Federal Register of Legislation - Australian Government

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Directions/Other as made
This direction gives guidance to the Future Fund Board of Guardians in relation to its investment strategy for the Aboriginal and Torres Strait Islander Land and Sea Future Fund.
Administered by: Finance
Exempt from sunsetting by the Legislation (Exemptions and Other Matters) Regulation 2015 s11 item 03
Registered 26 Feb 2019
Table of contents.

Commonwealth Coat of Arms of Australia

 

Aboriginal and Torres Strait Islander Land and Sea Future Fund Investment Mandate Direction 2019

We, JOSHUA ANTHONY FRYDENBERG, Treasurer, and MATHIAS HUBERT PAUL CORMANN, Minister for Finance and the Public Service, give this Direction under section 32(1) of the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018.

Dated               19 February 2019                   

JOSHUA ANTHONY FRYDENBERG        MATHIAS HUBERT PAUL CORMANN

Treasurer                                                      Minister for Finance and the Public Service

 

 

 


Contents

Part 1      Preliminary                                                                                                     1

1  Name........................................................................................................................................ 1

2  Commencement........................................................................................................................ 1

3  Authority.................................................................................................................................. 1

4  Definitions................................................................................................................................ 1

Part 2      Direction                                                                                                          2

5  Object....................................................................................................................................... 2

6  Benchmark return and acceptable level of risk.......................................................................... 2

7  Board must consider impacts from its investment strategy....................................................... 2

8  Corporate governance............................................................................................................... 3

9  Reporting.................................................................................................................................. 3

 

 


Part 1    Preliminary

1  Name

                   This Direction is the Aboriginal and Torres Strait Islander Land and Sea Future Fund Investment Mandate Direction 2019.

2  Commencement

                   This Direction commences on the 15th day after it is given to the Board.

Note 1:       Section 42 (disallowance) of the Legislation Act 2003 does not apply to the direction—see regulations made for the purposes of paragraph 44(2)(b) of that Act.

Note 2:       Part 4 of Chapter 3 (sunsetting) of the Legislation Act 2003 does not apply to the direction—see regulations made for the purposes of paragraph 54(2)(b) of that Act.

3  Authority

                   This Direction is made under the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018.

4  Definitions

                   In this Direction:

Act means the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018.

Board means the Future Fund Board of Guardians established by section 34 of the Future Fund Act 2006.

Consumer Price Index means the All Groups Consumer Price Index number, being the weighted average of the 8 capital cities, published by the Australian Bureau of Statistics.

Fund means the Aboriginal and Torres Strait Islander Land and Sea Future Fund established by the Act.

Future Fund Act means the Future Fund Act 2006.

ILSC means the Indigenous Land and Sea Corporation established by section 191A of the Aboriginal and Torres Strait Islander Act 2005.

Responsible Ministers has the same meaning as in the Act.


 

Part 2    Direction

5  Object

(1)   The object of this Direction is to give guidance to the Board in relation to its investment strategy for the Fund.

(2)   The Board must seek to maximise the return earned on the Fund over the long term, consistent with international best practice for institutional investment, pursuant to section 33 of the Act, and subject to its obligations under the Act and any directions given by the Responsible Ministers under subsection 32(1) of the Act.     

(3)   This Direction is given under subsection 32(1) of the Act to articulate the Government’s expectations for how the Fund will be invested and managed by the Board. This sets out matters of risk and return for the Fund.

6  Benchmark return and acceptable level of risk

(1)   The Board is to adopt an average return over the long term of at least the Consumer Price Index + 2.0 to + 3.0 per cent per annum, net of costs, as the benchmark return on the Fund.

(2)   During the initial transition period, as the Board develops a long-term strategic asset allocation, the Government anticipates a return lower than the benchmark return.

                   Acceptable level of risk

(1)   In constructing a portfolio, the Board:

                     (a) must determine an acceptable but not excessive level of risk for the Fund, including having regard to the plausible capital loss from investment returns over the forward three-year period; and

                     (b) must have regard to its obligations under section 17 of the Act.

(2)   The Government acknowledges that targeting the long-term benchmark return implies accepting the risk of capital losses, in adverse markets, that may be 15‑20 per cent of the portfolio over a three-year period.

7  Board must consider impacts from its investment strategy

(1)   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.

8  Corporate governance

(1)   The Board must have regard to international best practice for institutional investment in determining its approach to corporate governance principles, including in relation to its voting policy.

9  Reporting

The Board must publish quarterly portfolio updates on its website showing:

(a)    actual returns against benchmark return; and

(b)   asset allocations by category.