1. Investment Objectives
The investment objective of the Fund is to generate total returns (capital and income), that exceed the outgoings of the Fund, and increase the real capital value of the Fund over time. The Fund aims to achieve a real return of 4.0% p.a. over the medium term (5-7 years) after allowing for inflation and Investment Manager costs.
The University recognises that short term risks may arise from the potential of the Fund to experience a shortfall in the income required to meet expected cash outflows. To offset this, the Fund should maintain sufficient liquidity, taking into account the expected cash flows and costs.
Prudent asset class diversification should be employed to reduce the likelihood of the Fund generating negative returns in a particular year. Appropriate diversification of fund managers and individual security selection will be undertaken to offset investment risk. The Fund’s investments should be selected with the aim of limiting the chance of a negative return (in any one year) to once every six years.
1.3. Cash Flows
An objective of the Fund’s investment is to generate sufficient income to cover expected outgoings, determined on an annual basis.
2. Investment Manager
The Investment Committee may appoint up to two Investment Manager(s) to assist with the investment and management of the Fund. In such an event, the University, subject to the agreement of the Finance Committee, may enter into an agreement with the Investment Manager(s), directing the Investment Manager to manage the Fund according to the Investment Mandate set out in this Policy.
An Investment Manager must:
- hold an appropriate Financial Services Licence
- have professional indemnity insurance cover, and provide evidence of it upon request; comply with investment requirements imposed by Australian and ACT laws;
- invest in assets in the name of the University and manage the Fund on behalf of the Investment Committee, including sourcing, and making suitable investments in accordance with the Policy;
- keep the Fund under review, including making full or partial realisation of, or exit from investments, and to confer at regular intervals with the Investment Committee regarding the investment management of the Fund;
- exercise all due diligence and vigilance in carrying out the Investment Manager’s functions, powers and duties under the Policy; and
- advise the Investment Committee of any breaches of the Investment Mandate and any material matters relating to the Investment Manager that in the opinion of the Investment Manager, should be disclosed to the Investment Committee.
If there are two Investment Managers appointed and both present the same investment opportunity to the University, the University will invest with the Investment Manager who first discussed the opportunity with the University, unless there is a compelling reason not to.
2.1. Investment Manager Performance
The performance of an Investment Manager is to be reviewed on an annual basis. In assessing the Investment Manager’s performance, consideration will be given to the following:
3. Investment Guidelines
3.1. Prudent Person Standard
- proactive approach to investment opportunities; value adding customer service;
- flexible, accurate and timely reporting; and
- and investment performance compared with benchmarks.The University recognises that short-term fluctuations may cause variations in performance and intends to evaluate the Investment Manager’s performance relative to their peers and from a medium-term perspective.
Prudence is to be used by the Investment Committee when overseeing the overall portfolio. Investments will be managed with the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons. This includes having in place appropriate reporting requirements that ensure the Fund investments are being reviewed and overseen regularly.
The Investment Committee is to oversee the investment portfolio of Fund and ensure that investments are not speculative, but for investment in the spirit of, and in accordance with the Policy. They will consider both the risk and return parameters of the Policy when advising on investment decisions. The Investment Committee will endeavour to ensure that the University avoids any transactions that might harm its reputation.
The Finance Committee will ensure that the Investment Committee has the appropriate mix of skills and experience to fulfil its obligations under this prudent person standard.
3.2. Authorised Asset Classes and Investments
Only investments in the following investment holdings are permitted:
Cash Management Trusts/investments with Australian licensed and regulated banks and deposit taking institutions with no less than an AA- credit rating
Term deposits with maturities less than 90 days
3.2.2. Fixed Interest
Direct Hybrid Securities
Direct Government and Corporate bonds
Term deposits with maturities greater than 90 days
Managed fixed interest products
3.2.3. Domestic Equities
Managed domestic equities products
Listed Investment Companies Exchange Traded Funds
Listed Real Estate Investment Trusts (REITs)
3.2.4. International Equities
Exchange Traded Funds
Managed international equities products
3.2.5. Property and Infrastructure
Managed REIT products or Managed Property Funds, both global or domestic
Listed Infrastructure assets both global or domestic
Managed Infrastructure or infrastructure products, both global or domestic
3.2.6. Alternative Investments
Managed alternative asset products relating to strategies such as long/short equity, private equity, currency, unlisted property, direct infrastructure, mezzanine finance, distressed debt, hedge funds, catastrophe bonds and commodities
3.3. Asset Allocation Considerations
The following factors are to be considered when determining the asset allocation for the Fund:
- need for sufficient liquidity;
- potential impact of inflation, requiring an exposure to growth assets in order to maintain the real capital value of the Fund over the long term; and
- use of asset allocation bands and tactical asset allocation, to provide for changes in the investment environment.
The actual allocation to cash may exceed the upper range for short periods of time as new cash inflows into the Fund are processed.
The asset allocation parameters are designed to reflect a balanced portfolio. The Investment Manager will provide annually, the proposed target strategic allocation within the range outlined in the table below. Performance against this will be reviewed quarterly.
||0% to 25%
|Fixed Interest Domestic
||5% to 50%
|Fixed Interest Global
||5% to 40%
||15% to 50%
||10% to 50%
|Property / Infrastructure
||5% to 20%
||0% to 30%
Note: some property and infrastructure assets are held in asset classes other than Property/Infrastructure.
3.4. Investment Restrictions
There should be no investment in fixed interest investments where the issuer rating is below Investment Grade BBB (minus) rating. Furthermore, the total exposure to global equities, domestic equities and alternative assets (growth assets) shall not exceed 85% of the portfolio investments of the Fund.
The University needs to remain alert to its taxation standing and be prepared to alter investment arrangements should a change occur.
4. Operational Guidelines
The Investment Committee, as an established sub-committee of Finance Committee is an advisory committee to University management.
4.2. Delegated Authorities
With respect to Investment Financial Delegations, refer to the University of Canberra Delegations of Authority Policy and Schedule, F.9.1 and F.9.2 (effective 13 January 2020).
The Investment Manager shall manage the Fund on behalf of the Investment Committee, including sourcing and recommending suitable investments in accordance with the Policy. The Investment Manager is instructed to inform the University’s Chief Finance Officer of any investment recommendations and may only execute the transactions with the approval of the Chief Financial Officer.
4.3. Conflicts of Interest
Investment Committee members shall refrain from personal activities that would conflict with the proper execution and management of the University’s investment portfolio. This Policy requires officers to disclose any conflict of interest to the Chief Finance Officer. Independent advisers are also to declare that they have no actual or perceived conflicts of interest.. Independent advisers are also to declare that they have no actual or perceived conflicts of interest.
The following guiding principles will apply to voting:
5. Risk Management
- Voting as a right of a shareholder of an investment will be undertaken by the Investment Manager;
- A vote either ‘for’ or ‘against’ can be made by the Investment Manager, except where there is a conflict of interest;
- Voting activity of the Investment Manager will be monitored by the Investment Committee; and
- The University may direct the Investment Manager how to vote at any time.
Investments carry a number of risks. The risks of investment will be managed by having a balanced portfolio to manage market risk and to allow real growth of the capital base of the Fund over time and an annual review of strategic allocations to manage liquidity risk.
The University will generally take an unhedged position with regards to currency risk on international securities as this approach tends to improve diversification. However the Investment Manager is to be alert to market conditions where an exchange rate hedge would be expected to add value.