Future Fund's tobacco investment soars 50%

THE Future Fund's stake in the tobacco industry has swelled by $78 million, an increase of more than 50 per cent, sparking criticism of the fund for investing in companies that are suing the government. The taxpayer-owned fund, which also holds shares in nuclear arms companies, yesterday revealed its tobacco shares were worth $225 million in February, up from $147 million at the end of 2010. Senate estimates also heard that a controversial report written by the fund's new chairman, David Gonski, last year named himself as a possible next chairman before the government had even considered him.

The $77 billion fund was set up by the Howard government to help pay federal public servants' pensions, but is now under fire for its ''unethical'' investments. While the government refuses to intervene in the fund's investment policies, the Greens say its stake in tobacco companies makes a mockery of the plain packaging laws for cigarettes - which tobacco giants are challenging in the High Court. Victorian Greens senator Richard Di Natale accused the government of profiteering from ''the death and misery of people dying with lung cancer''.

 "This undermines all of the good work we've done in tobacco control with measures such as plain packaging. It's particularly galling when you consider they are the same companies taking legal action against the government,'' Dr Di Natale said. The managing director of the fund, Mark Burgess, was unable to say if the increase in tobacco investments had occurred because of stock price rises, or if the fund had been buying more shares. ''Price, currency movements can have a significant impact, as can too an increase in holdings,'' he said.

Over the period in question, share prices of British American Tobacco, Philip Morris, and Imperial Tobacco rose by between 25 per cent and 40 per cent - less than the rise in the portfolio. The Aussie dollar's strength may also have boosted the value of the investments. The fund also owns $180 million of shares in arms companies, and last year was forced to sell its holdings in companies that make cluster bombs before a new treaty came into force.