Some interesting things to consider here.
1. Although the total fees for the fund a re going to be well below retail commissions (only about 0.4%) the $60million in fees is certainly not going to be chicken feed
2. To keep it at arms' length from the government a panel of "leading Australians from the private sector" is going to be involved in running it. Wouldn't it be funny if, in order to meet other "desired" aims (investing in infrastructure) it bought back substantial stakes in the Commonwealth Bank, Telstra at prices higher than or merely equal to the prices they were sold by the government. Wouldn't that be a curious turn up for the books.
3. In order to insulate the goevernment against criticism, the US equivalent has invested largely in T-notes and fixed securities. This strategy, though much safer in capital terms, has meant eh fund has had very low returns and has made almost no difference to capital markets, which raises the question of why it exists at all. On the other hand, if it follows a much more aggressive strategy, approximately 1 in 10 of the ventures will lose money. What will the government say about that, especially if in some years, it goes backwards?
4. Does the state really want capital markets to be significantly affected by the compebreastion an active player with state funds could have anyway? What effects will this have on fee structures in this area of financial advising anyway?
Watch this space.
Fran
