Managers looking to form long-term partnerships with the Future Fund should pay attention to ESG, succession planning and treating the sovereign wealth fund well in times of capital abundance, a Future Fund executive said at a conference in Melbourne yesterday.
Speaking to the Australian Investment Council Conference in Melbourne yesterday, Future Fund deputy chief investment officer for private markets Wendy Norris said the sovereign wealth fund knows capital is abundant at the moment, but it is looking for long-term partnerships with its external managers.
"We know capital is abundant right now, but we continue to look for partnerships that will stay with us through the long term," Norris said.
"Capital availability is like a pendulum and whilst it is very favourable towards managers right now, we know this will swing back at some stage and those who treat us well when capital is abundant will find us to be a great partner through leaner times."
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Future Fund invests over $200 billion on behalf of six public funds, including the main fund that has $160 billion in assets under management. It has rejigged its investment team in the recent years but majority of its investing at securities-level is outsourced to investment managers.
Its total investments in private equity, private debt, property, infrastructure, timberland and alternatives accounted for about 45% of the portfolio at June end. Returns for the main fund for FY19 were 11.5%.
Norris added that the fund looked for consistent investment processes which value diversity of perspective and that limit downside risk without cutting off the opportunity for the outperformers that significantly influence overall fund performance.
"We also value robust fund manager business structures with considered sharing of economics and thoughtful team development and succession planning."
Lastly, she hinted towards an increased focus on environment, social and governance factors from its managers.
"Partnership and an open two-way dialogue are becoming even more important to us. Asset owners face higher scrutiny and as we seek to be a responsible investor through the investments we make, we place more emphasis on understanding the way our managers engage with their investee companies about social and environmental impacts."