Federal Register of Legislation - Australian Government

Primary content

Directions/Other as made
This Direction provides guidance to the Future Fund Board of Guardians in relation to its investment strategy for the Building Australia Fund.
Administered by: Finance
Exempt from sunsetting by the Legislation (Exemptions and Other Matters) Regulation 2015 s11 item 03
Made 14 Jul 2009
Registered 21 Jul 2009
Tabled HR 11 Aug 2009
Tabled Senate 11 Aug 2009

Building Australia Fund Investment Mandate Directions 20091

Nation-building Funds Act 2008

We, WAYNE SWAN, Treasurer, and LINDSAY TANNER, Minister for Finance and Deregulation, give these Directions under subsection 35 (1) of the Nation-building Funds Act 2008.

Dated 14 July 2009

WAYNE SWAN                                                         LINDSAY TANNER

Treasurer                                                                   Minister for Finance and Deregulation


Part 1                 Preliminary

  

1              Name of Directions

                These Directions are the Building Australia Fund Investment Mandate Directions 2009.

2              Commencement

                These Directions commence on the 15th day after they are given.

Note   Section 42 of the Legislative Instruments Act 2003 (which deals with the disallowance of legislative instruments) does not apply to this instrument: see section 44 of that Act.  Part 6 of that Act (which deals with the sunsetting of legislative instruments) does not apply to this instrument: see section 54 of that Act.

3              Definitions

                In these Directions:

Act means the Nation-building Funds Act 2008.

Board means the Future Fund Board of Guardians.

Fund means the Building Australia Fund.

responsible Ministers has the same meaning as in the Act.

4              Object of these Directions

         (1)   The Building Australia Fund is a financing source to enhance the Commonwealth’s ability to make payments in relation to the creation or development of transport, communications, energy and water infrastructure, and eligible national broadband network matters.

         (2)   The object of these Directions is to give guidance to the Board in relation to its investment strategy for the Fund.  The Board is required by the Act to seek to maximise the return earned on the Fund, consistent with international best practice for institutional investment and subject to its obligations under the Act and any directions given by the responsible Ministers under the Act.

         (3)   These Directions are given under subsection 35 (1) of the Act to articulate the Australian Government’s expectations of how the Fund will be invested and managed by the Board.

         (4)   The responsible Ministers may review these Directions, including the benchmark return, in consultation with the Board.  The first review is expected to occur before 1 July 2010.

Part 2                 Directions

  

5              Benchmark return

         (1)   The Board is to adopt a benchmark return on the Fund of the Australian three month bank bill swap rate + 0.3 per cent per annum, calculated on a rolling 12 month basis (net of fees).

         (2)   In targeting this benchmark return, the Board should invest in such a way as to minimise the probability of capital losses over a 12 month horizon.

6              Board must consider impacts from its investment strategy

                In undertaking its investment activities, the Board must act in a way that:

                (a)    minimises the potential to effect any abnormal change in the volatility or efficient operation of Australian financial markets; and

               (b)    is unlikely to cause any diminution of the Australian Government’s reputation in Australian and international financial markets.


Note

1.       All legislative instruments and compilations are registered on the Federal Register of Legislative Instruments kept under the Legislative Instruments Act 2003. See http://www.frli.gov.au.