Disaster Ready Fund Investment Mandate Direction 2020

Disaster Ready Fund Investment Mandate Direction 2020

made under subsection 39(1) of the

Disaster Ready Fund Act 2019

Compilation No. 1

Compilation date: 1 March 2023

Includes amendments up to: F2023L00128

About this compilation

This compilation

This is a compilation of the Disaster Ready Fund Investment Mandate Direction 2020 that shows the text of the law as amended and in force on 1 March 2023 (the compilation date).

The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law.

Application, saving and transitional provisions for provisions and amendments

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law.

Self‑repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

Part 1 Preliminary

1  Name

  This Direction is the Disaster Ready Fund Investment Mandate Direction 2020.

2  Commencement

  This Direction commences on the 15th day after it is given to the Board.

Note 1: Section 42 (disallowance) of the Legislation Act 2003 does not apply to the direction—see regulations made for the purposes of paragraph 44(2)(b) of that Act.

Note 2: Part 4 of Chapter 3 (sunsetting) of the Legislation Act 2003 does not apply to the direction—see regulations made for the purposes of paragraph 54(2)(b) of that Act.

3  Authority

  This Direction is in force under the Disaster Ready Fund Act 2019.

4  Definitions

  In this Direction:

Act means the Disaster Ready Fund Act 2019.

Board means the Future Fund Board of Guardians established by section 34 of the Future Fund Act 2006.

Consumer Price Index means the All Groups Consumer Price Index number, being the weighted average of the 8 capital cities, published by the Australian Bureau of Statistics.

Fund means the Disaster Ready Fund established by the Act.

Future Fund Act means the Future Fund Act 2006.

Responsible Ministers has the same meaning as in the Act.

Part 2 Direction

5  Object

(1)    The object of this Direction is to give guidance to the Board in relation to its investment strategy for the Fund.

(2)    The Board must seek to maximise the return earned on the Fund over the long term, consistent with international best practice for institutional investment, pursuant to section 40 of the Act, and subject to its obligations under the Act and any directions given by the Responsible Ministers under subsection 39(1) of the Act.             

(3)    This Direction is given under subsection 39(1) of the Act to articulate the Government’s expectations for how the Fund will be invested and managed by the Board. This sets out matters of risk and return for the Fund.

6  Benchmark return and acceptable level of risk

(1)    The Board is to adopt an average return over the long term of at least the Consumer Price Index + 2.0 per cent to + 3.0 per cent per annum, net of costs, as the benchmark return on the Fund.

(2)    During the initial transition period, as the Board develops a long-term strategic asset allocation, the Government anticipates a return lower than the benchmark return.

  Acceptable level of risk

(1)    In constructing a portfolio, the Board:

 (a)  must determine an acceptable but not excessive level of risk for the Fund; and

 (b)  must have regard to its obligations under section 17 of the Act.

(2)    The Government acknowledges that targeting the long-term benchmark return implies accepting the risk of capital losses, in adverse markets, that may be 15 per cent to 20 per cent of the portfolio over a three-year period.

7  Board must consider impacts from its investment strategy

(1)    In undertaking its investment activities, the Board must act in a way that:

 (a)  minimises the potential to effect any abnormal change in the volatility or efficient operation of Australian financial markets; and

 (b)  is unlikely to cause any diminution of the Australian Government’s reputation in Australian and international financial markets.

8  Corporate governance

(1)    The Board must have regard to international best practice for institutional investment in determining its approach to corporate governance principles, including in relation to its voting policy.

9  Reporting

The Board must publish quarterly portfolio updates on its website showing:

(a)    actual returns against benchmark return; and

(b)    asset allocations by category.

Endnotes

Endnote 1—About the endnotes

The endnotes provide information about this compilation and the compiled law.

The following endnotes are included in every compilation:

Endnote 1—About the endnotes

Endnote 2—Abbreviation key

Endnote 3—Legislation history

Endnote 4—Amendment history

Abbreviation key—Endnote 2

The abbreviation key sets out abbreviations that may be used in the endnotes.

Legislation history and amendment history—Endnotes 3 and 4

Amending laws are annotated in the legislation history and amendment history.

The legislation history in endnote 3 provides information about each law that has amended (or will amend) the compiled law. The information includes commencement details for amending laws and details of any application, saving or transitional provisions that are not included in this compilation.

The amendment history in endnote 4 provides information about amendments at the provision (generally section or equivalent) level. It also includes information about any provision of the compiled law that has been repealed in accordance with a provision of the law.

Misdescribed amendments

A misdescribed amendment is an amendment that does not accurately describe how an amendment is to be made. If, despite the misdescription, the amendment can be given effect as intended, the amendment can be incorporated through an editorial change made under section 15V of the Legislation Act 2003.

If a misdescribed amendment cannot be given effect as intended, the amendment is not incorporated and “(md not incorp)” is added to the amendment history.

Endnote 2—Abbreviation key

Endnote 3—Legislation history

Endnote 4—Amendment history