Higher Education Endowment Fund Investment Mandate Directions 2007 (No. 1) (Cth)

Higher Education Endowment Fund Investment Mandate Directions 2007 (No. 1)

We, PETER HOWARD COSTELLO, Treasurer, and NICHOLAS HUGH MINCHIN, Minister for Finance and Administration, give these Directions under subsection 24(1) of the Higher Education Endowment Fund Act 2007.

Dated 12 October 2007

Peter Howard Costello   Nicholas Hugh Minchin

Treasurer   Minister for Finance and Administration

Contents

PART 1      PRELIMINARY

PART 2      DIRECTIONS

Part 1      Preliminary

1. Name of Directions

These Directions are the Higher Education Endowment Fund Investment Mandate Directions 2007 (No. 1).

1. Commencement

These Directions commence on 29 October 2007.

1. Definitions

In these Directions:

Act means the Higher Education Endowment Fund Act 2007.

Authorised deposit-taking institution means:

(a)    the Reserve Bank of Australia; and

(b) a body corporate in relation to which an authority under subsection 9(3) of the Banking Act 1959 is in force.

Board means the Future Fund Board of Guardians.

Fund means the Higher Education Endowment Fund.

Responsible Ministers has the same meaning as in the Act.

1. Objective of these Directions

The Higher Education Endowment Fund will enhance the Commonwealth’s ability to make grants of financial assistance to eligible higher education institutions in relation to capital expenditure and research facilities.

These Directions are given under subsection 24(1) of the Act to articulate the Government’s expectations for how the Fund will be invested and managed by the Future Fund Board of Guardians until such time as directions are made for investing and managing the Fund over the longer term.

In giving these Directions, subsection 24(3) requires that the responsible Ministers must have regard to various matters, including matters that we, as the responsible Ministers, consider relevant. Pending the development of a longer-term investment mandate, we consider it prudent to confine investments to assets that would maximise returns, subject to a negligible chance of capital loss, to facilitate a transition to a longer-term mandate at an appropriate time. In doing so, we recognise that the Board’s obligation to seek to achieve the objectives set out in subsection 24(12) of the Act is subject to its obligation to take all reasonable steps to comply with this mandate.

Part 2      Directions

1. Limits on investment

(1)     The Board is to confine investments to assets that would maximise returns, subject to a negligible chance of capital loss, such as:

(a)securities of the Commonwealth, or of a State or Territory; and

(b)securities guaranteed by the Commonwealth, a State or a Territory; and

(c)a deposit with an authorised deposit-taking institution, including a deposit evidenced by a certificate of deposit; and

(d)a bill of exchange accepted or endorsed only by an authorised deposit-taking institution.

(2)     The Board is to make decisions on investment taking into consideration the Government’s intention to issue further investment directions in the future.

1. Benchmark return

Over the period that these Directions are in operation, the Board is to adopt a benchmark return that is consistent with the type of assets listed in subsection 5(1).