The federal government has lowered the Future Fund’s long-term target return by 50 basis points, reflecting “changed global investment market conditions”.
Federal Treasurer Scott Morrison has issued a new investment mandate for the Future Fund.
The Future Fund Investment Mandate Direction 2017, effective from 1 July 2017, directs the Future Fund board of guardians to adopt an average return of between CPI+ 4 per cent and CPI+ 5 per cent.
The new mandate revokes former Treasurer Joe Hockey's 2014 mandate, which directs the board to pursue a target return of between CPI+ 4.5 per cent and CPI+ 5.5 per cent.
The revised investment mandate reflects "changed global investment market conditions and outlook", said Mr Morrison.
"Since its inception the Future Fund’s returns have grown to exceed the previous long-term target rate," said the Treasurer.
"But actuarial analysis indicates global investment market conditions may make it increasingly difficult for the Future Fund board of guardians to achieve current returns without taking on excessive risk."
The Future Fund has achieved returns of 7.7 per cent per annum since its establishment in 2006.
"The government supports the view that maximising returns must be balanced against the need to minimise the probability of losses to protect the taxpayer’s investment in the fund," Mr Morrison said.