Poor-performing Future Fund ill-conceived in the first place
The project was a vain attempt to set up a sovereign fund of sorts, but in reality it simply locked up money to the detriment of society
So the HK$225 billion Future Fund is unlikely to live up to the 5 per cent or more returns during its first year of existence as advertised when it was first set up. Acting Financial Secretary Chan Ka-keung was giving lawmakers a heads-up about its performance.
Critics may question the low returns, but that may not be fair with just one year of performance as reference. What we should ask instead is why we have the fund in the first place. What exactly is it for? There is, of course, the usual bureaucratic blah-blah-blah about needing a fund for a rainy day with an ageing population and slowing economic growth, and to cover future structural deficits.
It will be periodically topped up by government. This seems to be entirely arbitrary and not rule-bound. Presumably, it will be sucking in public capital whenever investment returns don’t meet expectations. We all know where this is leading. As an example, about HK$4.8 billion was added to the fund, in the summer, to the initial HK$220 billion, which was inherited from the Land Fund.
The latter fund dates back to the late colonial period, and even by the admission of government economic advisers, had “no authorised use”. In other words, they relabelled an idle fund without any use for a closed-account fund that could not be used for anything any time soon except for “emergencies”, however defined.
So why bother? My guess is that it has something to do with the “me too” mentality not only among officials but also lawmakers, including a few pan-democrats, for some kind of sovereign fund. But you don’t want to call it that and invite ridicule when its returns are no better than those of the overall Exchange Fund and because it’s so small. Singapore’s Temasek investment fund, for example, is worth almost US$200 billion and it is really a future fund with a well-defined mandate.
More importantly, the government under Financial Secretary John Tsang Chun-wah – who has resigned, reportedly because he wants to run for chief executive – loves closed-account funds that can’t be easily accessed but could sit and accumulate indefinitely. This financial philosophy of prudence threatens to make our government one of the richest in the world while impoverishing the rest of us and discouraging economic growth.
Good luck to Hong Kong if Tsang becomes the city’s next leader.