Mandate: Consumer Price Index plus 2.0% to 3.0% per annum over the long term with an
acceptable but not excessive level of risk.

Return 2018-2019: 0.9%

Cash flow history at 30 June 2019

Interpreting the Investment Mandate

The Aboriginal and Torres Strait Islander Land and Sea Future Fund (ATSILS Fund) was established in February 2019 to enhance the Commonwealth’s ability to make payments to the Indigenous Land and Sea Corporation.

The ATSILS Fund was established with a capital contribution of $2 billion transferred from the Aboriginal and Torres Strait Islander Land Account.

The Fund’s Investment Mandate requires the Board to target an average return, net of costs, of at least the Consumer Price Index + 2.0% to 3.0% pa over the long term while taking an acceptable but not excessive level of risk.

The Board of Guardians is in the process of developing a long-term investment strategy for the ATSILS Fund.

Investment review and risk positioning

While the Board develops a long-term investment strategy for the ATSILS Fund, it remains invested in a combination of cash and short-term deposit instruments.

During the initial transition period, as the Board of Guardians develops a long-term strategic asset allocation, the Australian Government anticipates a return lower than the benchmark return.

Performance

The ATSILS Fund commenced on 1 February 2019.

At 30 June 2019 the Fund had generated a return of 0.9% since inception and was valued at $2.0 billion.

Costs

Cost management

We closely monitor costs in the asset classes in which we invest, and review the expected returns and costs of implementing the investment strategy on an ongoing basis. In negotiating fee arrangements, we focus on securing arrangements that offer value for money for skill and resources applied, that are competitive relative to other managers in the sector and that provide for strong alignment between managers and our organisation.

All returns reported are net of costs.

Direct costs

Direct costs, previously reported as management costs and transaction and operational costs, reflect all directly incurred costs associated with the management of the ATSILS Fund.

The ATSILS Fund’s direct costs for 2018-19 are shown below. This includes the direct cost ratio (direct costs divided by the average net assets for the financial year).

Summary of direct costs and direct cost ratio

Cost disclosures under section 81 of the Future Fund Act 2006

Under its statutory arrangements the Board also reports costs in accordance with section 81
of the Future Fund Act 2006.