Future Fund dumps $2.4 billion of Telstra shares

Munir Kotadia | Aug 21, 2009 2:39 PM
Analysts say a trimming of the Telstra fat was inevitable.

The Future Fund, which was set up in 2006 to invest budget surplus cash for retired civil servant's superannuation payments, has dumped 684.4 million Telstra shares.

Despite the massive selloff, the Future Fund still owns 10.9 percent of Telstra, down from 16.4 percent. The Future Fund's board has committed to not sell any more Tesltra shares for at least 180 days.

The Future Fund's decision to offload such a large proportion of its Telstra holdings was not a surprise and is likely to be repeated in the future, according to BBY senior analyst for technology, media and telecomms (TMT) Mark McDonnell.

"The Future Fund was established largely on the proceeds of Telstra's privatisation and took up the residual on T3, which left [it's portfolio] overweight. It was always expected that it would re-weight its portfolio over time and seek to reduce its holding in Telstra," he said.

McDonnell believes Telstra's relatively poor performance on the stock market so far this year has likely delayed the move because "no one wants to sell at the bottom".

"If [Telstra] had outperformed, it would have been easier to sell out faster and sooner but I think what we have at the moment is a considerably improved position relative to a few months ago," said McDonnell.

Uncertainty over the NBN and regulation may have also been factors in the decision to sell, said McDonnell, who expects to see another offloading of Telstra stock in the future.

"There are also company specific reasons that go to the whole question of engagement in government on issues of regulation and the NBN.

"In the long term, the future fund would not wish to be more than a 'portfolio investor' in Telstra and I think it will take an approach that it continues to divest what it regards as an overweight position. Not so much as a comment or a reflection on the company but a reflection on the balance of its own portfolio," added McDonnell.