Company Interview / Future Generation generating shareholder return

Future Generation (ASX: FGX) reports a 9.8% increase in total shareholder returns for the first half of the year, with a dividend yield up by over 5.5%. The company offers investors access to Australian fund managers in a single vehicle, supporting non-for-profit organisations focused on children and youth at risk.

Caroline Gurney CEO of Future Generation (ASX:FGX) shares that the fund has delivered its 10th social investment of $5.4 million to non-profits, totalling over $43 million. The firm, with over $1 billion under management, serves 15,000 shareholders, delivering both strong investment returns and social good.

Caroline highlights that Future Generation Australia invests primarily in small-cap Australian equities, while the global fund has 15 managers focusing on small to mid-cap stocks. Despite not matching the MSCI, the global fund reports an 11.6% return over six months. Both vehicles offer an 8% fully franked yield, appealing to investors looking for long-term growth and social impact.

Full unedited transcript:

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Future Generation has reported a 9.8% increase in its total shareholder returns in the first six months of the year, dividend yield increasing by more than 5.5%. Future Generation Australia gives investors the opportunity to access Australian fund managers in a single investment vehicle, while supporting Australian non-for-profit organisations focused on children and youth at risk. And this year it will deliver its 10th social investment of $5.4 million of not for profits, bringing its total social investment to more than $43 million. Let's get some further detail. Chief executive Caroline Gurney joins us now. Caroline, welcome. Thank you very much, Andrew. Let's first start about what the raison d'etre, I guess, of future Australia is. And there are two vehicles. Essentially there's a local one and the global one. Why were they why was this set up? That's a very good question because they are very unique. So Jeff Wilson, who is the founder of Asset Management, Wilson Asset Management, he basically decided when he went to

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London they had an amazing vehicle there that was raising money seriously quickly for philanthropy. And the reason that model worked is because they had hedge fund managers, private equity guys, basically working completely pro-bono forever. So he came back, he spoke to David Paradise, he spoke to Peter Cooper. And, you know, the real ace of the legends of investing in Australia and said, sure, we all work pro-bono and basically raise a lot of money for Youth at Risk, which was the very first one that he set up. And two years later he set up Future Generation Global. So it's been a success. We have between the two vehicles, we have over a billion under management, and we have 15,000 shareholders who really believe in that, you know, do well for yourselves in terms of that investment returns, but also do good. Well, let's break those returns then down as to what the investors are getting and where that return is going. As far as helping kids, perhaps at disadvantaged. So as you said, in terms of our numbers, you know, we're very pleased with the numbers in terms of our investment performance. We're actually beating

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the All Ords and the Small Ords, which is which is really good for shareholders. And we're giving 8% fully grossed up yield, which for many of our shareholders, that's really what they're looking for. They're looking for that yield, but they're also looking for that capital growth. And in terms of the money you mentioned before, which is that 5.4 million, that's going to not for profits in the youth at risk. So that's for, you know, young people that are homeless, young people that are isolated, young people that you know, need help with their with their mental health. So it's doing doing a lot of good work. And we give to those not for profits. And we ask them to do with that money what they need to do to make a difference. Just as with our fund managers, you know, we have we have just over 500 million in future Generation Australia. And they manage that money and they're the best fund managers long term in the market. And, you know they do a great job for us as you can see by the performance. So when we take a look at the local vehicle then what's what's the mandate. What are you investing in. So we're the future generation. Australia is

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basically um Australian equities and that's mainly the smallcap end, because we have this investment committee which has, you know, on both of the vehicles and those investment professionals there from Guyana. The founder of Zenith Fund Managers, they know exactly what they're doing, and they really believe in that sort of small cap skew. And we believe that is going to get long term performance. One of the global Fund in. So if we turn to the global fund I mean the Global Fund is you know, we have we have 15 fund managers. They're managing our shareholders money. And in terms of our returns, I mean, as you said before, they're pretty they're pretty solid. I mean, it's what the six month investment is 11.6% in terms of that, you know, return. It's not as good, I must admit, as the MSCI, but we are just as you said, we're we're basically investing in that small to mid cap and we're not in the mega cap. And so we actually think that what we're giving our shareholders is a good return. And once again, it's that sort of fully grossed up fully

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franked 8% yield. And you know, our fully franked dividends have been increasing gradually. I'm intrigued as to how this works by committee. If you've got, say, 15 of the best managers to say, presumably the first thing that do you ask them to put their ego and their reputations, leave it at the door,

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come in, talk about it. Are you saying fund managers have egos? Gosh, no, no no no. How does that work so well? We have an investment committee. We have one for each vehicle. And they basically look at the fund managers that that can manage our money. And fund managers want to manage our money. So for them it's doing something good. They're really good at what they do, but they might not be good at giving their money away. So in a way they entrust us to do that. And their firms like it as well. Um, and then they will look at they will basically look at what we want in that portfolio. So whether it's, you know, long equities, whether it's absolute bias, do we need market neutral. And those people on the investment committee will determine what we what they think will give the best outcome for shareholders. But it has to be less volatility than the market. That's what we that's what we think our shareholders want and that's what they tell us. So a lot of work on their behalf. And we're very lucky because we have long second genre, and they also do very detailed analysis for us. So we can actually see

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exactly what's under the hood. And you've got some impressive leadership there in Jennifer Westacott and the global Yes Fund. And uh, Philip Lowe for the Australian, very impressive individuals, but really impressive boards as well. And you know they work pro-bono. But I would say since, um, Phil and Jennifer have come on, you know, that's that's really helped us in terms of talking to shareholders. Because when you've got such great individuals that have done so much for this country already, it's really good to have them working with us to, you know, not only get investment returns, but also to help young people. So, Caroline, is there an ultimate goal here? Uh, I mean, obviously they're both at a discount. So actually, one fund manager the other day said, oh, it's like elixir on sale, so you can buy them in the discounts or sort of above 12%. But at the same time, you can buy into something that's going to give you that long term, long term growth. And hopefully if we get it to a premium, then we'll be able to raise a bit more money. And you know, that's going to benefit Australia more.