Additional Estimates, 28 February 2017, Parliament House, Canberra
In late January we released our regular update on the performance and positioning of the five funds for which the Board is responsible and I would like to provide a short summary of the key points.
The object of the Future Fund is to strengthen the Commonwealth’s long-term financial position and to make provision for unfunded superannuation liabilities that will become payable during a period when an aging population will place significant pressure on the Commonwealth’s finances.
The Fund has exceeded its benchmark return over both short and long-term time horizons, generating returns of 9.8%, 11.8% and 10.0% per annum over 3, 5 and 7 year periods to 31 December 2016. Over ten years, the portfolio has achieved a return of 7.8% ahead of its benchmark of 6.9%.
In the 2016 calendar year the portfolio generated a return of 7.8%, growing to A$127.7 billion. Originally funded with contributions of $60.5 billion, investment returns have added over $67 billion to the value of the Fund, more than doubling the value of the Fund.
Looking to the investment environment, we have seen global equity markets strengthen over recent months, but at the same time uncertainty regarding global monetary policy, trade and a range of other factors remains. We maintain our long-held view that we see a challenging investment environment ahead with elevated risks and lower prospective returns than in previous years.
In light of this, we continue to cautiously and prudently manage the assets of the Future Fund. We are focused on maintaining our discipline to only take risk where it is adequately rewarded.
At 31 December 2016 the Medical Research Future Fund stood at $4.6 billion. The Fund is performing in line with its mandate and we will continue to diversify the portfolio over time.
At the end of December the DisabilityCare Australia Fund, Building Australia Fund and Education Investment Fund stood at $6.2 billion, $3.7 billion and $3.7 billion respectively. We continue to invest these funds in accordance with their low risk mandates.
In summary, the Future Fund Board of Guardians and management team now invests over $145bn across five public asset funds for benefit of future generations of Australians.
We are focussed on applying a prudent and disciplined long-term investment strategy in the pursuit of our objective to strengthen the Commonwealth’s long-term financial position.
I welcome your questions.