Future Fund: The Backbone of Australia’s Economy

Following the 2004 federal election in Australia, the idea of a Future Fund was born. By May of 2006, the first contribution of A$18 billion was deposited into the Future Fund by the government in the hopes of gaining revenue which would pay out the Commonwealth’s unfunded liabilities. In doing so, the sovereign fund’s aim was to alleviate the financial pressure of an ageing population that was starting to build up on the government. Having navigated the pitfalls of the recession and Covid-19, the sovereign fund now has assets under management of around A$243 billion and seems well on the right track to being the financial backbone for the commonwealth in the long-term.

Future Fund stresses their position as a long-term investor that has one single purpose and client: the Australian Government. The asset fund ambitiously aims to achieve investment returns of 4.5% to 5% per annum above inflation. Following on from our discussion with Nicolai Tagen from the Norwegian Sovereign Fund in Money Maze’s most recent episode, we were delighted to speak with the Future Fund’s Deputy CIO Ben Samild. He shares invaluable insights into who they are as a company, and gives answers to how these investment returns are so impressively attained, especially in a nation like Australia.

Whilst Future fund has no say in which projects they embark on, they nevertheless do so with great success. The company invests in an array of assets, ranging from the DisabilityCare Australia Fund to the Torres Strait Islander Land and Sea Future Fund. Each fund is unique and has its own investment strategy which is expertly overseen by the Future Fund’s Board of Guardians. The fund merits praise for its diverse portfolio since they effectively balance the risk aspects of each investment in order to best maximise returns and thus revenue for the Commonwealth. Future Fund has no doubt developed a stellar reputation for what they do.

Moving forward, the next focal point will inevitably be ESG sustainability, and how the Future Fund can engage with such portfolio firms which are still financially valuable for their business model. In our discussion with Ben, he describes the sustainability environment as the ‘biggest capital event of our lifetime’, and recognises how they as a company have a responsibility to be a part of this important movement. This, however, is by no means an easy task. It will be the first time in the Future Fund’s history where they will have had to remove a vast chunk of operating capital stock which has great yield into investments and may likely not have the same output in a 10–20 year timeframe. This is an area of significant importance and interest as we, from an outsider’s perspective, witness how the Future Fund performs in this new wake of investment.

By James Reed, who has completed Work Experience at the MMP. James is a first year Classics student at Durham University. He has experience as a private tutor, a literacy tutor, and a teaching assistant.

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