So… I'm sitting on a plane, on the way to the Gold Coast for a company meeting (three cheers for in-flight Wi-Fi!).
I'm really looking forward to it – we all work mostly or completely from home, so a whole-group get together is unusual.
And I thought I'd dash off some investing thoughts, here, before the work day takes over.
At least, that was the plan. Until I arrived at the airport.
Yes, my plane was delayed. That wasn't the issue… or unusual.
What changed my plan was the news I read when I jumped out of the car.
See, I wanted to write about investing. About sensible diversification. About maximising long term returns. About not messing with your portfolio unnecessarily.
Until, that is, the Federal Treasurer announced he was going to make precisely those mistakes.
Oh, not him, personally.
He's going to instruct the Future Fund to make those mistakes on his behalf.
The Future Fund, as I'm sure you know, is called a 'sovereign wealth fund' but isn't really that, in the usually understood sense of the term.
It has no broad nation-building mandate. It's a fund (a few different funds, actually) created to meet very specific mandates, primarily funding public service Superannuation.
Its website – I grabbed a screenshot, because they may soon have to change it – promises that it acts independently of government.
Unfortunately, that's about to come to a screeching halt.
See, according to this morning's Australian Financial Review, the Treasurer is about to direct the Future Fund to invest in housing and renewable energy.
He has also said, apparently, that doing so won't hurt the fund's returns.
Both of which are, well, ridiculous.
Don't get me wrong. I think the government (of any stripe) should invest in public housing. And in energy generation, if the private sector can't, or won't.
But that's the government. Not The Future Fund.
And the difference is important.
The Future Fund has those very specific mandates. And should achieve them by maximising the return on its investments.
And if it could maximise those returns by investing in housing and renewables… it would already be doing so.
Do you know any fund manager who needs to be directed to earn better returns?
No, me either.
So the only time you'd need to direct a fund manager to do something specific would be if it wasn't in the service of achieving those returns.
Which makes the Treasurer's comments… "courageous, Minister".
And let's be clear: this meddling is a breach of the mandate and the convention of allowing the Future Fund to be independent and to achieve its investment goals.
And comes on the back of the Treasurer having chosen not to reappoint the last RBA Governor and seeking to implement a new rate-setting board (an aim that seems to be faltering).
It seems, unfortunately, emblematic of an interventionist Treasurer… in ways that are not improving things.
(Lest you think this is partisan or political, please remember I'm the guy who lashed the last government, loudly and repeatedly, over the policy of allowing – nay, inviting – people to raid their Super during the pandemic. And the current Opposition for suggesting young people should raid their Super for a housing deposit. I have no political dog in this fight… I would just like good policy to reign.)
At a time when we need fiscal and budgetary repair…
A time when we need serious people in political positions of power to make decisions in the national interest…
… we have had successive governments running structural Budget deficits, forecasting endless future deficits and growing national debt, while using supposedly independent institutions and programs for ideological ends.
Yes, this set of policies is as poor as you imagine.
I have long called for an expanded, proper Sovereign Wealth Fund. We should be capturing the value we're extracting from our resources (in particular) and preserving and growing that value for the prosperity of future generations.
But not one that is the ideological play thing of one side of politics or the other.
(And if you're in favour of these aims, consider the alternative government who might otherwise use the Future Fund for aims with which you disagree – to open new coal-fired power stations, for example.)
See, that's the thing about principle and responsibility – they apply regardless of the favour with which you might (or not) consider the present objectives.
If the Treasurer does indeed proceed here, with the support of his party and his supporters, those same supporters can't complain that the other mob, when in power, use the Future Fund for their own aims.
But let's step back from the politics for a second.
The simple reality is that the Future Fund's stated aim and mandate is to fund public service Superannuation. To whatever extent that aim is jeopardised by politicians meddling in its investment choices, the risk on future tax revenues is heightened.
It is, simply, very poor economic and fiscal management, just as raiding Super during COVID or for housing, was and is very poor economic and fiscal management.
Turns out, I can still achieve my original goal, though… there is a lesson for investors, here.
It is just one of seeing an example that one shouldn't follow – of learning from the mistakes of others.
Investors should always seek to maximise their long term returns, not seek to follow ideological paths (if you want to support an objective or cause, do it with the proceeds of your investing, not with your investment dollars themselves.)
Investors should be diversified.
Investors should focus on long term objectives, not be swayed by short-term desires.
And investors should live within their means, adding to their portfolios, and funding their wants and needs from their incomes, not their portfolios (at least not until the portfolio is large enough to deliver on your stated goals).
I'm a born optimist. And I'm someone who always wants to believe the best.
On Super and on fiscal management, those tendencies are being tested. But giving in isn't an option. We need to continue to demand more of our elected representatives.
So, let me say clearly: both parties should respect the mandate of the Future Fund and the sole purpose of Superannuation. Our future prosperity literally depends on both.
Fool on!
