The Australian Government has directed the Future Fund to consider investments in housing and the green energy transition, provided these align with its primary objective of maximising returns. This directive represents the most significant change in the fund's 18-year history.
The government has also committed not to draw down on the fund's holdings until at least the 2032-33 fiscal year, offering medium-term stability to the $230 billion independently managed sovereign wealth fund.
Finance Minister Katy Gallagher and Treasurer Jim Chalmers announced the new investment mandate, which maintains the fund's target of achieving returns of 4 to 5 percentage points above inflation annually.
The mandate specifies that investments in areas such as housing, energy transition and security infrastructure should be pursued “where possible, appropriate and consistent with strong returns”.
Newly appointed chair of the Future Fund and former Labor minister Greg Combet welcomed the announcement, saying it reflects "confidence in the work we do" and allows the fund to focus on delivering returns while expanding its portfolio in energy and infrastructure investments.
Established in 2006 with an initial injection of $60.5 billion, the Future Fund has grown to $230 billion, approximately one-tenth the size of the Australian economy.
Over the past decade, it has achieved an average annual return of 8.3%.
The fund was originally set up to pay for public service pensions but has also been viewed as a means to benefit future taxpayers amid an ageing population and increasing budget demands.
Not without criticism
However, the change has drawn criticism from the fund's creator and former chair Peter Costello, who has previously warned that diluting the fund's strict focus on financial returns could be “the beginning of the end”.
Deputy Opposition Leader Sussan Ley also expressed concerns, stating, “The best way for the Future Fund to maximise its return for all Australians is for it to be left alone, to get on with the job.”
The government's directive aligns with Treasurer Chalmers's broader approach to directing public and private capital towards social objectives, a concept he has referred to as “values-based capitalism.”
The new mandate represents a shift towards integrating national priorities into the fund's investment strategy.