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DisabilityCare Australia Fund

Mandate: Australian bank bill swap rate plus 0.3% per annum calculated on a rolling 12-month basis while minimising the probability of capital loss.

Earnings for 2018-19: $0.3 billion

Return 2018-19: 2.2%

Earnings since inception: $0.8 billion

Return since inception: 2.4% per annum

Cash flow history at 30 June 2019:





$18.6 billion

$0.8 billion

$3.1 billion

$16.4 billion

Interpreting the Investment Mandate

The DisabilityCare Australia Fund’s Investment Mandate was issued to the Board by the responsible Ministers in July 2014 and is available at Appendix B and on our website.

In summary, the Mandate:

  • benchmarks returns against the Australian three-month bank bill swap rate +0.3% per annum calculated on a rolling 12-month net-of-fee basis
  • requires us to invest in such a way as to minimise the probability of capital losses over a 12-month horizon
  • requires us to act in a way that:
    • is consistent with international best practice for institutional investment
    • minimises the impact on the Australian financial markets
    • is unlikely to cause a diminution of the Australian Government’s reputation in financial markets
  • allows for a review of the Mandate, including the benchmark return, by the responsible Ministers in consultation with the Board of Guardians.

Risk positioning

We are required to invest the assets of the Fund in such a way as to pursue the benchmark return while minimising the probability of capital losses over a 12-month horizon.

The Government has indicated that it expects to make additional capital contributions to the Fund as well as withdrawals to reimburse States, Territories and the Commonwealth for expenditure incurred in relation to the National Disability Insurance Scheme. We continue to focus on maintaining additional liquidity to help manage transaction costs and the timing of cash flows as they are confirmed.

Investment review


The DisabilityCare Australia Fund is designed to fund cash flows related to National Disability Insurance Scheme spending. Accordingly, we invest the Fund to provide an ample liquidity buffer to support these outflows.

Our core strategy is to invest in a combination of short-and medium-term domestic and global debt instruments, providing some yield above base cash rates while maintaining a high quality, liquid and defensive profile.


Early in the life of the Fund, before withdrawals were expected, we positioned the portfolio into ​​somewhat longer-maturity high quality credit instruments. As the expected duration of capital has fallen, we have taken steps to increase available liquidity and reduce risk. This has included broadening the active management strategy beyond a credit spread emphasis and lowering the level of credit spread duration risk.

Strategy exposure at 30 June 2019



Investment grade corporate


Mortgage backed securities


Others securitised


Cash and other


Region exposure at 30 June 2019





United States of America


Europe (ex UK)


United Kingdom




Developed (other)





In 2018-19 the DisabilityCare Australia Fund generated an investment return of 2.2%, marginally below its benchmark of 2.3%.

The Fund received capital contributions of $4.3 billion from the Australian Government in 2018-19. The value of the Fund was $16.4 billion at 30 June 2019.


Cost management

We continue to closely monitor costs in the asset classes in which we invest, reviewing 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 DisabilityCare Australia Fund.

The Fund’s direct costs over the last three years are shown below. This includes the direct cost ratio (direct costs divided by the average net assets for the financial year).

Changes in costs over the years reflect changes in the size of the Fund and the investment activity undertaken during the year.

Summary of direct costs and direct cost ratio




Direct costs

$4.7 million

$7.0 million

$10.8 million

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.


Amount debited 2016-17

Amount debited 2017-18

Amount debited 2018-19

Contracts with investment managers




Board remuneration and allowances




Agency remuneration and allowances




Consultants and advisers to the Board and Agency




Agency operations





All costs reported under section 81 of the Future Fund Act 2006 are reported on a cash basis, whereas the direct costs in the above table include accruals.