ASX Chairman Gonski to Step Down to Manage Australia Future Fund

ASX Ltd. Chairman David Gonski
David Gonski, chairman of ASX Ltd. Photographer: Ian Waldie/Bloomberg

ASX Ltd. Chairman David Gonski will step down from his role at Australia’s main stock market operator after being appointed to oversee almost A$90 billion ($95 billion) in the nation’s sovereign-wealth funds.

Gonski, 58, will run the Australian Future Fund as well as the country’s nation-building funds that invest in infrastructure, Treasurer Wayne Swan said in a statement yesterday. Steven Harker, chief executive officer of Morgan Stanley’s Australian unit, was named to the board.

Gonksi replaces David Murray, former chief executive of Commonwealth Bank of Australia, who was given a 12-month extension last year to lead the fund, which pays pension costs for retiring politicians, judges and other public servants. The “extraordinary delay” in naming Gonski, who will step down from his ASX role in June, raised questions about the government’s management ability, the Australian newspaper said in an editorial today.

The government’s lengthy decision-making process to select his replacement had been disruptive to the board, Murray said in an Australian Financial Review article yesterday. Outgoing Future Fund board member Brian Watson said the government had “misled” Australians after Gonski was initially appointed as an adviser to help select a new chairman, according to the Australian yesterday.

Gonski is a graduate in law from the University of New South Wales, where he’s now Chancellor. As well as being chairman of ASX, which was blocked from merging with Singapore Exchange Ltd. last year, he also chairs Coca-Cola Amatil Ltd., the nation’s biggest soft-drink maker, and is a director for Singapore Airlines Ltd. and Westfield Group. Born in South Africa, he was appointed as a Companion of the Order of Australia in 2007.

Sovereign Wealth

Yesterday’s appointments “will position the board well for the opportunities and challenges ahead,” Swan said in his emailed statement.

The fund was established in 2006 as a statutory authority by the administration of then Prime Minister John Howard. It has its own board, which includes former Treasurer Peter Costello, and Stephen Fitzgerald, who last month retired as chairman of Goldman Sachs Group Inc.’s Australia and New Zealand unit. Oversight is provided by the treasurer and finance minister, according to its website.

The fund is the world’s 13th-largest sovereign-wealth fund by assets under management, ranked behind the Qatar Investment Authority, according to the Sovereign Wealth Fund Institute, which analyzes such institutions. The Abu Dhabi Investment Authority is the world’s largest with $627 billion.

Alternative Investments

Some 10.8 percent of the fund was invested in Australian shares as of Dec. 31, with another 15.7 percent in global developed markets. So-called alternative investments including hedge funds accounted for 19.8 percent of the total, or A$14.5 billion. The balance of its holdings was in private equity, property, infrastructure, debt and cash.

The Future Fund states its purpose is to “strengthen the Australian government’s long-term financial position by making provision for unfunded” pension liabilities. Laws prevent money from being withdrawn from the fund either until 2020 or once the pension liability is fully offset, according to its website.

The fund targets an average return of at least the rate of the consumer price index plus 4.5 percent to 5.5 percent per annum as its long-term benchmark with an “acceptable, but not excessive, level of risk.”

Last year, the fund excluded 10 companies involved in making munitions from its investments, including selling two of its three biggest defense holdings in Lockheed Martin Corp. and General Dynamics Corp., according to a portfolio holdings obtained by Bloomberg News through an Australian Freedom of Information Act request.

Tobacco Investments

The fund has faced calls from the Australian Greens, who helped Prime Minister Julia Gillard win power in 2010, for its investment rules to be revised after a separate Freedom of Information request filed by Bloomberg found it had A$147.7 million of tobacco investments, including shares in British American Tobacco Plc. Australia has some of the toughest anti-smoking laws in the world.

Gonski’s term as a director for Singapore Airlines ends in July, Swan said.

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