FF 2022

FF 2022
Future Fund
Pillar 1: Legal
Legal framework,objectives,and coordination with macroeconomic policies
Principle 1
1. The legal framework for the SWF should be sound and support its effective operation and the achievement
of its stated objective(s).
1.1. The legal framework for the SWF should ensure legal soundness of the SWF and its transactions.
1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the
SWF and other state bodies, should be publicly disclosed.
The legal framework for the Future Fund Board of Guardians (“Board of Guardians”) and its supporting
management team in the Future Fund Management Agency (“Agency”), together with arrangements for the
governance and operation of the public asset funds for which the Board of Guardians is responsible, are
detailed in the Future Fund Act 2006, the DisabilityCare Australia Fund Act 2013 the Medical Research
Future Fund Act 2015, the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018, the
Future Drought Fund Act 2019 and the Emergency Response Fund Act 2019.
Under the framework, the roles of the responsible Ministers, Board of Guardians and Agency are defined,
along with the purpose of the Funds and arrangements for contributions to and withdrawals from them. The
framework also sets out reporting and accountability arrangements.
The framework is designed specifically to establish the sound and effective operation of the organisation and
achievement of its objectives.
The legal basis and structure and the legal relationships between the Board of Guardians, Agency and the
Australian Government is detailed in the legislation which is publicly available.
Additional detail and discussion of the basis and operation of the Board, Agency and the various public asset
funds themselves is available from the Future Fund’s annual report and website.
www.futurefund.gov.au/About-us/Legislation-and-governance
www.futurefund.gov.au/investment/how-we-invest/investment-mandates
Principle 2
The policy purpose of the SWF should be clearly defined and publicly disclosed.
The Future Fund was established to strengthen the Australian Government’s long-term financial position.
The Medical Research Future Fund (“MRFF”) was established to improve the health and wellbeing of
Australians by providing grants of financial assistance to support medical research and medical innovation.
The Aboriginal and Torres Strait Islander Land and Sea Future Fund (“ATSILS”) was established to fund the
Indigenous Land and Sea Corporation which assists Indigenous Australians to acquire and manage land
resources.
The DisablityCare Australia Fund (“DCAF”) was established by legislation with the object of reimbursing
States, Territories and the Commonwealth for expenditure incurred in relation to the National Disability
Insurance Scheme Act 2013 and to fund implementation of the National Disability Insurance Scheme Act
2013 in its initial period of operation.
The Emergency Response Fund (“ERF”) to support communities impacted by natural disasters.
The Future Drought Fund (“FDF”) to support initiatives that enhance the drought resilience of Australian
farms and communities.
www.futurefund.gov.au/About-us/annual-reports
www.futurefund.gov.au/about-us/our-funds
Principle 3
3. Where the SWF’s activities have significant direct domestic macroeconomic implications, those activities
should be closely coordinated with the domestic fiscal and monetary authorities, so as to ensure consistency
with the overall macroeconomic policies.
The Australian Government is responsible for determining the timing and extent of withdrawals from the
Future Fund, the MRFF, the ATSILS, the DCAF, the FDF and the ERF subject to requirements set out in
legislation.
The Commonwealth’s financial position, including the assets of the Future Fund, the Commonwealth’s
unfunded superannuation liabilities and the assets and liabilities associated with other funds invested by the
Board of Guardians, is a matter for Government. Full details are published annually in the Australian
Government Budget Papers and other related documents.
The Board of Guardians does not have control or influence over management of the liabilities and frames its
investment strategy around the Investment Mandate Directions issued by the responsible Ministers under the
legislation. The Investment Mandate Directions do not direct the Board of Guardians to invest in particular
sectors or asset classes domestically or internationally. Based on its mandate the Board of Guardians
develops and implements appropriate investment portfolios in line with the Investment Mandate Directions.
Withdrawals from the Future Fund, the MRFF, the ATSILS, the DCAF, the FDF and ERF are made in
accordance with the governing legislation.
Coordination by Government with all relevant fiscal and monetary authorities, and relevant departments, is
undertaken as part of the legislated processes for withdrawals.
www.budget.gov.au
Principle 4
4. There should be clear and publicly disclosed policies, rules, procedures, or arrangements in relation to the
SWF’s general approach to funding, withdrawal, and spending operations.
4.1. The source of SWF funding should be publicly disclosed.
4.2. The general approach to withdrawals from the SWF and spending on behalf of the government should be
publicly disclosed.
Legislation publicly sets out the funding, withdrawal and spending arrangements and procedures for the
funds, including arrangements for Parliamentary oversight and public disclosure of funding, withdrawals and
spending. The source of funding is publicly disclosed together with the approach to withdrawals and
spending of monies. Details on planned contributions to and withdrawals from the funds are included in the
Australian Government’s annual Budget.
www.finance.gov.au/investment-funds/
www.budget.gov.au
Principle 5
5. The relevant statistical data pertaining to the SWF should be reported on a timely basis to the owner, or as
otherwise required, for inclusion where appropriate in macroeconomic data sets.
Statistical data is consolidated in national financial accounts, government financial statistics, the balance of
payments and international investment position by the Australian Bureau of Statistics in accordance with its
regular data collection and reporting arrangements. Data is also incorporated into the Government’s budget
statements.
Audited annual financial statements are tabled in Parliament and quarterly updates on the portfolio are
released publicly.
www.abs.gov.au
www.futurefund.gov.au/investment/investment-performance/portfolio-updates
www.futurefund.gov.au/about-us/annual-reports
Pillar 2: Institutional
Institutional Framework and Governance Structure.
Principle 6
6. The governance framework for the SWF should be sound and establish a clear and effective division of
roles and responsibilities in order to facilitate accountability and operational independence in the
management of the SWF to pursue its objectives.
The roles and responsibilities of the Government, as asset owner, and the Board of Guardians and Agency, as
asset manager are detailed in the legislation. The Government, through the responsible Ministers, is
responsible for appointing members of the Board of Guardians based on the requirements set in legislation.
The Board of Guardians is responsible for deciding how to invest the capital of each fund, while the Agency
is responsible for assisting and advising the Board in its functions.
Further detail is provided by the Investment Mandate Directions for each fund and the Statement of
Expectations and Statement of Intent exchanged between the Government and the Board of Guardians and
the Agency.
Internal policies, procedures and protocols have been established to further delineate roles and
responsibilities at the operational level.
Principle 7
7. The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in
accordance with clearly defined procedures, and exercise oversight over the SWF’s operations.
The objective for each fund, the procedures for the appointment of the Board of Guardians by Government
and arrangements for the exercise of oversight, while maintaining the investment independence of the Board
of Guardians, are detailed in the legislation. Individuals are not eligible to the Board of Guardians unless
they have substantial experience or expertise and professional credibility and significant standing in the fields
of investing in financial assets, managing investments in financial assets or corporate governance.
Oversight is maintained through regular reporting to the Ministers including the tabling of audited financial
statements in Parliament.
Principle 8
8. The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and
adequate authority and competency to carry out its functions.
The Board of Guardians is bound by the legislation and Investment Mandate Directions set by Government
to pursue the investment objectives detailed in the legislation and to act in good faith. The legislation also
provides the Board of Guardians with the necessary powers to undertake its mandated activities and sets out
the experience, expertise and credibility required of appointees to the Board of Guardians.
Principle 9
9. The operational management of the SWF should implement the SWF’s strategies in an independent
manner and in accordance with clearly defined responsibilities.
The Board of Guardians is responsible for investing the assets of the funds in accordance with the legislation
and makes decisions independently of Government. The legislation establishes the Agency to provide
support and advice to the Board of Guardians and to assist in giving effect to its decisions.
Clear internal policies, procedures and protocols have been established to further delineate roles and
responsibilities at the operational level.
Principle 10
10. The accountability framework for the SWF’s operations should be clearly defined in the relevant
legislation, charter, other constitutive documents, or management agreement.
Accountability arrangements, including the requirement for publication of an annual report and arrangements
for the provision of reports and information to the responsible Ministers, are detailed in the legislation.
Members of the Board of Guardians are held accountable through the requirements imposed on them through
the legislation, with civil and criminal penalties applying for breach of specific duties and obligations
including in relation to care and diligence, acting in good faith, use of position and use of information.
Further accountability is also provided through the operation of the Public Governance, Performance and
Accountability Act 2013 governing the establishment and operation of Special Accounts for each fund.
Principle 11
11. An annual report and accompanying financial statements on the SWF’s operations and performance
should be prepared in a timely fashion and in accordance with recognized international or national
accounting standards in a consistent manner.
An annual report (prepared in accordance with the requirements of the Future Fund Act 2006 and the Public
Governance, Reporting and Accountability Act 2013) and audited financial statements are prepared in
accordance with the Public Governance, Performance and Accountability (Financial Reporting) Rule.
The legislation requires that the annual report and audited financial statements are presented to the
responsible Minister as soon as practicable after the end of each financial year and tabled in Parliament
within 15 sitting days of each House of Parliament. The annual report and financial statements are also
published online once they have been tabled in Parliament.
www.futurefund.gov.au/annual-reports
Principle 12
12. The SWF’s operations and financial statements should be audited annually in accordance with recognized
international or national auditing standards in a consistent manner.
Internal audit services are provided by an external firm reporting to the Audit & Risk Committee of the
Board of Guardians. The Australian National Audit Office is responsible for an annual independent external
audit conducted in accordance with the Australian National Audit Office Auditing Standards, which
incorporate the Australian Auditing Standards.
www.anao.gov.au
Principle 13
13. Professional and ethical standards should be clearly defined and made known to the members of the
SWF’s governing body(ies), management, and staff.
The duties and obligations of members of the Board of Guardians are detailed in the legislation together with
arrangements for the management of conflicts of interest. The legislation also includes details of the civil and
criminal penalties applying for breach of specific duties and obligations. Persons are eligible for appointment
to the Board of Guardians only if the responsible Ministers are satisfied the person has substantial experience
or expertise and professional credibility and significant standing in investing in financial assets, managing
investments in financial assets or corporate governance.
Staff of the Agency are employed under the Public Service Act 1999 and are bound by the Australian Public
Service Values and Code of Conduct. Details of these obligations are included in internal policies and
training activities.
www.apsc.gov.au/values/conductguidelines.htm
Principle 14
14. Dealing with third parties for the purpose of the SWF’s operational management should be based on
economic and financial grounds, and follow clear rules and procedures.
The approach to engaging third parties, including advisors and investment managers, by the Board of
Guardians and the Agency is outlined in a Statement of Investment Policies available on our website.
Engagement of third parties is based on economic and financial grounds.
The purchase of goods and services by the Agency is consistent with the Commonwealth Procurement
Guidelines and governed by clear internal policies and procedures to encourage value for money, open and
effective competition and fair dealing and ethics.
www.futurefund.gov.au/investment/how-we-invest/investment-policy-and-position-papers
Principle 15
15. SWF operations and activities in host countries should be conducted in compliance with all applicable
regulatory and disclosure requirements of the countries in which they operate.
The Board of Guardians requires that all investment activities are undertaken in accordance with applicable
regulatory and disclosure requirements. Detailed due diligence and reporting is in place to monitor
compliance. The legislation requires the Board of Guardians to act in a way that is unlikely to cause any
diminution of the Australian Government’s reputation in international financial markets.
Principle 16
16. The governance framework and objectives, as well as the manner in which the SWF’s management is
operationally independent from the owner, should be publicly disclosed.
The governance framework and objectives of the Board of Guardians and the Agency are set out in the
legislation and in public annual reports. The framework clearly establishes the independence and
accountability arrangements for each Fund, the Board of Guardians and the Agency.
In particular the Investment Mandate Directions cannot be changed by Government without consultation with
the Board of Guardians. Where the Board of Guardians provides input to any such consultation it must be
made public. The operations of the Board and the Agency are funded from the assets of the funds, meaning
that the organization is not reliant on appropriations from Government for its activities. Further, members of
the Board of Guardians are selected on the basis of their expertise and experience in the fields of investing,
investment management and corporate governance. A person is not eligible for appointment to the Board of
Guardians if they are an employee of the Commonwealth, an employee of a statutory authority of the
Commonwealth, an employee of a Commonwealth company or the holder of a full time office under a law of
the Commonwealth.
Principle 17
17. Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its
economic and financial orientation, so as to contribute to stability in international financial markets and
enhance trust in recipient countries.
An annual report and audited annual financial statements are tabled in Parliament and published via the
website. The organisation also issues public quarterly updates on performance and asset allocation and
routinely provides updates on its operations and the performance of the various funds during formal public
hearings before a Committee of the Senate.
www.futurefund.gov.au/investment/investment-performance/portfolio-updates
www.futurefund.gov.au/news-room
Pillar 3: Investment
Investment and Risk Management Framework.
Principle 18
18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance,
and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio
management principles.
18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of
leverage.
18.2. The investment policy should address the extent to which internal and/or external investment managers
are used, the range of their activities and authority, and the process by which they are selected and their
performance monitored.
18.3. A description of the investment policy of the SWF should be publicly disclosed.
A Statement of Investment Policies, published on the website as required by legislation, details the
investment strategy and risk tolerance of the Board of Guardians and its application of portfolio investment
principles. Annual reports, as well as regular public speeches and briefings, provide additional insight and
discussion of the investment strategy.
The Board is prohibited from borrowing under Section 23 of the Future Fund Act.
These documents and communication activities address matters relating to financial risk, leverage, the use of
and extent of the activities and authority of internal/external managers as well as the process for their
appointment and monitoring of their performance.
The policies and practices detailed by these documents and communications are consistent with the
obligations contained in the legislation.
Principle 19
19. The SWF’s investment decisions should aim to maximize risk-adjusted financial returns in a manner
consistent with its investment policy, and based on economic and financial grounds.
19.1. If investment decisions are subject to other than economic and financial considerations, these should be
clearly set out in the investment policy and be publicly disclosed.
19.2. The management of an SWF’s assets should be consistent with what is generally accepted as sound
asset management principles.
The Board of Guardians is obliged by legislation to seek to maximise risk-adjusted financial returns. Return
and risk parameters for each fund are detailed through Investment Mandate Directions created under relevant
legislation. The Board of Guardians is required to operate in a manner consistent with international best
practice for institutional investment.
The limited set of restrictions on the Board of Guardians’ investment activities, such as limits on the size of
stakes in Australian and foreign listed companies, are clearly expressed in the legislation. The approach to
consideration of environmental, social and governance matters, and to the universe of investments the Board
of Guardians considers, is detailed in the Statement of Investment policies and reflects the organisation’s
focus on acting as a prudent investor seeking to maximise risk adjusted returns.
Principle 20
20. The SWF should not seek or take advantage of privileged information or inappropriate influence by the
broader government in competing with private entities.
The Board of Guardians does not seek or have a right of access to privileged information from, or
inappropriate influence by, the Government in competing with private entities.
Under the statutory governance framework the Board of Guardians operates and makes decisions
independently of Government. Policies and processes are in place to restrict and coordinate engagement with
the Government in relation to matters concerning the Board of Guardians and Agency. Board members are
not permitted to be employees of the Commonwealth or to be holders of a full-time office under a law of the
Commonwealth. Agency staff are bound by the Australian Public Service Code of Conduct.
The Investment Mandate Directions also requires the Board of Guardians, when undertaking its investment
activities, to act in a way that is unlikely to cause any diminution of the Government’s reputation in
Australian and international financial markets.
Principle 21
21. SWFs view shareholder ownership rights as a fundamental element of their equity investments’ value. If
an SWF chooses to exercise its ownership rights, it should do so in a manner that is consistent with its
investment policy and protects the financial value of its investments. The SWF should publicly disclose its
general approach to voting securities of listed entities, including the key factors guiding its exercise of
ownership rights.
The Board of Guardians is required to have regard to international best practice for institutional investment in
determining its approach to corporate governance principles, including in relation to its voting policy.
Its approach to the exercise of ownership and voting rights is detailed in the Statement of Investment
Policies. The Board of Guardians is an active owner and exercises its voting rights in public listed companies
in Australia and overseas. A series of voting principles have been developed and published to communicate
the Board’s corporate governance expectations. The exercise of voting rights is supported by engagement
with companies where appropriate. The annual report discusses the application of this policy including
reporting in aggregate of how voting rights have been exercised. A detailed report on the exercise of voting
rights in Australian listed entities is published annually.
www.futurefund.gov.au/investment/how-we-invest/esg
Principle 22
22. The SWF should have a framework that identifies, assesses, and manages the risks of its operations.
22.1. The risk management framework should include reliable information and timely reporting systems,
which should enable the adequate monitoring and management of relevant risks within acceptable parameters
and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an
independent audit function.
22.2. The general approach to the SWF’s risk management framework should be publicly disclosed.
Principle 23
23. The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should
be measured and reported to the owner according to clearly defined principles or standards.
The assets and investment performance of the funds, including performance against the benchmarks
established in the Investment Mandate Directions, are reported to the responsible Ministers and publicly
through quarterly portfolio updates and an annual report (including audited financial statements) which is
tabled in Parliament.
Principle 24
24. A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of
the SWF.
The Board of Guardians undertakes regular reviews of its implementation of the Santiago Principles. The
Board of Guardians contributes to IFSWF reports on the application of the Santiago Principles.
The Board and Agency also regularly participate in workshops and discussions with other members of the
IFSWF on best practice approaches to the investment and governance of SWFs.
www.ifswf.org

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4.1. The source of SWF funding should be publicly disclosed.

Investment and Risk Management Framework.

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