FAQs
What is the Future Fund?
The Future Fund was established in 2006 as a financial asset fund designed to accumulate financial assets and invest them on behalf of the Australian Government to address the Government’s unfunded superannuation liability. This liability arises from the superannuation entitlements payable to some public servants and defence personnel. The Future Fund is overseen by an independent Board of Guardians.
In May 2007, the Australian Government announced its intention to establish a Higher Education Endowment Fund (HEEF) which would also be managed by the Board. The Higher Education Endowment Fund Act 2007 received Royal Assent in September 2007. The HEEF's objective is to support capital expenditure and research facilities in Australian universities. This support will be provided by the dividends on the capital invested in the HEEF, not the capital investments.
How much money is in the Future Fund and the HEEF?
As at November 2007 the Future Fund’s balance is $61.5 billion - this includes the value of approximately 2.05 billion shares in Telstra Corporation which are held under escrow until mid 2008, subject to certain exceptions.
The Australian Government has committed $6 billion to the HEEF.
Where did the money in the Fund come from?
Contributions to the Future Fund and HEEF come from the Australian Government's budget surpluses. The Future Fund has also received contributions resulting from the proceeds of the sale of the Government’s stake in Telstra in late 2006.
Our Organisation
How is the Future Fund organised?
The Future Fund Board of Guardians is an independent body that is collectively responsible for making investment decisions and is accountable to the Government for the safekeeping and performance of the assets of both the Future Fund and the HEEF. The Chairman of the Board of Guardians is David Murray AO. He is also the Chief Executive Officer of the Future Fund Management Agency, although in practice the operations of the Agency are overseen by the General Manager.
The Future Fund Management Agency undertakes administrative and operational functions in relation to the Future Fund and HEEF, and, in particular, acts on the investment directions of the Board. Staff of the Agency are engaged under the Public Service Act 1999.
Distribution of the dividends of the HEEF is the responsibility of the Minister for Education, Science and Training, who is advised by the HEEF Advisory Board.
How are members of the Board of Guardians appointed?
Members of the Board of Guardians are appointed by the Treasurer and the Minister for Finance and Administration and are appointed for up to five years.
Board members are selected on the basis of their expertise in investment management and corporate governance.
The Board is Chaired by David Murray AO. Other members are Mr Jeffrey Browne, Ms Susan Doyle, Dr John Mulcahy, Mr John Paterson, Mr Trevor Rowe AM and Mr Brian Watson.
Investment Objectives
What are the investment objectives?
The investment returns expected from the Future Fund are detailed in the investment mandate provided by the Treasurer and the Minister for Finance and Administration.
The Future Fund Act 2006 states that the mandate must have regard to maximising returns on the Fund over the long term, consistent with international best practice for institutional investment and other matters considered relevant by Ministers.
The current mandate sets a target return of between 4.5% and 5.5% above the Consumer Price Index (CPI) measure of inflation over the long term. The Board has interpreted this as an objective to provide a return of at least 5% above CPI over rolling 10 year periods.
It is recognised that as the Fund transitions to a long-term strategic asset allocation, a return lower than this benchmark is expected.
Return expectations for the HEEF will also be detailed in its investment mandate.
Who decides how to invest assets to meet the investment objectives?
The Board of Guardians is responsible for deciding how to invest assets. The Board is governed both by the Future Fund and HEEF legislation and the Investment Mandates established by the responsible Ministers, being the Treasurer and the Minister for Finance and Administration.
How are the assets held by the Fund currently invested?
The 2006-07 annual report provides a snapshot of the investments of the Future Fund at 30 June 2007.
During 2007-08 the portfolio will be further developed. It does not make commercial sense for the Board to reveal details of this transition at this stage, although as the investment strategy is implemented more detail will be provided. Moving to a strategic asset allocation will take place over the medium term.
Does the Future Fund invest the assets itself?
The Board, with the support of the Future Fund Management Agency, builds the investment strategy and is accountable for the performance of the Fund.
Actual investments will be made through professional investment managers selected by the Board.
Withdrawals from the Future Fund
When will money be drawn from the Future Fund?
Withdrawals from the Fund are governed by the Future Fund Act 2006.
The Act allows assets to be withdrawn to discharge unfunded superannuation liabilities after 2020. However, if the assets of the Fund match the present value of the liability before 2020, money can be withdrawn from the Fund for the purpose of meeting superannuation benefit payments.
Money from the Fund is also used to cover the costs of the Future Fund Board of Guardians and the Future Fund Management Agency.
Page Last Updated:
21 July 2008