The Australian Future Fund invests in the global weapons industry. Is the profit worth it?

Are we happy with this arrangement?

Australia’s sovereign wealth fund, the Future Fund, was established in 2006.

In its first two years, the federal government committed $60.5 billion to invest on behalf of all Australians.

Those billions came from federal budget surpluses in 2004, 2005 and 2006, as well as from the sale of the government’s remaining Telstra shares.

Since then, the fund has never received another capital injection beyond its initial $60.5 billion.

But its total value is now $229.7 billion (as of September 30, 2024).

How did he do it?

Because the total return on investments worldwide in stocks, bonds, real estate, infrastructure and derivatives over the past 18 years was $169.2 billion.

But are Australians aware of how some of these returns were made on their behalf?

For example, do they know that the Future Fund currently holds over half a billion dollars worth of shares in weapons manufacturers and war-related companies, and that the value of many of these shares has risen sharply over the past year, helping to support the fund’s financial “performance”?

The Future Fund is essential to maximizing returns on behalf of Australians.

But there are now more than 50,000 shares traded on many of the world’s public stock exchanges.

Does the fund believe that there are no other publicly listed companies that generate similar earnings or similar dividends or demonstrate better growth potential than gun manufacturers?

Let’s take a look at some of these companies to see why Future Fund experts think they’re worth investing in.

The best of the best global stocks?

Last December, following a freedom of information (FOI) request from Greens senator David Shoebridge, the Future Fund published a list of 30 “defence companies” in which it had direct holdings (i.e. global arms manufacturers and aerospace companies).

You can see the list here.

It showed that the value of Future Fund’s assets in these 30 companies was $604.5 million (as of October 30, 2023).

But little has changed since then.

As of June this year, eight months later, according to the Future Fund’s latest periodic investment report (June 30, 2024), the fund’s share price in the same list of 30 companies was $503.3 million.

So it’s worth $100 million less.

But that’s not because all of these stocks have lost money since last October.

It’s important to note that in February of this year, Future Fund sold all of its shares in Rocket Lab USA, the largest holding on the list. These shares were worth a whopping $192.2 million to her stock portfolio.

The company has also added Leonardo SPA to its official exclusion list (its shareholding was worth $563,740 last year) and no longer holds Jamco Corporation shares (worth $25,851 last year).

But for the remaining companies on the original list, the value of the fund’s assets has risen sharply since October last year.

See the table below that I compiled.

It shows the total market value of the fund’s shares in these 30 companies in October 2023 and June 2024.

Now keep in mind that it is not clear from the table above whether the value of each shareholding has increased because each company’s share price has risen, or because the Future Fund has bought more shares in each company, or both. another.

But it clearly shows something interesting.

The company shows significant growth in the value of its assets last year in BAE Systems (+87.5%), Howmet Aerospace (+75.9%), Melrose Industries (+77.3%), Rolls Royce Holdings (+159.1% ). ), SAAB (+99 percent) and Transdigm Group (+71.2 percent) and many others.

These are financial assets accumulated on behalf of all Australians. Of course, some of these companies also generate large revenues from civilian projects, including Airbus, Rolls Royce and Boeing.

And pay attention to the increase in the value of the Future Fund’s investments in Elbit Systems (on page 2 of the table).

It jumped from $488,768 to $1.33 million, an increase of 172 percent, the fastest growth of any company on the list.

What makes Elbit Systems so special?

Elbit Systems, Israel’s largest private arms manufacturer, was recently at the center of a scandal in Australia.

The company is, among other things, notorious for its drone technology.

His Hermes 450 drone was reportedly used in the strike that killed Australian aid worker Zomi Frankcom along with six of her colleagues in April this year when vehicles in their convoy were attacked and bombed by the Israel Defense Forces after they that we finished. delivery of humanitarian food packages to the center of Gaza.

You can read the official report of this incident here, from Australia’s Special Adviser, Air Chief Marshal Mark Binskin AC.

Elbit drones have also killed countless Palestinian and Lebanese civilians.

Earlier this year, a public petition to the Australian Parliament called on the federal government to ban Elbit Systems from receiving Commonwealth government contracts.

In response to the petition, federal Defense Industry Minister Pat Conroy said the government had no intention of boycotting Israeli businesses.

In the same ABC interview, Mr Conroy said the government had several important contracts with Elbit Systems.

“We have several contracts with Elbit to supply equipment to the Australian Defense Force,” he said.

“The two are worth $9 million for thermal imaging equipment maintenance and repairs, plus another contract for several drones for the Australian Army,” he said.

Albana’s government is investing more than $10 billion in drones purchased from several countries.

Anthony Loewenstein, in his award-winning book The Palestinian Laboratory: How Israel Exports Occupation Technologies Around the World (2023), explains why Elbit Systems is central to Israel’s huge arms export industry.

And last month, when Elbit Systems released third-quarter earnings results, it said it now had a record order book worth US$22.1 billion ($33.9 billion).

“Elbit Systems reports a strong quarter, with significant growth in key performance indicators exceeding our internal targets while meeting the needs of our customers in Israel and around the world,” Bezhalel Machlis, president and CEO of Elbit Systems, said in a statement.

“The company’s record order backlog of more than $22 billion ensures the company’s stability and sustainability for years to come as our investments in research and development provide a strong foundation for long-term growth and development,” he said.

Over the past 12 months, Elbit Systems’ share price has jumped 18 percent.

Palantir Technologies and the Growing Domain of Surveillance

Or move away from the list of 30 “defense companies” that the Future Fund invests in.

There are similar companies that are not on the list, and they are also worth paying attention to. They all have unique stories.

For example, Future Fund now owns $5.5 million worth of Palantir Technologies shares, according to its Periodic Investment Report (June 30, 2024).

This company is at the forefront of big data analytics, government and national security state intervention, and surveillance.

One of its co-founders is American billionaire Peter Thiel, who believes that freedom and democracy are no longer compatible.

The Future Fund’s investment experts must believe that modern surveillance networks and a global crackdown on privacy will bring profits.

If you haven’t heard of Palantir Technologies, a good starting point is this 2013 Forbes article: How a ‘deviant’ philosopher built Palantir, a CIA-funded data-mining powerhouse.

Or look at things from a different angle.

Let’s look at the list of companies that the Future Fund is happy to invest in, but which Norway’s $2.6 trillion sovereign wealth fund – a world leader in environmental, social and governance (ESG) investing principles – has included on its own exclusion list.

They include:

• Airbus SE (Norway excluded it from the nuclear weapons production category since 2006)
• BAE Systems (excluded from 2018: nuclear weapons production)
• Boeing Co (2006: nuclear weapons production)
• Elbit Systems (2009: Other particularly serious violations of fundamental ethical standards)
• General Dynamics (2024: nuclear weapons production)
• Honeywell International (2006: nuclear weapons production)
• L3Harris Technologies (2024: nuclear weapons production)
• Lockheed Martin (2013: nuclear weapons production)
• Northrop Grumman Corp (2006: nuclear weapons production)
• Textron (2009: production of cluster munitions) and others.

In November last year, then Chairman of the Future Fund Board of Trustees Peter Costello said the Australian Future Fund was established in 2006 with a clear purpose.

“The goal of the Future Fund is to transfer wealth between generations,” he said.

“The people who run the Future Fund are called Guardians. The name was not chosen by chance.

“It is important that Guardians have the power and authority to protect the fund and have a clear focus on the long-term benefit of future Australians,” he said.

But is it worth thinking about what kind of heritage the fund’s custodians are actually protecting?

Is it strictly financial? Or does legacy include something other than money?

Over the past 12 months, journalistic gadflies such as Michael West, the former business editor of the Sydney Morning Herald, have pestered the Future Fund with nagging questions about its investments.

Mr. West says that so far the Future Fund has been reluctant to provide answers.

But now that Treasurer Jim Chalmers has started talking about the Future Fund’s investment mandate, isn’t it time we all start talking about its wider legacy and the nature of its “wealth” that we plan to pass on to future Australians?