Investment for Community Foundations Chris Morcom CFP®, CPA(FPS), B.Bus Dip FP Director/Private Client Adviser

The information contained in this presentation is general in nature and is not intended as personal advice. Please obtain advice from your Financial Adviser before acting upon this information

Agenda The reason for a Investment Policy Components of an Investment Policy Where does advice fit in? How should investments be monitored Calculation of grant amounts Questions

The Investment Policy Legislative requirement Good practice Link your investment policy to your objectives

Components of the Investment Policy Clear objectives related to your foundation

Objectives - example GENERAL SHORT TERM (12 MONTHS) To invest the corpus of the foundation in a way that protects the corpus from loss and achieves the objectives of the foundation SHORT TERM (12 MONTHS) Provide access to 4% of capital within 30 days Provide access to 10% of capital within 90 days

Objectives - example MEDIUM TERM (1-5) YEARS Generate sufficient income to cover expenses and grants LONG TERM (BEYOND 5 YEARS) Grow the corpus to maintain the value in Real Terms.

Objectives - example LONG TERM (BEYOND 5 YEARS) Grow the corpus to reach a long term target of $1 million, inclusive of fundraising activities and donations.

Components of the Investment Policy Clear objectives related to your foundation Measurable targets for income and growth

Investment benchmarks - example INCOME To achieve a before costs income rate of return of at least 90 days bank bill rate on a rolling 3 year basis. GROWTH To achieve growth in the net value of the foundation corpus above the CPI index, as measured by the Global all Groups Index over a rolling 5 year period.

Investment benchmarks - example INVESTMENT POLICY BENCHMARKS INCOME To achieve a before costs income rate of return of at least 90 day bank bill rate plus 1% on a rolling 3 year basis. GROWTH To achieve growth in the net value of the foundation corpus of 2% above the CPI index, as measured by the Global all Groups Index over a rolling 5 year period.

Investment Policy – example reporting - Performance Benchmarks

Components of the Investment Policy Clear objectives related to your foundation Measurable targets for income and growth Desired asset allocation

Asset Allocation Examples Asset Allocation Strategy Asset Class Target Benchmark Benchmark Range Min Max Cash at call 4% 0% 100% Interest Bearing Investments 46% 20% 70% Equity – Australian 35% 10% 60% Equity – International 5% 30% Property Asset Allocation Strategy Asset Class Target Benchmark Cash at call 10% Interest Bearing Investments 40% Equity – Australian 30% Equity – International Property

Components of the Investment Policy Clear objectives related to your foundation Measurable targets for income and growth Desired asset allocation Details about types of investments preferred & excluded

Investment details - example PROPERTY Listed property trust exposure via Exchange Traded Fund Managed & Private Syndications Direct Property Investment if appropriate Unlisted Direct Property Fund Gearing <50% Quality Tenants High Occupancy EQUITIES – AUSTRALIAN Investment limited to: Listed investment companies Australian companies restricted to the S&P/A SX 100. Exceptions must be specifically approved by Board resolution. Stock Selection: Reliable dividend yield, preferably fully franked dividend yield of 3% or greater Widely held shareholding Exclude companies that derive most of their revenue from Provisions of gambling services or the manufacture of gambling machines Sale or manufacture of armaments Sale of manufacture of alcohol or tobacco

Advice – what to expect and how to access Focus on core organisation goals & skills Be clear on what you want Administration and reporting Certified Financial Planner

Managing your investments Actively manage your asset allocation Rebalancing the portfolio

Rebalance

Calculating Grants Legislated minimums Cash flow vs asset growth

Recap Investment policy in writing Objectives focussed Measurable targets for returns and liquidity Asset allocation Predictable cash flow Advice can help

Questions

Phone: 03 8548 4800 Email: chris@hewison.com.au Address: Level 8/417 St Kilda Road Melbourne VIC 3004