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The Future Fund is an independently managed
sovereign wealth fund A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as ...
established in 2006 to strengthen the
Australian Government The Australian Government, also known as the Commonwealth Government, is the national government of Australia, a federal parliamentary constitutional monarchy. Like other Westminster-style systems of government, the Australian Governmen ...
'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. In 2021 the fund had US$143.7 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: * Building Australia Fund – An infrastructure fund to provide investment in infrastructure projects (including road, rail, ports and broadband). At 30 June 2018, it was valued at A$3.9 billion. * DisabilityCare Australia Fund – A fund to contribute to the cost of the
National Disability Insurance Scheme The National Disability Insurance Scheme (NDIS) is a scheme of the Australian Government that funds costs associated with disability. The scheme was legislated in 2013 and went into full operation in 2020. The scheme is administered by the Na ...
. At 30 June 2018, it was valued at A$14.7 billion. *
Medical Research Future Fund The Medical Research Future Fund (MRFF) is a research fund established in Australia by the Abbott Government. It is managed by the Future Fund, with interest generated going to medical research. In 2020-2021, the MRFF reached its capitalisation ...
– A fund to disperse interest generated to medical research. At 31 December 2019, it was valued at $17.85 billion. * 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. 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: :Hon. 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 AO 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 Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
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 The Australia and New Zealand Banking Group Limited (ANZ) is an Australian multinational banking and financial services company headquartered in Melbourne, Victoria. It is Australia's second-largest bank by assets and fourth-largest bank by ma ...
. 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 Royal assent is the method by which a monarch formally approves an act of the legislature, either directly or through an official acting on the monarch's behalf. In some jurisdictions, royal assent is equivalent to promulgation, while in oth ...
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 Telstra Group Limited is an Australian telecommunications company that builds and operates telecommunications networks and markets voice, mobile, internet access, pay television and other products and services. It is a member of the S&P/ASX 2 ...
in its ongoing privatisation, was deposited into the fund. On 28 February 2007, the government transferred the Commonwealth's remaining 17% stake in
Telstra Telstra Group Limited is an Australian telecommunications company that builds and operates telecommunications networks and markets voice, mobile, internet access, pay television and other products and services. It is a member of the S&P/ASX 2 ...
, 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. In March 2007, the opposition Labor Party announced it would withdraw A$2.7 billion from the Future Fund to finance the National Broadband Network, an initiative to install broadband internet infrastructure across Australia, if it won the 2007 election; this proposal prompted government ministers to proclaim that Labor intended to "raid" the Future Fund for their own means. Labor later indicated that the use of any funds from the Future Fund towards a national high speed broadband network will have to comply and meet all requirements of any commercial investment. This included producing a commercial
rate of return In finance, return is a profit on an investment. It comprises any change in value of the investment, and/or cash flows (or securities, or other investments) which the investor receives from that investment, such as interest payments, coupons, cas ...
on the invested funds, with all profits being returned into the Future Fund allowing further investment. In May 2007, it was revealed that the
Chicago (''City in a Garden''); I Will , image_map = , map_caption = Interactive Map of Chicago , coordinates = , coordinates_footnotes = , subdivision_type = List of sovereign states, Count ...
-based
Northern Trust Corporation Northern Trust Corporation is a financial services company headquartered in Chicago that caters to corporations, institutional investors, and ultra high net worth individuals. Northern Trust is one of the largest banking institutions in the Uni ...
had won a competitive tender process to manage the Fund. Rick Waddell, President and Chief Operating Officer of Northern Trust, indicated that Australian companies did not have the expertise to manage the Future Fund. Northern Trust stood to collect A$30 million in annual fees. Controversy arose when it was realised that the Fund will be managed by a foreign bank with no base in Australia. National secretary of the Finance Sector Union Paul Schroder estimated that around 100 jobs will be lost when the US company starts managing the Fund from Singapore using staff from India. Northern Trust was linked to the
Enron scandal The Enron scandal was an accounting scandal involving Enron Corporation, an American energy company based in Houston, Texas. Upon being publicized in October 2001, the company declared bankruptcy and its accounting firm, Arthur Andersen then ...
. General Manager of the Future Fund Management Agency, Paul Costello, told a Senate estimates committee hearing that "We were not concerned that this represented a risk to us in terms of the arrangements that we were seeking to put in place with Northern Trust". In his
2008 Australian federal budget The 2008 Australian federal budget for the Australian financial year ended 30 June 2009 was presented on 13 May 2008 by the Treasurer of Australia, Wayne Swan, the first federal budget presented by Swan, and the first budget of the first Rudd ...
speech, the Treasurer,
Wayne Swan Wayne Maxwell Swan (born 30 June 1954), often colloquially referred to as Swanny, is an Australian politician who is National President of the Labor Party. He was previously the Deputy Prime Minister of Australia and Deputy Leader of the Labor ...
announced three new "Nation-Building Funds", also to be managed by the Future Fund Board. These included a $20 billion Building Australia Fund to invest in roads, rail, ports and broadband; an $11 billion Education Investment Fund, which absorbed the $6 billion Higher Education Endowment Fund set up by the previous government; and a $10 billion Health and Hospital Fund. In that budget and the following 2009 federal budget, the Labor Rudd Government promised A$41 billion to create these new funds. The fund become a member of the
International Forum of Sovereign Wealth Funds The International Forum of Sovereign Wealth Funds (IFSWF) is a nonprofit international group of sovereign wealth funds managers which was established in 2009. It is based in London, England. History In 2009, a group of 23 leading state-owned ...
and signed up to the
Santiago Principles The Santiago Principles or formally the Sovereign Wealth Funds: Generally Accepted Principles and Practices (GAPP) are designed as a common global set of 24 voluntary guidelines that assign best practices for the operations of Sovereign Wealth Fun ...
on best practices for managing Sovereign Wealth Funds. As a member it publishes how it adopts and implements the principles within its governance procedures. In May 2013, a DisabilityCare Australia Fund was established by the ''DisabilityCare Australia Fund Act 2013''. The Fund will fund the
National Disability Insurance Scheme The National Disability Insurance Scheme (NDIS) is a scheme of the Australian Government that funds costs associated with disability. The scheme was legislated in 2013 and went into full operation in 2020. The scheme is administered by the Na ...
and is also to be managed by the Future Fund Board. The Fund is to receive contributions from the increase in the medicare levy by 0.5% to a total of 2% from 1 July 2014. In the May 2014 federal budget, the Abbott Government announced its intention to establish the
Medical Research Future Fund The Medical Research Future Fund (MRFF) is a research fund established in Australia by the Abbott Government. It is managed by the Future Fund, with interest generated going to medical research. In 2020-2021, the MRFF reached its capitalisation ...
and the Asset Recycling Fund and to discontinue the Building Australia Fund, Education Investment Fund and Health and Hospitals Fund. These changes are subject to the passage of legislation.Annual Report 2013-14
/ref> The Senate approved the establishment of the Medical Research Future Fund in August 2015, to be managed by the Future Fund, with interest generated going to medical research, beginning with $10 million in 2015, growing to $390m over the following three years. In 2016 it was announced that the Future Fund,
Queensland Investment Corporation QIC (Queensland Investment Corporation) is a Government owned investment company owned by the Queensland Government. It was founded on 1 July 1991 pursuant to the ''Queensland Investment Corporation Act 1991'' to serve the long-term investment r ...
and
AGL Energy AGL Energy Ltd () is an Australian listed public company involved in both the generation and retailing of electricity and gas for residential and commercial use. AGL is Australia's largest electricity generator, and the nation's largest carb ...
would form the
Powering Australian Renewables Fund Powering Australian Renewables (PowAR) is an Australian infrastructure investment fund closely associated with but independent from AGL Energy. Initial investment in PowAR was $200M from AGL, and up to $800M from each of QIC Global Infrastructu ...
(PARF) investing in two of Australia's largest solar plants at the time. In April 2019, the Future Fund announced that it had returned an average of over 10% a year in the last decade. In September 2019, the Future Fund reported it had $162.6 billion in assets at the prior June 30, from seed capital of $60.5 billion in 2008, with no contributions made over the period.


Investments in nuclear weapons and tobacco industries

In May 2011 the Future Fund was criticized by ''
The Age ''The Age'' is a daily newspaper in Melbourne, Australia, that has been published since 1854. Owned and published by Nine Entertainment, ''The Age'' primarily serves Victoria (Australia), Victoria, but copies also sell in Tasmania, the Austral ...
'' newspaper for investing A$135.4 million in 15 foreign-owned companies involved in the manufacture of nuclear weapons for the United States, Britain, France and India. Information about the investments was obtained through a freedom of information request by the
International Campaign to Abolish Nuclear Weapons The International Campaign to Abolish Nuclear Weapons (abbreviated to ICAN, pronounced ) is a global civil society coalition working to promote adherence to and full implementation of the Treaty on the Prohibition of Nuclear Weapons. The camp ...
. In February 2013, the Future Fund announced it would exclude primary tobacco producers from its investment portfolios.


Funds held under management

The total funds held under management, as at 31 December each year, inclusive of funds held in the Building Australia Fund, the Health and Hospitals Fund, the former Education Investment Fund and the DisabilityCare Australia Fund, are: :


See also

*
Australian federal budget An Australian federal budget is a document that sets out the estimated revenues and expenditures of the Australian Treasury in the following financial year, proposed conduct of Australian government operations in that period, and its fiscal poli ...
*
Generational accounting Generational accounting is a method of measuring the fiscal burdens facing current and future generations. Generational accounting considers how much each adult generation, on a per person basis, is likely to pay in future taxes net of transfer p ...
*
Superannuation in Australia In Australia, superannuation, or just super, is the term for retirement pension benefit funds. Employers make compulsory contributions into these funds on behalf of their employees. Superannuation is compulsory for all employed people workin ...
* List of countries by sovereign wealth funds *
Medical Research Future Fund The Medical Research Future Fund (MRFF) is a research fund established in Australia by the Abbott Government. It is managed by the Future Fund, with interest generated going to medical research. In 2020-2021, the MRFF reached its capitalisation ...
* Australian Reward Investment Alliance, superannuation trustee for Australian Government employees


References


External links


Future Fund website
*{{cite book , url=http://www.futurefund.gov.au/__data/assets/pdf_file/0017/4661/16853_FF_2011_AR_WEB_A212093.pdf , title=Annual Report , year=2011 , publisher=Future Fund Board of Guardians , isbn=978-0-646-56322-0 Commonwealth Government-owned companies of Australia Public pension funds Sovereign wealth funds Government finances in Australia Superannuation funds in Australia