The almost $1.2 billion Foundation North dipped into its kitty to fund grants over the latest financial year after investment returns fell almost $60 million under budget.
Foundation North, previously known as the ASB Community Trust, recorded a net investment return of $18.4 million over the 12 months to March 2016 compared almost $138 million during the previous period, the latest annual report shows.
According to the annual financial report, the 2015/16 investment performance was “adverse to budget by $56.7 million” with the fund meeting excess grants demand from its reserve account.
The result led to Foundation North reporting a net loss of $28.6 million over the latest fiscal period after disbursing grants of almost $41 million (up from $36.8 million for the 2014/15 year).
Total net assets dropped from over $1.2 billion as at March 2015 to about $1.19 billion a year later, the accounts show.
In the 2016 report Ken Whitney, Foundation North chair, says the sharp fall in investment returns reflected “the current uncertainty in the international financial markets”.
“Despite this disappointing result, the Foundation’s return on its portfolio in the last year exceeded its benchmarks,” Whitney says.
The fund returned 1.2 per cent during the annual period compared to the “benchmark composite index” of 1.1 per cent, the Foundation North financial report says, while averaging 5.7 per cent over five years versus the benchmark 4.9 per cent.
Liam Sheridan, Foundation North chief financial officer, said the fund’s benchmark is “a policy weighted average for the portfolio”.
“For example, our global equity managers are measured against the MSCI World Index, our emerging markets manager uses the MSCI Emerging Markets Index and so on,” Sheridan said. “And these are then all combined at policy target weights as a weighted average.”
During the year, Foundation North also signed up investment consultant, the US-headquartered Cambridge Associates, for a further five-year term after completing a review.
The-then ASB Community Trust replaced Russell with Cambridge Associates in 2010, the first NZ client for the upper-echelon consultancy firm that boasts, among others, the Bill and Melinda Gates Foundation and several Ivy League university endowment funds as clients.
Foundation North shelled out about $1.26 million in “fund management and advisory fees” over the year or an increase of $84,000 on the previous annual period.
The financial statements also reveal the trust reduced its underlying fund manager roster from 28 to 23 during the year. Despite the manager changes, the Foundation North asset allocation strategy remains more-or-less stable year-on-year, the report shows.
Sheridan said the only recent change was an update in the fund’s policies to allow investment in NZ direct property.
The fund invests across four strategies dubbed: growth (listed and private equities); diversified, or hedge/absolute return funds; inflation hedging (listed and unlisted real assets); and, deflation hedging (fixed income and cash).
According to the Foundation North accounts, as at March 31, 2016 the growth and diversified allocations sat at about $566 million and $268 million respectively, compared to $534 million and $264 million 12 months prior.
However, the report shows inflation-hedging investments rose from $97 million to $128 million over the year while deflation-hedging assets under management fell from $341 million to $247 million during the same period.
Foundation North cut its global bond exposure by more than $70 million during the year from $106 million to just under $32 million as NZ fixed income investments increased from $172 million to almost $203 million.
The charitable trust, the biggest of its kind in Australasia, reported employee costs of $2.8 million (with almost $900,000 accruing to the ‘leadership group’ of six) over the year, representing an annual increase of $400,000. Total administration costs jumped from $4.34 million in 2015 to almost $4.9 million in the latest period, according to the Foundation North books.