11 August 2017

Investment fund return $1.3 million ahead of budget

Waikato Regional Council’s investment fund return has come in $1.3 million better than expected for last financial year.

The “very satisfying” extra result has generated surplus funds that will help future proof fund returns, said finance committee chair Jane Hennebry.

“These are very satisfying returns. The committee has worked closely with our finance team and financial advisers to ensure the fund is tightly managed. We will be able to apply the $1.3 million to our investment equalisation reserve which acts as an insurance policy against years when returns might be poorer than budgeted for.”

After excluding interest on internal loans, the return for the year on the now $94 million fund was $6.35 million compared to a budgeted return of $5.04 million.

Returns from the fund – derived from the sale some years ago of shares in the Ports of Auckland and Tauranga – are used for such things as keeping rates down and building up the council’s regional development fund, which now has reserves of around $2 million and is designed to allow the council to contribute to significant projects that benefit the region’s economy.

Aside from the $1.3 million transfer to council’s healthy investment equalisation reserve, $1.16 million from last year’s returns will go to the regional development fund, $1.86 million to keep rates down and $1.77 million for inflation-proofing the fund. Another $250,000 will go towards projects that deliver on Waikato Means Business, the region’s economic development strategy.

A report to this week’s finance committee meeting said the final quarter of last financial year was generally positive for investors as the majority of global equity and bond indices trended upwards.

It was also noted the fund’s long term investment objective is a return of four per cent after inflation and fees, and that over 10 years the council’s return (after inflation and estimated fees) has been 4.4 per cent.

Advisers say keeping the equalisation reserve healthy is prudent given the ongoing potential for market volatility.

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