The country’s largest charitable fund, Foundation North, has squeaked into positive territory over the last financial year, returning just 0.6 per cent.
But while the $19.5 million result was more than $70 million under budget, the almost $1.4 billion fund outperformed the -2.8 per cent recorded by its composite benchmark, the latest Foundation North financial statements show.
“Since the global surge of the pandemic, the Foundation North Trustees and management, together with its investment advisors Cambridge Associates have formed an Investment Working Group to meet regularly to closely monitor the impact on global markets and the investment portfolio,” the report says. “Although the Foundation’s portfolio has recovered somewhat since year end, global market volatility is expected to remain for some time.”
Despite missing investment return targets, the community trust increased grants by about $7.5 million year-on-year to distribute just over $45 million across the Auckland and Northland regions over the 12 months to March 31.
Administration expenses were also up by about $700,000 compared to the previous period to breach the $6.3 million mark. Likewise, funds management, custody and advisory fees rose to $2.6 million from about $1.9 million in the 2019 fiscal year.
Foundation North saw reserves drop from about $300 million as at April 1 last year to just under $240 million 12 months later as it dipped into the kitty to cover committed grants and other costs.
As at the end of this March, the fund reported net assets of more than $1.3 billion, almost on a par with the same time last year.
The accounts show the biggest drag on Foundation North investment performance came courtesy of a roughly $43 million loss on ‘foreign exchange contracts’. Otherwise the fund, which has a strong tilt to private equity as favoured by Cambridge, held investment income steady year-on-year at close to $33 million while increasing net realised gains to over $48 million ($28 million in 2019) and booking unrealised losses of $18.8 million (compared to $37.7 million unrealised gain last year).
Cambridge is famously secretive about its underlying managers but the Foundation North asset allocation strategy appears unchanged over the year. The fund invests in four asset ‘buckets’ labeled growth, diversification, inflation hedging and deflation hedging. With the exception of the diversification exposure (down about $60 million year-on-year to $197 million), all the buckets remain at similar levels as last year.
Just over 70 per cent of the Foundation North portfolio was invested in assets that could be cashed in within 12 months, the report says. The community trust had committed about $500 million to private equity funds in NZ and offshore as at March 31.
Earlier this year the charitable fund hired Fidato Advisory to review its investment adviser, currently Cambridge, but has yet to confirm the outcome of the process.
From this April Foundation North also folded its previously separate entity, the Centre for Social Impact (CSI), into the main community trust structure.
CSI “supports high engagement ventures” through several Foundation North initiatives.
But impact investing is also assuming wider importance in the community trust portfolio. Last week Foundation North made its first impact investment after allocating $2 million to support three Salvation Army community housing projects through the recently formed Community Finance platform. Formed by several organisations last November, Community Finance specialises in funding houses for “those in need”.
As well as Christian Savings and the Matua Foundation, Community Finance is backed by family-based charities including the Tindall Foundation, the Lindsay Foundation and the Wilberforce Foundation.
In a statement, Foundation North investment committee chair, Mel Hewitson, said: “Adding an impact investment asset class to our investment portfolio widens the set of tools available to the Foundation for creating positive impact.
“With this first impact investment, Foundation North is demonstrating how a large institutional investor can balance getting strong returns and supporting positive social outcomes.”
It is understood Foundation North (formerly known as the ASB Community Trust) is also looking to appoint an external manager for a new impact investment portfolio.