NZ’s largest charitable trust, Foundation North, has booked an almost 9 per cent investment return after fees for the 12 months to the end of March this year.
While the roughly $142 million boost (equating to a net-of-fees return of 8.7 per cent) to the community trust’s bottom line was less than half the 2021 result, the latest Foundation North annual report notes the fund performed comparatively well amid a bout of volatility late in the financial year.
“With a diversified portfolio (across both private and public markets) designed to weather market volatility, Foundation North’s portfolio outperformed its benchmark by 440 basis points over this time period (2020-21 660 basis points,” according to the just-released annual accounts.
“… The trailing ten-year performance was 8.7% net of fees, favourable to the ten-year benchmark composite index of 7.2% (2020-21: 8.0% actual, 6.6% benchmark). The since inception return of 7.9% net of fees has outperformed both the benchmark composite index return of 6.1% and the long term objective (CPI + 4.5%) being 7.2% over 28 years.”
Total assets under management for the Auckland-based community trust rose from just over $1.65 billion as at the end of March 2021 to more than $1.7 billion a year later with the charity boosting reserves by $12 million to close the period at $633 million – the remaining $1 billion plus is classed as “real” inflation-adjusted capital in the group accounts.
The 2022 Foundation North report is the first full-year covered under aegis of new investment adviser, JANA, which took over from the incumbent, Cambridge Associates, at the end of 2020.
However, the community trust’s overarching investment strategy appears largely in line with previous years with portfolio assets group into four categories dubbed: growth; diversification; inflation-hedging; and, deflation-hedging.
Overall allocation between the four portfolio sub-genres remained more-or-less steady year-on-year as the number of underlying managers edged up to 30 from the 29 recorded in 2021.
Approximately $500 million – or a third – of Foundation North assets have been placed, or committed to, private equity managers across NZ, the US and Europe, the accounts show.
“Management has made extensive enquiries of private equity fund managers to determine the valuation techniques used and to confirm that these techniques are in accordance with international best practice, however, there remains significant estimation uncertainty in relation to the fair value of these,” the report notes.
The less-frequently priced private equity assets tend to lag trends in listed markets with some institutional investors, including the almost A$200 billion Australian government Future Fund last week, warning valuations would come under pressure in coming months.
Foundation North also kicked off its new $20 million impact investment portfolio with allocations to two projects over the 12 months to March 31.
During the latest financial year, Foundation North reported net unrealised gains of over $50 million, net realised gains of just under $27 million and investment income of close to $73 million as well as currency hedging losses of $8 million.
Expenses for the community trust grew by about $2.3 million during the 12-month period to $62.8 million on the back of a rise in grants to $52.6 million ($49.9 million in 2021) and a $1.4 million hike in administration costs: investment fees covering fund management, custodial and advice fell to $1.4 million from almost $2.2 million in the previous year.
The spike in Foundation North admin expenses was largely due to staff costs jumping to $4.7 million from $4 million in 2021 and $500,000 extra ‘other’ charges.
As covered here last month, the community trust – which currently counts about 40 employees – is on the hunt for a new head of investments, reporting directly to CEO, Peter Tynan.