MELBOURNE, Victoria, Australia, November 29, 2017 – Australia’s Future Fund is a government-owned investment fund of Australia. The fund’s capital revenue emanates from the excess financial plan invested by the government of Australia. The Fund currently possesses nearly $60 billion of property, as stated by the Sovereign Wealth Fund Institute.
In the year 2006, the government of Australian launched the Fund via passage of the Future Fund Act. Operating out of Melbourne, a Board of Guardians governs the Fund, which invests in international and domestic equities, real estate, private equity funds, alternative assets, debt securities, and infrastructure. The Board actively searches for the best investment ideas for the intended risk and return goals in a given investment setting.
Why was the Future Fund established?
The government of Australia issued its first Intergenerational Report in 2002. Its intent was to contribute long-term vision for the federal budget and economic policy, evaluating how current generations were getting ready for the needs of the future. This step needed a thorough examination of the long period revenue of the government. This exercise recognized the arising costs that mandates advance attention, especially the expenses associated with a growing population.
The Australian government applied policies to minimize excess spending, while boosting the growth of the nation’s economy, ultimately arriving at the idea of creating a Future Fund to generate savings and reinforce the government’s finances. In May 2006, the government invested A$18 billion to initiate the Fund.
Function of the Future Fund
Considering that the Australian government owns the money deposited in the Fund, it directs all the income to supported causes, the Fund often lends proceeds to public sectors that are not currently receiving funds. The government also hopes they can develop the Future Fund in a way that will help fully fund pension costs. This strategy would allow current generations to set money aside for future needs and generations.
It Is Not A Superannuation Fund
The Australian Future Fund is not and never will be a superannuation fund. It is a government-owned investment. The wealth of the fund is invested on behalf of the taxpayers.
A single person cannot invest in the Future Fund, nor can any individual make a withdrawal from it. On the other hand, an individual can contribute money to a superannuation fund. Australian individuals own the money and the assets. If the fund should close down, they can collect all the proceeds.
The Future Fund has surpassed its standard target of return over the last ten years, pursuing its goals by sustaining reasonable investment risks but not beyond normal and customary prudence.
Considering the financial crisis of 2008 and the small yields of these recent years, the Fund has managed to sustain an returnof 7.7% for each year, which is an impressive feat. The chairman of the Fund believes the world economy remains in a low yield, long-term environment, and the organization invests accordingly.
Recently, the Australian government announced their intention to lessen the acceptance of excessive risks by 50 points compared to a Consumer Price Index +4 to 5% per annum. This remains a difficult target. However, it allows the Board of Guardians a sense of the perspective regarding stability between return and the risk.
The Fund Improves The Budget Balance
For the time being, the income of the Future Fund will contribute to the total account of the national budget, thus bolstering the financial status of the Commonwealth. In addition, it has teamed up with different partners like Ashe Morgan to boost returns.
While the Future Fund’s purpose is more important than anything else, it also enhances the country’s standing in financial markets across the globe, given its status as one of the most prominent sovereign wealth funds in the world.
Consequently, the Fund’s outlook on critical international financial matters is in great demand. Various representatives from the Australian Future Fund have been requested to attend meetings in key world capitals that look forward to attracting greater foreign investment.
Australia’s Future Fund was established to enhance the financial position of the Commonwealth. It is internationally recognized by various sovereign wealth funds and other investors worldwide. The Fund has achieved success via economic diversification, clear objectives, attention to possible risk factors, patience, and informed governance.