AUSTRALIA - About two thirds of the A$61.48bn (US$59.78bn) Future Fund assets have been left in cash in bank accounts, an amount that equals up to 4% of total bank deposits in Australia in the last year.
"It seems that the fund's money, along with extra funding from the Reserve Bank aimed at easing the pressure in the money market, has financed close to one-quarter of the roughly 20% annualised growth in total bank liabilities seen during the crunch," said Kieran Davies and Felicity Emmett in an ABN AMRO media briefing.
Future Fund general manager Paul Costello noted that the flip side to the large cash holding was the fact that over the past year, there had been an investment programme in excess of $20bn.
He said "The portfolio has grown quickly. During the year, a decision was made to use cash as a defensive asset and the progress of the programme to build exposures to other markets is definitely something we formed a view on, and it was less rapid than may have been envisaged initially."
The Future Fund held A$35bn in cash as of the latest portfolio update to the end of April. It had A$52.1bn in assets plus an additional A$9.35bn in Telstra shares, which is held in escrow until November 2008.
ABN AMRO said of the A$35bn: "While some of this money could be held in short term paper, this amounts to 4% of total bank deposits or close to one third of the 15% increase in deposits over the past twelve months.
"The Future Fund will eventually invest this cash in equities and fixed income, so this means that banks will have to find additional funding elsewhere or curb their lending."
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