This paper sets out what should be included in an Investment Policy Statement (IPS) for an any organisation with a pool of investment assets to manage. This includes charitable trusts and foundations, Māori and Iwi investment organisations, superannuation and provident funds, and other board-governed investment entities. It provides helpful tips for Stewards who are preparing the IPS internally or adopting an IPS prepared by a financial adviser or fund manager.
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Objective-based asset allocation (OBAA) funds were born in the ashes of the GFC and target an absolute return. Their appeal is that they offer investors a one-stop solution and better potential management of downside risks through dynamic asset allocation and risk protection overlays. However, our analysis shows most have under-performed conventional balanced funds since inception, and they have not, in general, meaningfully used the asset allocation ranges permitted by their investment policies. They are also yet to be truly tested in a bearish market environment. Our findings show that the actual investments made differ markedly between OBAA funds. This highlights that the need for comprehensive due diligence by Advisers, Trustees and other fiduciaries is just as material for OBAA funds as conventional funds. Finally we argue that the ongoing monitoring requirement is even higher with OBAA funds because the asset allocation and fund selection decisions they make still remain the responsibility of the fiduciary – they cannot be delegated away.
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Staff from fi360 Pacific were involved in a research program run by the New Zealand Institute of Pacific Research to develop an understanding of Sovereign funds in the Pacific and opportunities to lift performances. Pacific Island funds are often the largest single investor in their host nations, and they are a key sources of wealth and potential mechanism to help Pacific Islands achieve greater self-reliance. The 3 phases of this research were:
A key finding of this research was that for many funds there needs to be more clarity on their economic purpose so that clear investment strategies can be developed to best meet their purpose. Opportunities to improve investment governance were also identified, including through training of Trustees and regular scheduled reviews of policies and providers. Papers for this research are available here:
Socially responsible investing (SRI) (also called sustainable, responsible, impact investing) is growing in markets around the world. It offers investors the opportunity to ensure that their investments align with their mission and values and is part of a wider movement to make the global financial system more effective in mobilising capital towards an environmentally sustainable and socially inclusive economy, that is, sustainable development. As SRI is becoming better understood and more widely accepted, the historic barriers to SRI, such as the belief that it is inconsistent with the fiduciary obligation of loyalty to beneficiaries because it has a negative impact on returns, are being challenged and arguably dismantled.
This paper aims to help those boards charged with overseeing investments for the benefit of others (i.e. fiduciary boards) in the Pacific sovereign wealth fund, philanthropic, charities and Māori sectors (for the purpose of this paper, Investment Stewards) understand what SRI is and how it fits in with their fiduciary obligations and investment governance practices.
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Financial service providers including brokers, advisers, banks and investment managers have had to re-think business models, re-train, even decide whether they want to continue. They are now wrapped in new regulation, designed to protect investors and inform. They lose their ticket to attend the game if they fail to meet requirements.
Providers might claim, “If we meet compliance, surely any client should be satisfied. What other scrutiny could possibly be necessary?”
Actually – quite a lot!
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Why Community Foundations and Charities with Foundations Need to think about their Investment Governance
The community foundation movement is relatively young in New Zealand, but is fast gathering steam. The purpose of this paper is to explain what investment governance is and to explain its importance and value in the context of community foundations and other charities with foundations.
This paper argues that community foundations have the potential to hold a special, privileged position by virtue of their structure and community role in defined geographic regions and that this privileged position heightens the level of fiduciary obligations they owe to their communities. It will also be argued that the scrutiny of their internal investment governance practices will only increase in the near future for several reasons. Together, these factors mean community foundations must act now to put in place strong, objective and standardised investment governance procedures and be able to outwardly demonstrate to those whose support they rely on to grow (their communities, donors, lawyers and other professionals) that they have done so.
Further, charities that have their own foundations must do the same in order to be able to compete for funds on the basis of investment governance capability and trustworthiness.
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Updated practices and new layout are provided in the recent release of an edition suitable for New Zealand, Australia and Asia Pacific stewards or for use by service providers working with such entities. Copies are available to purchase via the Store or please contact us for more information on discounts for multiple copies.
The summary of preferred approach recommended by the Law Commission has been published, and given the ramifications for those in governance roles, is generating great interest with Trustees and professional legal and accounting practices. fi360 has been providing guidance and insights to these groups and the advisers that support them, in terms of illustrating how our defined fiduciary practices framework can meet the proposed requirements.
The Law Commission will be moving on to review law relating to charities in the near future.
After an extensive review and collaboration with independent industry experts and the AICPA (as technical editors), the new handbook series has been released for the US. The practices themselves have not fundamentally changed but rather have been regrouped in places and the commentary has been improved. We have commenced work on amended versions suitable for advisers and trustees in New Zealand.
Additionally, fi360 Pacific has commenced adaptation for a specialised Australian Superannuation handbook.
The revised practices also mean the Accredited Investment Fiduciary and Fiduciary Essentials training courses will be provided with upgraded content.
fi360 and IPS AdvisorPro partner with FinaMetrica for data integration December 16, 2013
fi360's IPS AdvisorPro®, which enables financial advisors to develop customised investment policy statements (IPS), is now integrated with the FinaMetrica risk profiling system.
US users who subscribe to both technologies can now import their clients’ risk profile reports directly from the FinaMetrica system into investment policy statements generated using IPS AdvisorPro®. Used together, the technologies help facilitate advisor-client communications, mutual understanding of roles and responsibilities, and overall more successful client and investment management practices.