{"id":"F2019L01510","name":"Future Drought Fund Investment Mandate Direction 2019","slug":"future-drought-fund-investment-mandate-direction-2019","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":440306,"registerId":"F2019L01510-fast-fetch-1775955990080","compilationNumber":null,"startDate":"2026-04-12","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Future Drought Fund Investment Mandate Direction 2019","content":"---\nmeta-content-style-type: text/css\nmeta-content-type: application/xhtml+xml; charset=utf-8\n---\n\n?xml version=\"1.0\" encoding=\"utf-8\" standalone=\"no\"?>\n\n![Commonwealth Coat of Arms of Australia](image.001.jpeg)\n\n \n\nFuture Drought Fund Investment Mandate Direction 2019\n\nWe, JOSH FRYDENBERG, Treasurer, and MATHIAS HUBERT PAUL CORMANN, Minister for Finance, give this Direction under section 41(1) of the Future Drought Fund Act 2019.\n\nDated 15th November 2019  \n\nJOSH FRYDENBERG   MATHIAS HUBERT PAUL CORMANN\n\nTreasurer Minister for Finance\n\n \n\n \n\n \n\nContents\n\nPart 1 Preliminary\n\n1  Name\n\n2  Commencement\n\n3  Authority\n\n4  Definitions\n\nPart 2 Direction\n\n5  Object\n\n6  Benchmark return and acceptable level of risk\n\n7  Board must consider impacts from its investment strategy\n\n8  Corporate governance\n\n9  Reporting\n\n \n\n \n\nPart 1 Preliminary\n\n1  Name\n\n  This Direction is the Future Drought Fund Investment Mandate Direction 2019.\n\n2  Commencement\n\n  This Direction commences on the 15th day after it is given to the Board.\n\nNote 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.\n\nNote 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.\n\n3  Authority\n\n  This Direction is made under the Future Drought Fund Act 2019.\n\n4  Definitions\n\n  In this Direction:\n\nAct means the Future Drought Fund Act 2019.\n\nBoard means the Future Fund Board of Guardians established by section 34 of the Future Fund Act 2006.\n\nConsumer 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.\n\nFund means the Future Drought Fund established by the Act.\n\nFuture Fund Act means the Future Fund Act 2006.\n\nResponsible Ministers has the same meaning as in the Act.\n\n\n\n\nPart 2 Direction\n\n5  Object\n\n1.     The object of this Direction is to give guidance to the Board in relation to its investment strategy for the Fund.\n2.     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 42 of the Act, and subject to its obligations under the Act and any directions given by the Responsible Ministers under subsection 41(1) of the Act.             \n3.     This Direction is given under subsection 41(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.\n\n\n6  Benchmark return and acceptable level of risk\n\n1.     The Board is to adopt an average return over the long term of at least the Consumer Price Index + 2.0 to + 3.0 per cent per annum, net of costs, as the benchmark return on the Fund.\n2.     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.\n\n\n  Acceptable level of risk\n\n1.     In constructing a portfolio, the Board:\n\n\n (a)  must determine an acceptable but not excessive level of risk for the Fund; and\n\n (b)  must have regard to its obligations under section 18 of the Act.\n\n1.     The Government acknowledges that targeting the long-term benchmark return implies accepting the risk of capital losses, in adverse markets, that may be 15‑20 per cent of the portfolio over a three-year period.\n\n\n7  Board must consider impacts from its investment strategy\n\n1.     In undertaking its investment activities, the Board must act in a way that:\n\n\n (a)  minimises the potential to effect any abnormal change in the volatility or efficient operation of Australian financial markets; and\n\n (b)  is unlikely to cause any diminution of the Australian Government’s reputation in Australian and international financial markets.\n\n8  Corporate governance\n\n1.     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.\n\n\n9  Reporting\n\nThe Board must publish quarterly portfolio updates on its website showing:\n\n1.     actual returns against benchmark return; and\n2.     asset allocations by category.\n\n\n \n","sortOrder":0}],"analysis":{"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"},"flash_summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"The Direction clarifies and constrains how the Board should invest the Fund under the statutory power in s41(1); it sets performance targets, risk guidance and reporting obligations but does not alter the Fund’s statutory objects or create new statutory powers beyond the Act (ss3,5,6,9)."},"complexity_factors":["Statutory basis and limits: Direction issued under s41(1) of the Future Drought Fund Act, so it guides rather than amends the Act (s3,5).","Prescriptive benchmark: specifies CPI + 2.0–3.0% p.a. net of costs as the long‑term target (s6.1).","Explicit risk tolerance: acknowledges potential 15–20% portfolio losses over three years, requiring the Board to define an 'acceptable but not excessive' level of risk and have regard to s18 of the Act (s6. Acceptable level of risk).","Market and reputational constraints: requires investment conduct that minimises abnormal volatility and reputational harm (s7).","Governance obligations: mandates regard to international best practice and voting policy for corporate governance (s8).","Reporting requirements: quarterly public reporting of actual returns against benchmark and asset allocations (s9).","Transitional allowance: permits lower returns during initial transition while strategic asset allocation is developed (s6.2)."],"plain_english_summary":"This Direction tells the Future Fund Board of Guardians how to manage the Future Drought Fund’s investments. It requires the Board to seek long‑term returns of Consumer Price Index + 2–3% per annum (net of costs), accept short‑term capital loss risk, follow institutional governance/voting best practice, avoid disrupting markets or government reputation, and publish quarterly portfolio updates (ss5–6,7–9). The Board makes allocation choices; investment outcomes directly affect the Fund’s ability to finance drought programs (ss5,6)."},"kimi_summary":{"content_quality":"ok","complexity_score":2,"scope_assessment":{"changed":false,"description":"The Direction remains tightly focused on its original purpose: providing investment guidance for the Future Drought Fund. It does not expand beyond articulating risk/return expectations, governance standards, and reporting requirements for the Board."},"complexity_factors":["Very short document (only 9 sections across 2 Parts)","Only 5 defined terms in section 4","Minimal cross-referencing (only references to the parent Act and Future Fund Act)","Straightforward conditional logic with clear obligations ('must') and permissions","No nested exceptions or complex procedural requirements","Simple structure: preliminary matters followed by substantive directions"],"plain_english_summary":"The Direction tells the Future Fund Board of Guardians how to invest the Future Drought Fund: pursue long‑term growth using institutional best practice, target returns of CPI + 2–3% after costs (with lower start‑up expectations), and accept measured risk—including possible 15–20% drawdowns over stressed three‑year periods. The Board must avoid market disruption, follow strong governance and voting practices, and publish quarterly performance and asset disclosures. It primarily binds the Board and matters to all Australians who rely on drought resilience funding."}},"importantCases":[],"_links":{"self":"/api/acts/future-drought-fund-investment-mandate-direction-2019","history":"/api/acts/future-drought-fund-investment-mandate-direction-2019/history","analysis":"/api/acts/future-drought-fund-investment-mandate-direction-2019/analysis","conflicts":"/api/acts/future-drought-fund-investment-mandate-direction-2019/conflicts","importantCases":"/api/acts/future-drought-fund-investment-mandate-direction-2019/important-cases","documents":"/api/acts/future-drought-fund-investment-mandate-direction-2019/documents"}}