Financial Services

Investment Policy

Policy No.
UP09/13
Function
Financial Management
Authoring Organisational Unit
Treasury and Investments
Date Approved
01/06/2001 Revised 11/07/2019
Next Review Date
01/02/2022
Approving Body
Senate

University of Western Australia

Investment Policy Statement 2019

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.

 

 

 

 

 

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 (including direct property holdings) 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.

 

                Attachment A

UWA Investment pool structure

Long Term

Medium Term

Short Term

Cash

Pool Structure

The pool contains funds of a permanent or long-term nature.

The pool represents funds of a non-permanent nature and may include a portion of the University’s working capital that has a medium term horizon and a moderate level of risk tolerance.

The pool represents the working capital of the University and is considered to be of short-term in nature - investments are managed to provide liquidity.

The pool consists of a core cash component including bank accounts, term deposits and cash funds   under management.

Strategic Asset Allocation

Growth:       80%

Growth:       40%

Growth:       0%

Defensive: 100%

Defensive:  20%

Defensive:  60%

Defensive:  100%

Performance Objective

CPI+5%

CPI+3.0%

CPI+1.5%

RBA Cash Rate

Over rolling 10 years

Over rolling 5 years

Over rolling 3 years

Over rolling 12 months

Risk Objective

Risk Loss: 1 in 5 yrs or 20%

Risk Loss: 1 in 8 yrs or 12%

Risk Loss: 1 in 25 yrs or 4%

Risk Loss:  nil or 0%

Time Horizon

8+ years

4 – 7 years

1 – 3 years

0 - 1 year

Performance Benchmark

To exceed (after fees) the return on the weighted composite strategic benchmark over rolling 10yr periods

To exceed (after fees) the return on the weighted composite strategic benchmark over rolling 5yr periods

To exceed (after fees) the return on the weighted composite strategic benchmark over rolling 3yr periods

To equal (after fees) Bloomberg Bank Bill Index

Spending Policy

Fixed 5%

Reducing Capital

Reducing Capital

Operational Liquidity

 

 

 

 

 

 

 

 

 

Attachment B

ADI Investment limits

Rating Classification

ADI Limits

Maximum $ Limit (per ADI)

Target Range% of Cash Pool (per ADI)

AA- or above

$40m

0-50%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attachment C

Short term pool strategic asset allocation

Asset Class

Minimum

Benchmark

Maximum

Growth Assets

0%

0%

0%

Emerging Market Debt

0%

13%

30%

Global High Yield

0%

0%

20%

Australian Sovereign Bonds

0%

15%

50%

Global Sovereign Bonds

0%

10%

35%

Global Credit

0%

5%

15%

Australian Inflation Plus

0%

10%

35%

Absolute Return Fixed Income

0%

12%

30%

Cash

0%

35%

70%

Defensive Assets

0%

100%

100%

Total

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attachment D

Medium term pool strategic asset allocation

Asset Class

Minimum

Benchmark

Maximum

Australian Equity

5%

16%

28%

Global Equity (UH)

0%

10%

20%

Global Small Cap Equity

0%

2%

10%

Emerging Markets Equity

0%

2%

10%

Diversified Growth Funds

0%

0%

15%

Australian Direct Property

0%

5%

15%

Global Unlisted Infrastructure

0%

5%

15%

Growth Assets

25%

40%

50%

Defensive Alternatives

0%

4%

10%

Australian Sovereign Bonds

0%

15%

30%

Global Sovereign Bonds

0%

6%

15%

Australian Inflation Plus

0%

0%

25%

Global Absolute Return Fixed Income

0%

20%

40%

Global Credit

0%

5%

15%

Cash

5%

10%

50%

Defensive Assets

50%

60%

75%

Total

100%

 

Notes:

1. (UH) – Unhedged

 

 

 

 

 

 

 

 

 

Attachment E

Long term pool strategic asset allocation

Asset Class

Minimum

Benchmark

Maximum

Australian Equity

20%

32%

45%

Global Equity (UH)

0%

13%

20%

Global Equity (H)

0%

5%

25%

Global Small Cap Equity

0%

2%

10%

Emerging Markets Equity

0%

3%

10%

Private Equity (UH)

0%

5%

10%

Diversified Growth Funds

0%

0%

20%

Australian Direct Property

0%

10%

20%

Global Unlisted Infrastructure

0%

10%

20%

Growth Assets

65%

80%

90%

Defensive Alternatives

0%

5%

20%

Australian Sovereign Bonds

0%

5%

20%

Global Sovereign Bonds

0%

0%

20%

Global Absolute Return Fixed Income

0%

8%

20%

Cash

0%

2%

20%

Defensive Assets

10%

20%

35%

Total

100%

Notes:

1. (H) – Hedged

2. (UH) – Unhedged

 

Policy No

UP09/13

This is the TRIM record number.  Note: This is not the TRIM file number.  If this is a new policy, apply for the policy number (contact rorett@admin.uwa.edu.au) after the policy has been approved by the relevant position or body and before it is submitted for storing in TRIM.

 

Approving body or position

Seante

Include the name of the body or position with responsibility for approving the policy.  This must be one of the following:

Senate

Academic Board/Council

Vice-Chancellor

Senior Deputy Vice-Chancellor

Deputy Vice-Chancellor (Education)

Deputy Vice-Chancellor (Research and Innovation)

Registrar and Executive Director (Academic Services) Executive Director (Finance and Resources)

 

Date original policy approved

June 2001

Insert date of approval of original policy.  If this information cannot readily be ascertained insert “as per file”.

 

Date this version of policy approved

June 2019

When the policy document has been approved by the relevant body or position insert date of approval.

 

Date policy to be reviewed

February 2022

If the proposing body has not determined a date for review of the policy, a default date of ten years from the date of the latest revision approval will apply.  Enter the appropriate date.

If the document contains procedures, include the date that these were last updated.  Procedures are approved by the relevant Director.

 

Insert the appropriate TRIM file number.  All policies must have a TRIM file for storing information relating to policy development and other related information.  Note this is not the policy number.  Apply for a TRIM file number at http:/intranet.uwa.edu.au/page/38742

 

Contact position

Manager Treasury and Investment

State the name of the position that is to be contacted for any queries regarding the policy, eg University Secretary.  Note: As this will link through to the University’s Contact Directory, the position name must be given exactly as it appears in that directory.

 

 

Provide details of, and, if appropriate, web links to, other policies, legislation or committee resolutions that relate to the subject of the policy, if known, eg Statute(s), University General Rule(s).  If unsure what these might be, try one or more of the following:

Conduct a search on TRIM.

Make an enquiry to Archives and Records.

Seek help from staff in the relevant section. 

If related policies are stored in University Policy format on the University Policies site, please provide the relevant policy number(s).