Future fund just fine. We know the government continues to claim that Australia has frittered away the boom years and failed to set up a sovereign wealth fund (SWF), and we know that when MPs make this comment, they point to Norway as the prime example of a commodity-producing country that has a very successful SWF. And we also know that when pushed, they will admit that we have a sovereign wealth fund in the shape of the Future Fund (FF) — but qualify that by saying it’s supposed to fund the retirement of Commonwealth public servants from their old ultra-generous public service retirement schemes. But the truth is the FF isn’t really directly paying public servants retirement incomes at the moment — the budget is — and the FF won’t until 2020 at the earliest.
So how about organising some legislation to change that so that the fund is a real SWF and a repository of national savings? The way the FF is going at the moment, it is a hot operator, outperforming the much larger Norwegian fund. The Norwegian Fund is more than US$800 billion, the FF is smaller at a still substantial A$117 billion. That helps the FF to be a bit more nimble in the markets than the Norwegian giant, but the FF is a biggie nevertheless and doing very well. — Glenn Dyer
Take that, Norway. In the June quarter the Future Fund grew by 0.2% — that doesn’t sound much, but the more high-profile Norwegian fund fell 0.9%. In the September quarter the Future Fund grew by 0.5%, but the Norwegian Fund went backwards by 4.9% (or US$32.1 billion). That was its biggest loss for four years and was driven by an 8.6% slide in the value of its listed shares. And if you go back to the generally buoyant first quarter of this year, the Norwegians did well, growing their massive fund by 5.6%. But the Future Fund grew its smaller asset base by 7.1%. So for the first nine months of 2015, the Future Fund has grown by 7.7%, while the Norwegian Fund has contracted. The Norwegian fund’s income flows from Norway’s North Sea and other oil, and gas assets around the world have slowed or run dry because of the sharp fall in oil and gas prices since mid 2014.
That has also crimped the income of the Norwegian government, and it is withdrawing US$440 million from the fund to help its budget position. Australia’s financial position is nowhere near as desperate as that. In fact we are in a much stronger financial position than Norway. You never read or hear about that from PM Mal and all those other urgers and critics of our handling of our resources boom. And the FF is outperforming many of those supposedly clever hedge funds and private equity operations, the ones the PM has his money invested in. Clever Australia. — Glenn Dyer
Whack went Deutsche Bank, slash went Shell. Dramatic cuts and losses for two of the world’s biggest companies — Deutsche Bank and Shell. The German banking giant is to exit 10 countries, including New Zealand (so much for the lure of the All Blacks), slash costs, including 15,000 jobs. It will drop its dividend for two years, take write-downs and other charges of 7.6 billion euros (A$11.4 billion), meaning a loss for the third quarter of 6 billion euros (A$9 billion), a bit less than the earlier estimate of 6.2 billion euros. Over at Shell it was business as expected — a slashing loss of US$9.1 billion, (A$12.8 billion).
There was the write-off of the costs of its Arctic drilling failure and 2 billion euros to shut an oil sands mining operation in Canada. Underlying profit was US$1.77 billion, short of market forecasts (including Deutsche Bank) of US$2.9 billion. Shell earned an underlying profit of US$8.1 billion a year ago, so the turnaround, thanks to the losses is a rather large US$17 billion (A$24 billion). Unlike Deutsche Bank, Shell is continuing with its dividend and will payout 47 cents a share for the quarter. Anything to keep shareholders happy whereas Deutsche Bank has to keep regulators in Europe, the UK and the US happy and confident that it will have enough capital to survive. — Glenn Dyer
iSelect a black hole. A cosmic black hole is a strange object beloved of astronomers and nerds. They usually lurk at the centre of galaxies, eating everything gravity brings to within their event horizon. Apart from a glimmer of photons (so-called Hawking Radiation), nothing escapes a black hole. But here on Earth, corporate astronomers (a sub, sub-branch of the science) have found a reverse black hole, which does allow bodies to escape. It’s called the iSelect death star — based in the galaxy of comparison websites businesses. In the two years since October 2013, nine or 10 senior executives have come and gone. It’s corporate bloodletting on a truly cosmic scale.
The latest was chief financial officer Paul McCarthy, who has resigned from the insurance comparison website company in the middle of a takeover bid from US private equity group Providence Equity Partners. Others to depart in the past two years include the two CEOs, including the most recent, Alex Stevens. His predecessor, Matt McCann, left a year ago, just four months after iSelect floated on the ASX. Others include a chief financial office, chief innovation officer, marketing director, operations director, and a human resources director. If the company had a door person, he or she would have been out as well. The “mobility” in the upper ranks makes it easier to understand the approach from the private equity mob — it could be blessing in disguise. — Glenn Dyer