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  • 1. Title: Investment Policy Version 1.0 TRIM file number 07/702 Short description A policy on investment Relevant to All staff Approved by University Council Responsible officer Executive Director, Financial Services Responsible office Division of Finance Date introduced 31 August 2007 Date(s) modified Next scheduled review date 30 August 2010 Related University documents Instrument of Delegations Related legislation Charles Sturt University Act 1989 Public Finance and Audit Act 1983 Public Authorities (Financial Arrangements) Act 1987 Key words investment, property, money, finance, expenditure, bank, accounts Investment Policy Page 1 Version 1.0 – 31 August 2007
  • 2. TABLE OF CONTENTS 1.INTRODUCTION.................................................................................................................3 2.DEFINITIONS......................................................................................................................3 4.OBJECTIVES......................................................................................................................3 5.GENERAL INVESTMENT PRINCIPLES.............................................................................6 6.volatility of returns................................................................................................................6 7.LIQUIDITY AND CASH MANAGEMENT.............................................................................7 8.ASSET ALLOCATION.........................................................................................................7 9.FINANCING AND OPERATING ACTIVITIES......................................................................7 10.INVESTMENT FUNDS MANAGER PERFORMANCE REVIEW AND EVALUATION........8 11.REPORTING AND OVERSIGHT.......................................................................................8 SCHEDULE 1 ROLES AND DELEGATIONS......................................................................10 SCHEDULE 2 INVESTMENT FUNDS MANAGERS............................................................12 SCHEDULE 3 ASSET ALLOCATIONS...............................................................................13 SCHEDULE 4 INVESTMENT GUIDELINES........................................................................14 Investment Policy Page 2 Version 1.0 – 31 August 2007
  • 3. 1. INTRODUCTION This investment policy includes guidelines for asset allocation, funds management, portfolio management, reports on investment performance and market benchmarks to assist in tracking and adjusting the investment performance targets. 2. DEFINITIONS In this Policy, unless the contrary intention appears: Guidelines means the Guidelines in Schedule 5 to this Policy. Policy means this Investment Policy. 3. SCOPE The University has authority granted by the NSW Treasurer and Minister for Education & Training to exercise investment powers under Part 4 of Schedule 4 of the Public Authorities (Financial Arrangements) Act 1987. The investment activities of the University are constrained by any limitations, caveats or restrictions specified by the NSW Treasurer and Minister for Education & Training and any relevant regulation or motion passed by the University Council or authorised committee of the University Council. Any such limitations have been incorporated in clause 11 below. This policy is applicable to all funds under the control of the University Council with the exception of funds administered by the Charles Sturt Foundation Limited and The Western Research Institute Limited. 4. OBJECTIVES 4.1 The primary objective of the University’s investment policy shall be to optimise the return on all funds available for investment to support the operation of the University. 4.2 Objectives of the fund types available are: 4.2.1 Bank Account - to provide security and accessibility for day to day operating transactions and interest calculated on a daily basis. 4.2.2 Short Term Investment Portfolio (STIP) (< 12 months) - to provide a high degree of security, liquidity and interest rates higher than available from the transactional bank account. 4.2.3 Long Term Investment Portfolio (LTIP) (12 months and more) - to exceed the target real rate of return (see below) over rolling three- year periods. 4.3 Rate of Return - to be reviewed annually by the Resource and Investment Committee. 4.3.1 To equal or exceed a return (before fees) of: Investment Policy Page 3 Version 1.0 – 31 August 2007
  • 4. - Bank Account A competitive interest rate relative to similar banking facilities in the market. - Short Term Investment Portfolio The UBS Warburg Australian 90 day Bank Bill Index over rolling one year periods. - Long Term Investment Portfolio Excess over the headline Consumer Price Index (CPI) as determined by the Resource and Investment Committee over rolling three-year periods; and - The performance of a composite benchmark based on the strategic allocation to each class of investments and the benchmark for each asset class, over rolling three-year periods. 4.3.2 Income and Growth - to achieve a balanced return of current income and modest growth of principal. 4.3.3 Long-Term Growth of Capital - to emphasise long-term growth of principal while avoiding excessive risk. Short-term volatility will be tolerated consistent with the volatility of comparable market index(s). 4.4 Investment return is to be measured on the basis of total return; that is, the aggregate return from capital appreciation and dividend and interest income. 4.5 Asset class benchmarks are to be agreed with the Investment Fund Manager(s) as part of the written contract with them and reviewed in terms of the contract. 3. PURPOSE 5.1 The purpose of this investment policy is to: 5.1.1 Establish a clear understanding of the University's investment goals and objectives. 5.1.2 Define and assign responsibilities for investing activities. 5.1.3 Offer guidance and define limitations regarding the investment of University assets. 5.1.4 Manage University investment assets according to prudent standards and consistent with the laws of the State of NSW. 5.1.5 Establish the relevant investment horizon for which the investments will be managed. 5.1.6 Establish a basis of evaluating investment results. 5.1.7 Establish a balance between the risk associated with investment activity and achieving the desired levels of returns on funds invested. Investment Policy Page 4 Version 1.0 – 31 August 2007
  • 5. 4. RESPONSIBILITIES 6.1 The assignment of responsibility for investment decisions in the University are: 6.1.1 The functions of the Resource and Investment Committee are set out in the Governance (Resource and Investment Committee) Rule 2007. In general, the Resource and Investment Committee is responsible to the University Council for monitoring the management of University funds in excess of day to day operational requirements. The Committee will approve the appointment of any Investment Fund Manager (IFM) and/or consultant. The Committee will monitor the performance of investments and of investment fund managers. 6.1.2 The functions of the Investment Management Committee are set out in the Governance (Investment Management Committee) Rule 2007. In general, the Investment Management Committee (IMC) is responsible for: • The formulation and execution of investment policy, objectives, and Guidelines. • Evaluating investment fund managers. • Reviewing investment fund managers performance on an ongoing basis. • Measuring and reporting investment performance. • Approval of the day to day investment transactions within delegations, consistent with the provisions of this policy. • Other tasks as deemed appropriate. 6.1.3 Investment Fund Manager(s) are external entities with discretion to purchase or sell, in the name of the University, the specific securities that will be used to meet the investment objectives. The appointment of IFM’s are specified in Schedule 2. 6.1.4 Each Investment Funds Manager appointed by the University must acknowledge, in writing, its acceptance of responsibility for investing University funds and agree to comply with the requirements of this policy. The terms of appointment of each Investment Funds Manager(s) will allow those managers discretion to make investment decisions for the assets placed under their control and responsibility, Investment Policy Page 5 Version 1.0 – 31 August 2007
  • 6. while observing and operating within this policy. Specific responsibilities of the Investment Funds Manager(s) include: 6.1.4.1 Discretionary investment management including decisions to buy or sell individual securities, either directly and/or via specialist investment managers, and to alter asset allocation within the limitations set out in this policy. 6.1.4.2 Report investment performance results on a monthly basis. 6.1.4.3 Provide monthly valuation of their investment portfolio based on the previous month's closing prices. 6.1.4.4 Communicate any major or foreseeable changes to the economic outlook, investment strategy, or any other factors that may affect investments, or investment objectives. 6.1.4.5 Inform the University regarding any qualitative change in the investment management organisation. ie changes in portfolio management personnel, ownership structure, investment philosophy, etc. 6.1.4.6 Other reporting to the University as required. 6.1.5 The Resources and Investment Committee is required to have expertise in investment management. 6.2. Arrangements with any external IFM must be in writing, comply with the provisions of this policy and be authorised by the Vice-Chancellor. 5. GENERAL INVESTMENT PRINCIPLES It is desirable to achieve a balance between the social, ethical and financial aspects of investment policy, while maintaining the interests of students and employees of the University, government and industry partners and the responsibility for the stewardship of public funds. 7.1 Investments shall be made solely in the best interests of the University. 7.2 Investments shall be made with care, skill, prudence, and due diligence. 7.3 Investment of funds shall be so diversified as to minimise risk. 7.4 The University may employ one or more Investment Fund Managers to achieve its investment objectives. 7.5 Part of the investment portfolio will be administered by staff of the University. 7.6 Available cash should be utilised productively at all times, by investment in short term cash equivalents to provide safety, liquidity and return. 6. VOLATILITY OF RETURNS In order to achieve the investment objectives, it is understood that investment returns may experience volatility and fluctuations in market value. The University will tolerate Investment Policy Page 6 Version 1.0 – 31 August 2007
  • 7. volatility as measured against the volatility of a comparable market index in each asset class and a composite index based on the strategic allocation to each asset. The indices (eg. the ASX All Ordinaries index) used as a measure of an investment manager's performance will also be used to benchmark what is allowable volatility (risk). 7. LIQUIDITY AND CASH MANAGEMENT 9.1 To minimise the possibility of a loss occasioned by the sale of a security forced by the need to meet a required payment, The Division of Finance will periodically provide the University Investment Office with an estimate of expected net cash flow. The University will notify the required Investment Funds Manager(s) in a timely manner, to allow them sufficient time to build up necessary liquid reserves. 9.2 Based on these estimates the University Investment Office will determine broad targets for the level of available investment funds that are to be held in cash or cash equivalent forms. 8. ASSET ALLOCATION 10.1 Asset allocation refers to the mix of investments, ie the mix of funds held in cash compared to fixed term bonds, equities or property. 10.2 The asset allocation will be reviewed each six months by the Resource and Investment Committee. 10.3 This investment policy requires an allocation between asset classes as specified in Schedule 3. 9. FINANCING AND OPERATING ACTIVITIES 11.1 The amount of funds available for investment is limited by the demand for funds for financing and operating activities of the University. Financing and operating decisions may therefore significantly increase or decrease the investment returns to the University. 11.2 Financing decisions, for example, the offering of internal loans, should be evaluated against benchmark returns for investment funds and internal loan and other similar financing decisions should be required to deliver a return equal to the investment benchmark. If this cannot be achieved, then consideration should be given to external financing. Essentially, internal loans should be charged interest at the rate of the benchmark for investment funds i.e. the cost of capital is set at the investment benchmark. 11.3 Management decisions with significant impact on operating cash flows should be evaluated to determine if alternative financing arrangements can be entered into so as to maximise investment income. 11.4 All major cash flows arising from financing or operating decisions which impact on available funds for investment are to be reported in the monthly investment report. Investment Policy Page 7 Version 1.0 – 31 August 2007
  • 8. 10. INVESTMENT FUNDS MANAGER PERFORMANCE REVIEW AND EVALUATION 12.1 Performance reports generated by the Investment Funds Manager(s) shall be compiled monthly. The investment performance of total portfolios, as well as asset class components, will be measured against performance benchmarks specified by NSW Treasury guidelines in addition to the market index asset class benchmarks agreed with the investment funds manager(s). Consideration shall be given to the extent to which the investment results are consistent with the investment objectives, goals, and guidelines as set forth in this policy. The University intends to evaluate the portfolio(s) over at least a three-year period, but reserves the right to terminate a manager for any reason including: 12.1.1 Investment performance that is significantly less than anticipated given the discipline employed and the risk parameters established, or unacceptable justification of poor results. 12.1.2 Failure to adhere to any aspect of this statement of investment policy, including communication and reporting requirements. 12.1.3 Significant qualitative changes to the investment management organisation. 12.2 Investment Funds Managers shall be reviewed annually regarding performance, personnel, strategy, research capabilities, organisational and business matters, and other qualitative factors that may impact their ability to achieve the desired investment results. 11. REPORTING AND OVERSIGHT 13.1 An investment report will be prepared by the Investment Manager, Division of Finance and submitted to the Resource and Investment Committee at each of its meetings. 13.2 The Investment Report will contain the following relevant detail: • Asset Allocation Information - asset values and asset class percentages versus target allocation and ranges. • Investment Performance - investment returns versus performance benchmarks. • Guideline Compliance - a statement that each portfolio conforms to guidelines or identification where variances occur. • Forward cash flow projections. • Expected economic outlook summary. • Investment market outlook and possible future portfolio options. 13.3 To assure the continued relevance of the guidelines, objectives, financial status and capital markets expectations as established in this policy, the Resource and Investment Committee will review investment policy annually. Investment Policy Page 8 Version 1.0 – 31 August 2007
  • 9. Table of amendments Version Date Short description of amendment number Investment Policy Page 9 Version 1.0 – 31 August 2007
  • 10. SCHEDULE 1 ROLES AND DELEGATIONS University Council The Council is responsible under Schedule 2 of The Charles Sturt University Act 1989 for authorising the investment of University funds. This authority of Council may be delegated. Resource and Investment Committee The Resource and Investment Committee is a committee responsible to the University Council. This Committee will oversee and review investment activity, recommend asset allocation and classes, review and recommend any policy or procedural changes, determine investment guidelines and benchmarking requirements, recommend the appointment of any investment fund managers and/or consultants. Investment Management Committee The Investment Management Committee is a committee formed within the Division of Finance. This Committee oversees and authorise transactions carried out by the University Investment Manager and/or Investment Office which relate to the day to day cash flow requirements of the University and the management of funds not otherwise invested with external investment funds managers. All investment decisions require the authorisation of at least one person from each of the levels listed below. Level 3 Executive Director, Division of Finance Director, Division of Finance Level 2 Financial Accountant Management Accountant Level 1 University Investment Manager (Finance Manager - Systems) University Investment Officer (Finance Officer - Systems) Meetings of the Investment Management Committee are to be held to approve investment decisions as required. University Investment Manager The University Investment manager is an employee of the University. The University Investment Manager is to be responsible for managing the day to day cash flow operational needs of the University, short term cash requirements and managing the portfolio of investment funds not allocated to external investment funds managers. Delegations University Council approved financial delegations for the investment of funds are to apply to all investments approved through the Investment Management Committee. Investment Policy Page 10 Version 1.0 – 31 August 2007
  • 11. Delegations for approval of investments will still apply until they can be reviewed by the Resource and Investment Committee and any recommendations approved by the University Council. Investment Policy Page 11 Version 1.0 – 31 August 2007
  • 12. SCHEDULE 2 INVESTMENT FUNDS MANAGERS Investment Fund Managers will be appointed by the Resource and Investment Committee on behalf of the Council who will recommend the appointment to the NSW Treasurer. Investment fund managers will be appointed following a formal tender process. The criteria for selection will be determined by the Investment Management Committee and will include management expertise, historical performance, level of fees, reporting capability, asset management expertise, etc. Several investment fund managers (both external and internal) may be appointed having different specialities such as equities, balanced growth, fixed income, etc. Investment Policy Page 12 Version 1.0 – 31 August 2007
  • 13. SCHEDULE 3 ASSET ALLOCATIONS Cash – The Investment Management Committee will determine the level of funds required to meet day to day operational requirements and short term commitments on advice from the Investment Office. Funds not committed to “cash” will be available for investment in other asset classes. The Resource and Investment Committee will determine asset allocations based on recommendations from the Investment Management Committee. Because of the need to change from our present investment position and strategy, to take advantage of the increased investment opportunities that Part 4 level powers offer, trading should not disadvantage the current portfolio composition and expected rates of return. Movement of funds to asset allocation targets will be approved by the Investment Management Committee. Investment Policy Page 13 Version 1.0 – 31 August 2007
  • 14. SCHEDULE 4 INVESTMENT GUIDELINES OBJECTIVE The University Investment Objective is to obtain the maximum possible long term return on available capital consistent with achieving a minimum return to the University of CPI plus 2% over rolling 5 year periods and ensuring a negative annual real return occurs less frequently than once every 6 years on average. Over the shorter term, it is recognised that there will be periods when investment returns do not meet this objective. Accordingly the University should also aim to achieve returns (after fees) that are in excess of the median return of other funds with comparable risk and return profiles as measured by independent industry surveys over rolling 3 year periods. The portfolio must contain sufficient liquid assets to pay the financial obligations of the University. INVESTMENT CRITERIA The University's investment objectives require a disciplined, consistent management philosophy which protects the assets of the University and maintains sufficient liquidity to meet expected future needs. The Long Term Investment Portfolio (LTIP) will be diversified into a mix of asset classes determined by the Resource and Investment Committee (UIC) and will include fixed-income, equity, property and alternative investment holdings. The purpose of this diversification is to provide reasonable assurance that no single type of investment will have a disproportionate impact on the University's total portfolio. The purpose of fixed-income investments is to provide a dependable source of income and a predictable source of cash flow. The purposes of equity, property and alternative investments are to provide current income, growth of income and appreciation of principal, with recognition that this requires the assumption of market variability and risk of loss. PORTFOLIO STRUCTURE In keeping with the philosophy of diversification, it is expected that there will normally be four main components i.e. fixed interest, listed equities (including both domestic and overseas), listed property trusts and alternative investments (including infrastructure, private equity, venture capital, direct property and unlisted property investments). The asset allocation ranges for each component will be approved by the Resource and Investment Committee on advice from the Investment Management Committee (FIC). The proportions held for each component within these approved ranges may be varied from time to time, on the basis of advice from the Investment Management Committee about the economic cycle and expectations in each of the asset sectors. The proportion held in cash and short dated securities will vary according to the strategy adopted for each of the other major asset classes. The Investment Management Committee may exercise reasonable discretion in the development of recommendations relating to the Short Term Investment Portfolio (STIP) and will report twice yearly to the Resource and Investment Committee. Investment Policy Page 14 Version 1.0 – 31 August 2007
  • 15. ALLOWABLE ASSETS Allowable Assets are: Cash • Funds held in University transactional bank account/s and at call Cash Equivalents • Bills • Money Market Funds • Foreign Currency (used for operational requirements only, not speculative) Fixed Income Securities • Government and Agency Securities • Corporate Notes and Bonds • Derivative Credit products eg CDO’s • Preferred Stock • Fixed Income Securities of Foreign Governments and Corporations Equity Securities • Common Australian Shares including Listed Property Trusts • Convertible Notes and Bonds • Convertible Preferred Shares • International Shares Equity Funds • Equity Funds that invest in securities, bonds and cash as allowed in this statement. These may be varied with the approval of the Resource and Investment Committee. RESTRICTED TRADING • Only Investment Fund Managers may trade in or engage in the following: • Derivative Securities: options and future contracts (except for hedging purposes) • Short Selling • Margin Purchases Investment Policy Page 15 Version 1.0 – 31 August 2007
  • 16. FIXED INCOME INVESTMENTS AND CASH EQUIVALENTS • Investment of assets in cash and fixed income securities shall be well diversified amongst various forms of Australian and global securities to the satisfaction of the Resource and Investment Committee. • New credit products shall be reviewed and authorised by the Investment Management Committee on an individual product basis following the recommendation of the University Investment Office. • Products selected should be principle protected investment grade securities with a rating above A+ for the principle. LISTED AUSTRALIAN SECURITIES Investments in listed Australian securities will only be undertaken by approved investment fund managers. These guidelines cover the purchase and sale of shares, stocks, securities, listed property trusts, convertible notes and exchange traded options. 1. Only securities that are listed on the Australian Stock Exchange Limited shall be considered. 2. A maximum of 10% of the allocated portfolio may be invested in any one security unless prior approval is granted by the Resource and Investment Committee annually. 3. The approved range for allocation to domestic listed securities within the LTIP is approved by the Resource and Investment Committee. 4. Investment may be made in listed property trusts for inclusion in the Listed Property Trust portfolio. 5. Trading in Exchange Traded Options is subject to the following special guidelines in addition to those applying to the underlying shares: (i) Purchase and sale of options is limited to options listed on the Australian Options market; (ii) Options trading is to be confined to scrip covered options and the closing out of open option positions; and (iii) The total market value of the underlying shares of the total option exposure is not to exceed 25% of the market value of the allocated equity portfolio. OVERSEAS INVESTMENTS Overseas investments will only be undertaken by approved investment fund managers. 1. The level of investments held in overseas securities shall not exceed the amount determined by the Resource and Investment Committee. Investment Policy Page 16 Version 1.0 – 31 August 2007
  • 17. 2. Funds may be invested in equities and/or interest bearing securities. 3. No more than 30% of the Overseas Shares strategic asset allocation will be held with any one external investment fund manager except where approved by the Resource and Investment Committee. 4. Direct currency hedging may be undertaken as a risk management tool against the overseas equity exposure. SHORT TERM INVESTMENT OF LIQUID FUNDS Short term funds available for investment by the University should be invested so as to provide earnings consistent with or above the relevant short-term interest rate benchmark (i.e. UBS Australian bank bill index) whilst maintaining a relatively low level of risk. Funds may be invested in the following securities. References to an S&P rating can be met by the equivalent Moody’s or Fitch rating. NO LIMIT ON INVESTMENT 1. Short Term Money Market Accounts, including 11am Cash Accounts Investment is restricted to deposits with an Australian-owned bank. 2. Treasury Notes 3. Promissory Notes Investment is restricted to State/Territory Governments or borrowers with a Commonwealth or State/Territory Government guarantee. 4. Bills of Exchange, Certificates of Deposit, Term Deposits Investment is restricted to securities issued, accepted or endorsed by: • An Australian-owned bank, or • A foreign subsidiary bank or a branch of a foreign bank with a short term S&P rating of A1+, or • Building Societies and Credit Unions regulated by APRA. 5. Floating Rate Notes Investment is restricted to senior debt issued by a major Australian-owned bank including ANZ, Commonwealth Bank, National Australia Bank, Westpac Bank and St George Bank with a limit of $20 million from any one issuer. 6. Floating Rate Notes issued by Banks In addition to guideline 5, investment in floating rate notes can include: Investment Policy Page 17 Version 1.0 – 31 August 2007
  • 18. • Senior and subordinated debt floating rate notes issued by Australian owned banks; • Senior and subordinated debt floating rate notes issued by foreign subsidiary banks and branches of foreign banks operating in Australia and regulated by APRA; • The value of FRN from any one issuer is limited to 10% of total investment portfolio. 7. Corporate Promissory Notes/Corporate Floating Rate Notes/Term Deposits Investment is restricted to those notes/term deposits with a short term S&P rating of A1 or above or a long term S&P rating of A+ or above. ‘Corporate’ includes banks and other financial institutions that are not covered under guidelines 1, 4, 5 & 6. 8. Building Societies Investment is restricted to building societies with a short term S&P rating of A2 or above with a limit of $5 million for any one agreement. Limit for any one agreement of no more than 2.5% of total portfolio. 9. Term Reverse Repurchase Agreements Term reverse repurchase agreements where the University is lending cash and taking securities as collateral may be entered into on the following bases: • The University only enters into term reverse repurchase agreements with authorised Money Market dealers, banks and other parties as determined by the Investment Manager and approved by the Vice-Chancellor or the Chief Finance Officer from time to time; • The collateral offered to the University meets the University’s policy guidelines for either the short term investment of liquid funds or fixed interest investments; • The term of the reverse repurchase agreements is a maximum of 90 days; • The reverse repurchase agreements do not extend over 31 December; and • Limit for any one product of no more than 2.5% of total portfolio. 10. Collateralised Debt Obligation (CDO) Securities/Asset Backed Securities (ABS)/Other Structured Securities Paying a Floating Interest Rate Investment is restricted to: • Products which have principal protection or are rated AA- or higher at the time of purchase; Investment Policy Page 18 Version 1.0 – 31 August 2007
  • 19. • Debt tranches of CDOs with a long term S&P rating of AA- or above at the time of purchase. If the CDO is downgraded below AA- then the University Investment Manager will seek approval from the Investment Management Committee if the CDO is continued to be held; • ABS with a long term S&P rating of AA- or above at the time of purchase; and • Other structured securities paying a floating interest rate, as determined by the University Investment Manager and approved by the Investment Management Committee should have principal protection or a rating of AA - at the time of purchase. FIXED INTEREST SECURITIES References to an S&P rating can be met by the equivalent Moody’s or Fitch rating. Holdings to be limited to the following: 1. Commonwealth Government Commonwealth Inscribed Stock, including Treasury Indexed Bonds. No limit, as a percentage of the market value of the Fixed Interest portfolio. 2. State/Territory Governments Bonds and other debt instruments issued by State/Territory Government guaranteed issuing authorities. Investment is restricted to a maximum of 25% of the market value of the Fixed Interest portfolio for any State/Territory Government guaranteed issuing authority, unless prior approval is obtained from the Investment Management Committee on advice from the University Investment Manager. 3. Corporate Debt Instruments Debt instruments issued by the following: (i) Australian-Owned Banks Investment is restricted to a maximum of 30% of the market value of the Fixed Interest portfolio in ANZ Bank, Commonwealth Bank, National Australia Bank, Westpac Bank and St George Bank and 25% for other Australian-owned banks, unless prior approval is obtained from the Investment Management Committee on advice from the University Investment Manager. (ii) Industrial Companies Debt instruments with a long term S&P rating of A+ or above. A maximum of $5 million face value may be invested with any one issuer unless prior approval is obtained from the Investment Management Committee on advice from the University Investment Manager. Investment Policy Page 19 Version 1.0 – 31 August 2007
  • 20. (iii) Other Debt Instruments Debt instruments with a long term S&P rating of A+ or above as determined by the Investment Office. A maximum of $5 million face value be invested with any one issuer unless prior approval is obtained from the Investment Management Committee on advice from the University Investment Manager. 4. Listed Hybrid Fixed Interest Securities Securities determined by the Investment Office and restricted to a maximum of 15% of the market value of the Fixed Interest portfolio from any one issuer unless prior approval is obtained from the Investment Management Committee on advice from the University Investment Manager. 5. Bank Affiliated Finance Companies First Charge Debenture Stock with those companies that have a long term S&P Debenture rating of A+ or above. A maximum of $5 million face value be invested in any one Bank-Affiliated Finance Company. 6. Repurchase Agreements/Stock Lending Repurchase agreements on Commonwealth, State/Territory Government debt instruments or other secured financial instruments with a rating of AA- or higher, may be entered into on the following bases: (i) The University only enters into repurchase agreements with authorised Money Market dealers, major Trading Banks and other parties as determined by the University Investment Manager and approved by the Investment Management Committee; (ii) A maximum of 50% of the Fixed Interest portfolio be subject to repurchase agreements at any one time; (iii) The maximum term of the repurchase agreement to be 180 days depending on market outlook; (iv) The repurchase agreements should not extend over 31 December. 7. Other Fixed Interest Securities The Resource and Investment Committee may approve other fixed interest securities that become available to the investment market. • Products must have capital protection or have the principal rated by S &P at AA- or above at the time of purchase. • No single agreement is to exceed 2.5% of total investment portfolio. ALTERNATIVE INVESTMENTS Investment Policy Page 20 Version 1.0 – 31 August 2007
  • 21. 1. The Alternative Investments (AI) portfolio may include individual investments or fund investments in Direct Property, Unlisted Property, Infrastructure, Listed and Unlisted Early Stage, Private Equity, Venture Capital, Hedge Funds and CDO Equity. 2. Potential AI investments should only by undertaken by an approved investment fund manager after approval by the Investment Management Committee on recommendation from the University Investment Manager. 3. The approved range for allocation to AI within the LTIP is approved by the Resource and Investment Committee. 4. No single AI investment will exceed 20% of the market value of the strategic allocation without the approval of the Resource and Investment Committee. 5. An exit strategy will be identified for all new investments as part of the due diligence process. DIRECT PROPERTY The general aim is to acquire prime properties in good locations, well and securely tenanted and with good growth prospects. No new direct property investment will be entered into without the approval of University Council. The following factors will be taken into account when selecting properties: 1. The desirability of geographical and functional diversity; 2. Suitability for future use by the University for University purposes; 3. The importance of detailed market analysis to assess property investments and establish income and growth prospects; and 4. Willingness to consider new developments, including projects in which the University is the developer and/or financier; or investment by way of joint venture developments or partnership in a single asset with partner/s approved by the University. UNLISTED PROPERTY 1. Investments in unlisted property trusts, funds or companies are to be endorsed by the University Investment. 2. When entering into new investments in unlisted property vehicles the total exposure to any one company/group should not exceed 20% of the combined direct and unlisted targeted strategic asset allocation for property without special approval of the Resource and Investment Committee. 3. No new investment in Unlisted Property should exceed 10% of total investment portfolio without special approval of Resource and Investment Committee. INFRASTRUCTURE AND PRIVATE EQUITY Investment Policy Page 21 Version 1.0 – 31 August 2007
  • 22. 1. Investments in infrastructure and private equity are to be approved by the Resource and Investment Committee. 2. No new investment in Infrastructure or Private Equity should exceed 1% of total investment portfolio. VENTURE CAPITAL, EARLY STAGE, SMALL CAP and OTHER AI Investment in these categories will only be undertaken by an authorised investment fund manager under conditions to be determined by the University Investment. No investment in this broad category should exceed 1% of total investment portfolio without special approval of the Resource and Investment Committee. Investment Policy Page 22 Version 1.0 – 31 August 2007