Michael Pascoe, Associate Editor of Eureka Report writes:

I fear colleague Kerr was too harsh on
David Murray’s Future Fund vision in yesterday’s Crikey – there is a big
difference between the dreaded government “picking winners” path and a
shareholder being prepared to vote on relevant issues.

The problem may have come from the
impression of the Eureka Report interview provided by the newspapers. As the
bloke who did the original interview, I can assure Christian that the meat of Murray’s meaning
was in his specific comment that an “activist” stance would be wrong for the
fund, but it would have to be prepared to vote in the interests of maximising
its returns.

Which is entirely reasonable. If the Future
Fund was completely passive, never voting its shares, it’s possible to imagine
circumstances when it would become complicit in poor governance and bad

Particularly in light of the Bob Gerard
affair, you’d have to think Costello and Minchin will select clean candidates
to make up the rest of the Future Fund board. I’d expect they will end up being
pretty much like any set of reasonably intelligent trustees of a super fund – people very aware of their responsibilities
and very keen not to make any big mistakes with other people’s money. The performance targets they’ve been set are
conservative and reasonable and there should be no hint of a bonus culture to
lead the fund astray.

The “manager of managers” approach and the
ban on direct borrowing, derivatives, property or infrastructure becomes a
further insulation. But as Murray explained, the fund still has to know what it wants:

intended to be a manager of managers but that cannot be done effectively
without running your own show … Even if you manage managers you have
to have a portfolio model that’s distinctive to get the objectives and you have
to have sufficient information and
sufficient skill to be able to adapt that portfolio towards its objectives all
the time. That can’t be done just by
giving instructions to other people, it has to be very very skillfully managed

Hence the management team of maybe 25
people – actually not a lot to oversee what has to become a $140 billion fund
in 14 years.

In all, it looks like a beast that has been
bred specifically with the intention of avoiding the cited Tricontinental, WA
Inc and State Bank of South
Australia type of disasters.

So, no, the Future Fund isn’t frightening.
And its overall performance should be better than what the average punter would
achieve with a few thousand dollars’ superannuation seed money as Peter Saunders
has suggested. It’s all very nice to be
doctrinaire about returning money to taxpayers to provide for their own
future, but the government’s unfunded superannuation liabilities still have to
be resolved.