2017 Industry Innovation Awards

Sovereign Wealth Fund

Australian Future Fund

Raphael Arndt, Chief Investment Officer
(Melbourne, Australia)

Art by Chris Buzelli

Raphael Arndt didn’t begin his career as an investor; but rather as an infrastructure engineer right out of school in 1992. He came to investing—in 2001—out of frustration, after an infrastructure project on which he was working lost funding. “I was drawn to investing because I wanted to get closer to the money, I wanted to see how those decisions were made,” he tells CIO.

After seven years in the investment industry, he moved to Australia’s Future Fund in 2008 to lead the infrastructure and timberland group. The sovereign wealth fund had just launched in 2006 with a combination of surplus funding from Australia’s government budget and profits from the sale of the Australian telecom company Telstra.

“In many ways, when we started, the Future Fund was the best-funded startup out there,” he said. “We had $60.5 billion, no investments, and no liabilities. It was an open road.” 

The investment team wasn’t interested in setting up another slow-moving bureaucracy. Instead, it envisioned an investment process that was dynamic and brought in viewpoints from a variety of investment strategists on the team. “We were really focused on culture from day one. We didn’t want to run things in silos. We wanted to be able to take everything to each part of the team,”Arndt recalls. “Our flattened structure lets us move very fast. Everyone is involved.” 

In practice, this structure means that the Future Fund operates somewhat differently than typical sovereign wealth funds that are organized in teams with little interaction between groups.

In 2014, Arndt took over as CIO of the fund itself, a move he says was aided by the collaborative culture within the fund.

“There’s no crash course to becoming a CIO; you can’t go take a class,” he said, “There are too many decisions, too many layers. The key for me is that we had already spent time on culture, so you trust that everyone is on the same page. You trust them to go make the decisions. You’re involved, certainly, but you’re on a team that has been empowered to act. That’s big.”

Ramping up the Future Fund’s involvement in the venture capital space is one area Arndt has innovated. Three years ago, the investment team started to develop a co-investment program to invest in the B through D rounds of startup financings. “The decision involved taking some risks,”Arndt says, noting that in early rounds, companies are typically cash flow negative and still evolving into mature businesses.

But so far, the risk has paid off. The Future Fund has already realized a few exits from the 30 transactions it has co-invested in over the past three years. Arndt adds that by doing these deals, the investment team has also gained critical insight into new technologies and growing industries. The newfound understanding is informing new investment decisions in an effort to futureproof the fund’s portfolio.

Arndt says the biggest lesson the team has learned is that creating a culture is more than just deciding how things will work in the organization. It’s about bringing everyone in and aligning a core set of investment beliefs with the culture. From there, even if investment ideas or structures change, group leaders will still know what the goals are and where the fund is headed. “It’s a really exciting time to be the CIO and to be thinking about what’s next,” he says.

Sovereign Wealth Fund Finalists

  1. Mubadala Capital
    Waleed Al Mokarrab Al Muhairi
  2. Abu Dhabi Investment Council
    Adriaan Ryder
  3. Texas Permanent School Fund
    Holland Timmins
  • Kim LewFoundation
  • Tom JoyEndowment
  • Brian ReedCorporate Defined Benefit Pension Plan Below $5 Billion
  • Elisabeth BourquiCorporate Defined Benefit Pension Plan Above $5 Billion
  • Matt ClarkPublic Defined Benefit Plan Below $15 Billion
  • Vijoy ChattergyPublic Defined Benefit Plan ($15 Billion - $100 Billion)
  • Scott EvansPublic Defined Benefit Plan Above $100 Billion
  • David HolmgrenHealthcare
  • Bob WatsonDefined Contribution
  • Raphael ArndtSovereign Wealth Fund
  • Jagdeep BachherESG
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