Australia’s $230bn sovereign wealth fund will be retooled to help build houses, improve infrastructure and combat global heating under a new investment mandate.
The Albanese government has announced that the independently managed Future Fund will get a new investment mandate and statement of expectations, the latter of which is the first update for the financial asset fund in 15 years.
Under the changes, the fund will have to consider national priorities including increasing the domestic supply of residential housing, continuing to support the energy transition as part of the net zero transformation of the Australian economy, and delivering improved local infrastructure including economic resilience and security infrastructure.
The government is hoping a greater certainty of investment in assets that have long-term benefits will encourage more supply of housing and clean energy projects.
Greg Combet, the chair of the Future Fund board of guardians, said it would appoint a new executive director responsible for the energy transition in response to the changes.
“We have also long recognised the importance of environmental, social and governance issues in our investment process and will add resources in this area,” he said.
Established in 2006 by the Howard government, the Future Fund has $230bn under management, making it the government’s largest financial asset. It is expected to grow to $380bn by 2032-33, with a benchmark for growth of returns of 4% to 5% above inflation over the long term.
In a joint statement the treasurer, Jim Chalmers, and the finance minister, Katy Gallagher, said the changes “will mean more investment where we need it most but not at the expense of returns”.
“The government is also confirming the fund’s enduring role in strengthening the commonwealth’s long-term financial position and covering unfunded superannuation liabilities,” they said.
“To support this, the government won’t start any drawdowns from the fund until at least 2032-33, providing the fund the certainty it needs to continue to build its portfolio.
“The government remains committed to the fund’s independence and commercial focus.”
They added that the fund’s primary objective would continue to be to maximise returns, there was no change to the benchmark growth rate and “there will be no change to the expected risk profile”.
The Future Fund board of guardians welcomed the announcement, which it said provided the foundation for it “to be an enduring institution able to invest for the long term, and at the same time further strengthen the nation’s balance sheet”.
Combet, who began his term as board chair in June, said the policies “are an endorsement of the work that the Future Fund has done over 18 years to deliver its demanding investment mandate”.
“The government’s decision to defer withdrawals from the Future Fund until at least 2032-33 provides the Future Fund with the confidence to provide more focus and resources to the areas of national priority identified in the new investment mandate that align with our risk and return hurdle.
“The priority areas are aligned with the Future Fund’s thinking … and consistent with its investment focus on seeking more local currency exposure and protection against sustained higher inflation.”
The Future Fund has invested in Tilt Renewables, a provider of 1.8GW of power from wind, solar and battery storage projects, in a third runway at Melbourne airport, and in a terminal and runway at Perth airport.
