AUSTRALIA - The government today seeded its Future Fund with A$18bn and issued the board of guardians with an investment mandate including a target return of at least 4.5 - 5.5% per annum.
The Future Fund aims to meet the government’s unfunded superannuation liabilities, expected to grow to $140bn by 2020.
According to the mandate, the board should determine an “acceptable but not excessive” level of risk for the fund, and establish an internal limit on holdings of any listed company in order to ensure that it does not trigger the take-over provisions under the Corporations Act 2001, or hold a stake of more than 20% in any foreign publicly listed company.
In addition, the board should only acquire a direct equity holding in Telstra if shares are transferred to the fund by the government or “gifted” to the fund with the approval of the government.
Furthermore, the board should have regard to international best practice for institutional investment in determining its approach to corporate governance principles, and act in a manner that minimises the potential to cause any abnormal change in the volatility or efficient operation of Australian financial markets.
The $18bn seed capital transferred to the fund was taken from surpluses accumulated at the Reserve Bank, and the government said it would look to make further contributions from future budget surpluses and asset sales once final budget outcomes were known.
By Damian Clarkson
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