The Future Fund is an independently managed sovereign wealth fund established in 2006 to strengthen the Australian Government's long-term financial position by making provision for unfunded superannuation liabilities for politicians and other public servants that will become payable during a period when an ageing population is likely to place significant pressure on the Commonwealth's finances. , the fund has US$136 billion in assets under management.
The board of the Future Fund also manages another five public asset funds, giving it responsibility for investing over A$210 billion on behalf of the Australian Government.
Purpose
The legislation establishing the Future Fund describes its main object as being 'to strengthen the Commonwealth's long-term financial position'. While legislation permits withdrawals from the fund from 1 July 2020, the government indicated in 2017 it intends to allow the fund to continue to accumulate until at least 2026/27 before making withdrawals. The Investment Mandate for the Future Fund is to target a benchmark return of at least the Consumer Price Index + 4 to 5 per cent per annum over the long term, while taking an acceptable but not excessive level of risk.
The Future Fund Board is currently also responsible for five other Australian sovereign wealth funds: DisabilityCare Australia Fund – A fund to contribute to the cost of the National Disability Insurance Scheme. At 30 June 2023, it was valued at A$16.9 billion. Medical Research Future Fund – A fund to disperse interest generated to medical research. At 30 June 2023, it was valued at A$21.9 billion. Future Drought Fund - A fund to provide secure, continuous funding for drought resilience initiatives. Valued A$4.6 billion at 30 June 2023. Aboriginal and Torres Strait Islander Land and Sea Future Fund (ATSILS Fund) – A fund to enhance the Commonwealth's ability to make payments to the Indigenous Land Corporation. Established in February 2019 with a capital contribution of A$2 billion transferred from the Aboriginal and Torres Strait Islander Land Account. Valued A$2.1 billion at 30 June 2023. Disaster Ready Fund - A fund to provide up to one billion dollars over the next five years, from 2023-24 for natural disaster resilience and risk reduction across Australia. Valued at A$4.4 billion at 30 June 2023.
The Education Investment Fund, a fund to provide capital investment in higher education and vocational education and training valued at A$3.9 billion in 2018, was ended by 2019 legislation, which redirected the money to natural disaster relief.
Governance
Investment of the Future Fund is the responsibility of the Future Fund Board of Guardians with the support of the Future Fund Management Agency. The Future Fund is overseen by an independent Board of Guardians selected on the basis of their expertise in investment management and corporate governance. The current Board composition is:
Costello was initially appointed as a Guardian on 18 December 2009 for a term of five years and reappointed as chair with effect from 4 February 2019 for a term of five years.
The Board was chaired by David Murray between 2006 and 2012. Amidst some controversy it was announced that David Gonski would succeed Murray as independent non-executive chairman when Murray's term expired on 3 April 2012. At the same time, Steve Harker, an investment banker from Morgan Stanley in Australia, replaced Brian Watson as a Guardian. David Gonski chaired the Board until January 2014 when it was announced that he would leave to chair the Australia and New Zealand Banking Group. Costello was appointed the interim chair until the announcement of his permanent chairmanship in February 2014.
History
On 11 September 2004, the Federal Treasurer, Peter Costello, announced that the Future Fund would be established following the 2004 federal election. The received Royal Assent on 23 March 2006. On 5 May 2006, A$18 billion, derived from government surpluses as well as income from the sale of a third of Telstra in its ongoing privatisation, was deposited into the fund. On 28 February 2007, the government transferred the Commonwealth's remaining 17% stake in Telstra, valued at A$8.9 billion, into the Fund. These contributions and transfers increased the Fund to over A$50 billion by the end of the 2006-2007 financial year.