6Benchmark return and acceptable level of risk

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.