Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Future Fund lends a hand to PNG to set up sovereign fund
(Pictured: Gordon McKellar)
Australia’s Future Fund is assisting the Papua New Guinea Government to establish a sovereign wealth fund to invest some of the money from that country’s natural gas exploitation. Gordon McKellar, the Future Fund chief operating officer, has been advising on the new fund’s operating model.
PNG is establishing a ‘Stabilisation Fund’ and a ‘Development Fund’ as part of managing the anticipated revenues from its liquefied natural gas (LNG) resources. The objectives in regards to the SWF are outlined in the ‘Organic Law’ established last year.
McKellar said last week that his role was to provide assistance as part of the broader Commonwealth Government Department of Finance program to provide advice to PNG on the establishment of its SWF. “More specifically, I’ve been providing assistance with regards to the operating model design and the associated requirements to implement operational capability,” he said.
The Department of Finance advice is being provided under the joint understanding between the Governments of Australia and PNG on further cooperation on the PNG LNG project, and focuses on implementation of the fund, governance and meeting international best practice.
The new SWF will enable PNG to manage its LNG revenues in a transparent and sustainable manner.
McKellar said the assistance provided by the Future Fund fits within its participation in the International Forum of Sovereign Wealth Funds – who’s honorary chair is the former Future Fund chair, David Murray – and its broader engagement with sovereign investors, focusing on best practices, as well as assisting Australia’s Department of Finance.
