Policy Document No. P2

Policy Statement: Trust funds investment

Key Words

• Investment Policy
• Trust Funds

1. Intent

The University holds specific trust funds which are classified as legal trusts. Subject to any terms of the instrument creating a specific trust, a medium to longer-term investment horizon applies to these funds. It is necessary to ensure that the capital component of trust funds is maintained in real terms and in addition, a reasonable return is available for distribution for trust purposes, over a 3 – 5 year period.

2. Scope

This policy applies to Council, the Finance Committee, Investment Managers appointed to manage funds on behalf of the University, Investment Consultants appointed to provide expert and independent advice in regard to investment strategy and management, and the Executive Director, Finance & Administration.

3. Objective(s)

Objectives of this policy are to:

• detail the authority delegated by Council; and
• provide guidelines for the composition of trust fund investments.

4. Definitions and Acronyms

5. Policy Owner

As Council approves the policy on the recommendation of the Finance Committee, it is the policy owner.

6. Policy Provisions

6.1 Authority Delegated by Council

Council delegates authority as follows:

• Finance Committee is authorised to appoint one or more Investment Managers to manage funds on behalf of the University, and an investment consultant to provide expert and independent advice in regard to investment strategy and management.
• Investment Managers are authorised to invest in securities as defined in this policy subject to:
  • the conditions of the agreement signed between the University and the Investment Manager;
  • the specific directions by the Executive Director Finance & Administration concerning University liquidity requirements; and
  • monthly review of performance by the Finance Committee
• The Finance Committee will determine the level of assets to be held from time to time, on the advice of the Investment Consultant and advise Council with respect to Trust Fund Investments.
• The Executive Director Finance & Administration is authorised to re-invest surplus funds, subject to the provisions of this Investment Policy.
• The Executive Director Finance & Administration is authorised to withdraw invested funds to the extent necessary to meet University liquidity requirements.
• The Executive Director Finance & Administration is authorised to withdraw and re-invest funds to the extent necessary to implement written advice from the Investment Consultant, provided that the asset allocation to individual sectors remains within the ranges specified in this policy.
• The Executive Director Finance & Administration must report to Finance Committee any withdrawal or re-investment made under clause 6.
• The Executive Director Finance & Administration is authorised to amend the benchmark index and schedules A & B of this policy to reflect minuted decisions made by Finance Committee.

6.2 Composition of Trust Fund Investments

Consistent with the nature of trust funds and the investment objectives, broad allowable asset allocation ranges are shown in Schedule A.

6.2.1 Trust Funds

These funds are managed on a 1-3 year investment horizon.

The investment objectives for the funds are:

• to produce a positive after fees return over each calendar year;
• over rolling three year periods, achieve an average annual after fees return at least equal to the average increase in Headline CPI plus 2.0%;
• over rolling three year periods, achieve an average after fees annual return that is at least equal to the return on the UBS Bank Bill Index; and
• over rolling three year periods achieve an average after fees annual return that is at least equal to the benchmark returns specified below

• to limit the probability of a negative return for the Trust fund to be no more than 1 in every 15 years.

The management is undertaken in a manner that minimises the risk of the investment producing a negative return over any financial year. Whilst this is the investment objective, it is recognised that in extreme market conditions, a negative return is possible.

6.3 Approved Investments

Investments approved by the Finance Committee are shown in Schedule B.

7. Responsibilities

8. Policy History

Schedule A: Trust Fund – Asset Allocation Ranges

Schedule B: Trust Fund – Approved Investments

Approved by Council on 8 April 2005, reviewed and last amended 24 August 2007.

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