Fund chair warns geopolitical conflict a top investment challenge of the next decade
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The news: Future Fund chair Greg Combet has warned that one of the biggest challenges in the next five to 10 years for the nation’s sovereign wealth fund will be managing the risks from geopolitical conflict.
The context: Speaking at the Australian Council of Superannuation Investors in Sydney on Tuesday, Combet said geopolitics is a key concern for long-term wealth managers.
“I spend a lot of my time thinking and worrying about it, and what are the implications of that for how we adjust our portfolio,” Combet said.
“We’re in a privileged position — we don’t have members, we don’t have clients. We’ve got $350 billion dollars in the number of funds that we have to manage to have certain return objectives for the Commonwealth Government,” he said.
“And managing that to deliver requires us to think very deeply about how the world is [and] how it impacts capital markets. What are the longer-term capital market assumptions we should operate on?”
In November 2024, the government directed the Future Fund to consider national priorities when investing. These priorities included the energy transition, residential housing and infrastructure. Combet noted the Future Fund’s renewed mandate but said the fund’s investment imperatives had not changed.
“We’re already a significant investor in renewables, [we have a] large equity slice of a renewable generator in Australia with a very strong pipeline. And provided the numbers are appropriate, we will stand behind further generation projects, and it’s been driven by demand,” Combet said.
“So just to touch on the data center element, Australia is quite an attractive location for data centre investment for tech companies overseas, particularly the US, obviously, because it’s a safe jurisdiction, good regulatory arrangements, abundant renewable resources available, and the demand for data center investment domestically is really significant.
“I think there will be plenty of opportunity, in time, for institutions here to continue to invest.”
The panel also hosted AustralianSuper chair Don Russell who clarified that the superannuation fund is not looking to leverage up after its chief liquidity officer Chandu Bhindi called to change rules that stop super funds from borrowing money or issuing debt.
Russell said the consequence of more members moving from accumulation stage to retirement stage and the ability for members to easily move from one fund to another led to more “taxing and demanding” liquidity issues.
“What Chandu was talking about was: how do we manage the liquidity? There’s no talk whatsoever about gearing up the portfolio to improve performance,” Russell said.
“And we’re not talking about trying to open up new pathways for funds to push the boundaries of debt and what have you within the existing structure… the reason why we appointed Chandu was to actually make the whole system more stable [and] to actually look at ways in which we manage liquidity at difficult times.”
Russell said that lines of credit could make it easier to handle liquidity issues in times of stress.
“So it’s [not about] opening up new pathways for clever funds to push the envelope. On the contrary, that’s what we’re trying to avoid,” he said.
“I’m pleased to have this opportunity to clarify we’re acting in a way which will be sustainable but also very sensible.”
The source: ACSI conference
