✨ Financial Statements and Investment Policies
NEW ZEALAND GAZETTE, No. 133
4 SEPTEMBER 2009
Market volatility
The risk that the investments will decrease in value with general market movements over the short term.
Investments are diversified across the asset classes, countries, industries and companies. Cash holdings are set to limit the need to realise assets and therefore market volatility does not impact on short-term distribution.
The reserving policy helps minimise the impact market volatility on the distribution policy. The reserves of the Foundation above the 29% threshold are invested in cash/bond assets. Cash holdings are increased as opportunities arise to ensure that assets need not be sold for distribution.
Market downturn risk
The risk that the markets suffer a severe and prolonged periods of negative performance.
Cash and bond assets are held to ensure that distributions can be maintained short-term. Assets are diversified across the asset classes and across the economic regions of the world.
The Foundation seeks specific independent advice on the market outlook as required, but a least annually.
Manager Risk
The risk that the discretionary active decisions of a single manager prove to be wrong or that the manager fails.
Where discretionary decisions are delegated, a specific mandate documents their application. The exposure to any single manager is limited. An index approach is adopted for overseas shares. Assets are held separate to the manager’s own assets under trust.
Timing Risk
The risk that investments are made as the market is about to fall, or sold as the markets are about to rise.
Money is moved into new investments or volatile assets classes over time in multiples typically no more than 5%.
The credit quality of Foundation’s New Zealand Bond portfolio is managed by the Foundation using Standard & Poor’s rating categories.
| NZ Bonds and Term Deposits | AAA to A | A+ to A- | BBB | NR | 2009 | 2008 |
|---|---|---|---|---|---|---|
| Corporate Bonds | 27% | 41% | 14% | 18% | 5,571,088 | 5,386,903 |
| Term Deposits | 100% | 4,220,000 | 5,600,000 |
Hedging:
Hedging is managed by State Street Global Advisors under the following guidelines:
The ideal currency hedged position, solely from a return point of view, is to be unhedged when the NZ dollar is depreciating and to be hedged when it is appreciating. The Foundation’s policy looks to set the actual hedging level relative to that shown below:
| Currency level relative to the long-term average level | Medium term trend/momentum |
|---|---|
| Upwards | |
| Above +2 standard deviations | 50% hedging |
| +1 to +2 standard deviations | 50% hedging |
| 0 to +1 standard deviations | 63% hedging |
| -1 to 0 standard deviations | 75% hedging |
| -2 to -1 standard deviations | 75% hedging |
| Below -2 standard deviations | 75% hedging |
Liquidity Risk
Liquidity Risk is the risk that the Foundation will encounter difficulties in meeting the obligations associated with its financial liabilities. This risk is managed through the Foundation’s investment in a diversified portfolio of financial assets.
The Foundation’s investment portfolio during the year under review consisted of only listed securities which under normal market conditions are readily convertible to cash. In addition, the Foundation maintains sufficient cash and cash equivalents to meet normal operating requirements.
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NZ Gazette 2009, No 133
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Financial Statements of Whanganui Community Foundation Incorporated
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💰 Finance & RevenueFinancial Statements, Community Trusts, Whanganui Community Foundation, Accounting Policies, Investment Portfolio, SIPO, Asset Allocation, Risk Management