Community Legacy Outperforms International Market
15 August 2006
‘Community Legacy’ Outperforms International Market
The first full year of New Plymouth District Council’s Perpetual Investment Fund (PIF) has finished successfully, with it outperforming the international investment market.
In the 12 months to the end of June this year, the PIF earned $43.3 million – a 16.5 per cent net growth.
“This is an extraordinarily good result,” says John Armstrong, chairman of Taranaki Investment Management Ltd (TIML).
“It’s been a big year for us: Getting the systems in place and getting the investments made so that the fund is appropriately diversified.
“We aim to match or better the markets we invest in. We’re trying to out-perform the market all the time, and when you compare the result to the different indices that we follow – such as the NZX, the Australian ASX and United States’ S&P500 – we’ve out-performed them all.”
The fund was set up on 14 December 2004 following the sale of the council’s shareholding in Powerco. Its initial $259.4m value comprised 37.5 per cent of Sparcs (high yield securities) and 62.5 per cent in cash or short-term deposits.
At the end of June 2006, the PIF had diversified to 28 per cent in Sparcs, 16.8 per cent in Australian equities, 15.3 per cent in US equities, 10.1 per cent in New Zealand equities, 12.4 per cent in other equities, 9.6 per cent in cash or short-term deposits and 7.8 per cent in fixed interest. Its total value at the end of June was $286.2m (after meeting its release payment obligations).
Mr Armstrong says TIML is getting closer to completing the fund’s desired diversification.
aim is to have 80 per cent of the fund in growth assets –
such as equities and property. At the end of June, 55 per
cent of the fund was in growth assets, and we’ll further
diversify as those opportunities arise.”
TIML takes a conservative approach to investments as it wants the PIF to be a long-term legacy for the community of New Plymouth District, says Mr Armstrong.
“In any investment fund you have good years and bad years, so it’s great to get the money in the bank and store up a bit of fat because there will be a bad year. It’s very pleasing to get the first year away and get some reserve going.
“The fund has grown to $286.2m which, accounting for inflation and release payments to the council, means that we are 4.8 per cent better off in real terms than 12 months ago.
“For the next three years we’ll pay out $21.5m per year to the council, and focus on sustaining and building the fund so that our great-grandkids can benefit from it.”
The cost of managing the fund has met the agreed price of a quarter of a percent of the fund’s value.
New Plymouth District Council has a AAA credit rating from Standard & Poor’s.
- TIML is governed by an independent board consisting of four directors. It is authorised to make all investment decisions relating to the fund, and it reports to the council’s Investment Subcommittee on a regular basis (at least quarterly).