HONG KONG -- The Government of Hong Kong Special Administrative Region announced Friday the establishment of the Future Fund with effect from January 1, 2016, with a view to securing higher investment returns for the fiscal reserves.

"The Future Fund will be established administratively and will remain an integral part of the fiscal reserves. It will have an initial endowment of HK$219.7 billion ($28.35 billion) notionally held against the Land Fund. Thereafter, the government may provide periodic top-ups for the Future Fund," a government spokesman said.

The Future Fund will be placed with the Exchange Fund for an initial 10-year investment period.

About 50 percent of the Future Fund will be set aside for incremental placement with the Exchange Fund's Long-Term Growth Portfolio to be built up gradually over a period of around three years, which includes private equities and investments in properties outside Hong Kong.

The rest will be placed with the Exchange Fund's Investment Portfolio or other investment assets.

"In line with the long-term investment objectives, the investment returns arising from the Future Fund during the course of the placement shall be retained by the Exchange Fund for reinvestment. Interest on the Future Fund placement with the Exchange Fund shall be due for payment to the government upon completion of the placement period," the spokesman added.

"As a long-term savings scheme, we hope that the Future Fund can bring about more aggressive returns to support our increasing spending needs in future. It is not a total solution but would help alleviate the pressure of our future generations," the spokesman added.