Financial Services

University Policy on Investment

Policy No.
Financial Management
Authoring Organisational Unit
Treasury and Investments
Date Approved
01/06/2001 Revised 11/12/2017
Next Review Date
Approving Body

The University of Western Australia

University Policy on: Investments

Purpose of the policy and summary of issues it addresses:

This Investment Policy Statement (IPS) governs the management of the University's Investment Portfolio and sets out investment guidelines such as investment restrictions and performance objectives, performance benchmarks and the strategic benchmarks for each investment pool.

1. Definitions:

Asset Allocation

The Investment Portfolio's exposure to various asset classes.

Asset Allocation Benchmark

The Investment Portfolio's target exposure to asset classes as defined by the Strategic Asset Allocation for each Investment Pool.

Dynamic Asset Allocation

Short to medium term tilts to the Strategic Asset Allocations (SAA) within an Investment Pool.

Environmental, Social and Governance (ESG)

A term used to describe a group of risks that are integrated into investment research and decision making that are outside traditional areas of the analysis of risk and return.

Implemented Consultant

An asset consultant that provides investment services including investment research, strategic investment advice and the implementation of approved investment strategies through a range of investment products with full discretion over the appointed investment managers.

Investment Advisory Group

The advisory group appointed to assist the Vice Chancellor fulfil relevant fiduciary responsibilities, including the effective implementation of the investment policy and oversight of the investment portfolio.

Investment Managers

Professional fund managers appointed to manage a segment of the University's Investment Portfolio.

Investment Pool

A component of the University's Investment Portfolio which has common investment strategies and policies.

Investment Portfolio

The University's total investment assets including managed and direct investments.

Strategic Asset Allocation (SAA)

The benchmark portfolio within which the Investment Pool is expected to operate. The strategic asset allocation is designed to achieve the long term investment return objective for each investment pool.

Policy statement:

2. Application

2.1 The investment policy statement covers the operation of the University's Investment Portfolio. This policy does not apply to strategic investments and intellectual property created outside the operation of the Investment Portfolio.

3. Legislation

3.1 The University of Western Australia Act 1911 requires the investment of University monies to be managed as trust funds.

3.2 The investment of University trust assets must comply with Part III of the Trustees Act 1962.

4. Investment Portfolio Purpose

4.1 The purpose of the University's Investment Portfolio is to maximise the investment returns available for an agreed level of risk over a defined timeframe, in order to:

• Support the purpose and mission of the University over the long term;

• Provide intergenerational equity by preserving real value of capital;

• Provide capital growth to support University growth projections;

• Provide funds to support short term spending commitments; and

• Provide a reasonable level of funding stability from year to year.

5. Governance

5.1 Senate is responsible for approving the University's investment policy.

5.2 The Strategic Resources Committee is responsible for managing the investment policies and strategies of the University's investments within the framework of strategy approved by the Senate.

5.3 The Vice Chancellor is responsible for the implementation of the investment policy acting on the advice from the Investment Advisory Group and other resources with appropriate expertise.

5.4 Unless otherwise provided by this policy, the Chief Financial Officer has specific delegated authority in relation to the day to day management of the investment portfolio and oversight of the Implemented Consultant as approved by the Vice Chancellor.

5.5 The day to day management of the investment portfolio, within the boundaries of this policy, has been delegated to the Implemented Consultant.

6. Investment Overview

6.1 The University's Investment Portfolio is primarily managed through a pooled investment approach. These pools are outlined in Attachment A.

6.2 All Investment Pools and direct investments incur external costs and an internal management charge in accordance with the University's user pays principles.

6.3 All pool asset allocations, including the impact of derivatives on an effective exposure basis and dynamic asset allocation are required to fall within the minimum and maximum ranges contained within the Strategic Asset Allocation.

7. Cash Pool

The cash pool seeks to meet the short term liquidity requirements of the University over a rolling twelve month period. Internally managed cash is subject to institutional limits as outlined in Attachment B.

8. Short Term Pool

The short term pool seeks to provide low to moderate real returns with a strong focus on capital preservation. The Strategic Asset Allocation is outlined in Attachment C.

9. Medium Term Pool

The medium term pool seeks to provide moderate real returns over a medium time horizon. The pool aims to achieve a reasonable balance between achieving real returns and preserving capital. The Strategic Asset Allocation is outlined in Attachment D.

10. Long Term Pool

The long pool seeks to provide strong real returns over long time periods. The pool has a high exposure to growth assets, with a high risk tolerance, whilst aiming to limit underperforming inflation over the long term. The Strategic Asset Allocation is outlined in Attachment E.

11. Dynamic Asset Allocation

The University's appointed Implemented Consultant undertakes Dynamic Asset Allocation strategies on behalf of the University. Dynamic Asset Allocation tilts are constrained by ranges within the Strategic Asset Allocation that impose minimum and maximum ranges for each asset class.

12. Direct Investments

The University may hold direct investments in accordance with the University's Policy on Charitable Gift Acceptance (UP13/13). The treatment of the direct investments requires the approval by the Chief Financial Officer and the Investment Advisory Group.

13. Risk Management

13.1 At a macro level diversification is the primary tool used to reduce risk.

13.2 The University's Implemented Consultant is responsible for managing the Investment Portfolio to maximise investment returns for an agreed level of risk.

13.3 Portfolio level risks such as market risk are managed by the Implemented Consultant through appointed Investment Managers.

14. Environmental, Social and Governance

14.1 Integration

14.1.1 The University believes that responsible investment requires effective stewardship that considers the management of environmental, social and governance risks.

14.1.2 The University requires the Implemented Consultant to demonstrate a commitment to effective investment stewardship, ESG integration and management. Amongst a range of responsibilities, the Implemented Consultant undertakes portfolio oversight on systemic risks linked to ESG, assesses investment managers and assigns ESG ratings and actively engages with investment managers to encourage improvement of ESG ratings.

14.1.3 The Implemented Consultant ensures that investment managers consider ESG factors within their investment processes.

14.2 Active Ownership

14.2.1 The Implemented Consultant, through the underlying investment managers, exercises voting rights attached to assets forming part of the University's portfolio.

14.2.2 The Implemented Consultant, through the underlying investment managers, engages with companies on the University's behalf to encourage effective management of ESG risks.

14.3 Exclusions

14.3.1 The University's policy on tobacco restricts any material investment in companies that are engaged directly in the production, manufacture, distribution, promotion or marketing of tobacco or tobacco products as its primary business.

14.3.2 As part of the ESG monitoring the Implemented Consultant, requires investment managers to maintain a watching brief on significant issues such as controversial weapons, human rights abuses, labour rights abuses, severe environmental pollution and corrupt business practices.

15. Performance monitoring and reporting

15.1 The University's investment portfolio is continuously monitored by management and the Implemented Consultant.

15.2 The principle goals in monitoring the portfolio are to assess:

15.2.1 The performance against pool objectives and benchmarks; and

15.2.2 That the investment policy has been complied with.

15.3 The Implemented Consultant provides reports to management on an ad hoc, monthly, quarterly and annual basis.

15.4 The University's Implemented Consultant also is required to report on a range of ESG matters such as ESG integration, compliance and active ownership.

15.5 Reports are provided quarterly to the Investment Advisory Group and the Strategic Resources Committee and annually to Senate.

15.6 Each Investment Pool is monitored relative to an appropriate published survey and calculated composite benchmark return using relevant market indices.

15.6 Non-compliance with this investment policy is monitored by the finance team. Where the non-compliance occurs it shall be reported to the Chief Financial Officer, the Investment Advisory Group and the Vice Chancellor, and to the next Strategic Resources Committee meeting.

16. Transitional provisions

Any material change to this investment policy may give rise to a period of transition. The transitional arrangements will be agreed at the time of approving the change.

17. Review of policy

17.1 The investment policy shall be formally reviewed every two years or more frequently if circumstances warrant.

17.2 The University's Implemented Consultant:

17.2.1 Annually assesses the appropriateness of the investment policy; and

17.2.2 Conducts a major investment policy review every four years.

18. Effective date of the Investment Policy

The investment policy comes into effect immediately upon being approved by Senate and replaces any previous policies, unless otherwise resolved by Senate.

Related forms: (Link)

Policy No: UP09/13

Approving body or position: Senate

Date original policy approved: 2011

Date this version of policy approved: 2017

Date policy to be reviewed: 2019

Date this version of procedures approved:

TRIM File No:

Contact position: Manager Treasury, Investments and Financial Compliance

Related Policies or legislation:

The University of Western Australia Act 1911Trustees Act 1962

University Policy 07/1: Funding from the Tobacco Industry

University Policy 13/13: Charitable Gift Acceptance