FMPM 300 Investments
James Cook University (the University) has been granted authority to exercise Category 3 investment power under Part 6 of the Statutory Bodies Financial Arrangements Act 1982 (Qld) (SBFA Act).
The Queensland Government Treasurer may from time to time constrain the investing activities of statutory bodies by limitation, caveat, restriction and/or other relevant regulation. Where this occurs, this Investments Policy will be reviewed and reissued to reflect such changes.
The intent of this document is to outline the University’s Investments Policy and guidelines regarding the investment of surplus funds, with the objective to maximise earnings within approved risk guidelines and to ensure the security of funds.
The activities of the investment officers or fund managers responsible for stewardship of the University’s funds will be measured against the standards and the objectives in this Policy.
Activities that defy the spirit and intent of this Policy will be deemed contrary to this Policy.
This Policy applies to the investment of all surplus funds held by the University and undertaken in accordance with the SBFA Act.
For the purposes of the appointment of an external fund manager pursuant to section 59 of the SBFA Act, to operate in a manner consistent with this Policy will constitute compliance.
Investments – for the purposes of this Policy, are defined as arrangements that are undertaken or acquired with the expectation of achieving a financial return through income returns or capital growth.
Illiquid Investments - Illiquid investments are defined as investments that are not publicly traded in sufficient volume to facilitate, under most market conditions, prompt sale without severe market price effect. Examples include: investment in private placement, sub investment grade (i.e. BBB rated investments and lower), a security that is not supported or priced by at least two approved brokers/securities dealers, or unrated securities.
All investments are to be made in accordance with:
- James Cook University Act 1997 (Qld)(JCU Act)
- Financial Accountability Act 2009 (Qld)
- Financial and Performance Management Standard 2009
- Statutory Bodies Financial Arrangements Act 1982 (Qld)(SBFA Act)
- Statutory Bodies Financial Arrangements Regulation 2007
- Financial Management Practice Manual (FMPM)
Ethics and Conflicts of Interest
Prudent Person Standard
The standard of prudence is to be used by investment officers when managing the overall portfolio. Investments will be managed with the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons. This includes having in place appropriate reporting requirements that ensure the investments are being reviewed and overseen regularly.
Investment officers are to manage the investment portfolios not for speculation, but for investment in accordance with this Policy. Investment officers are to avoid any transaction that might harm confidence in the University. They will consider the safety of capital and income objectives when making an investment decision.
Ethics and conflicts of interest
Investment officers/employees shall refrain from personal activities that would conflict with the proper execution and management of the University’s investment portfolio. This includes activities that would impair the investment officer’s ability to make impartial decisions.
This Policy requires that employees and investment officers disclose to the Deputy Vice-Chancellor (Services and Resources Division) any conflict of interest or any investment positions that could be related to the investment portfolio.
The University’s overall objective is to invest its funds at the most advantageous rate of return available to it at the time, for that investment type, and in a way that it considers the most appropriate given the circumstances. In achieving these goals, consideration will be made to the Environmental, Social and Governance (ESG) factors and the University’s tropical agenda.
The University shall invest its funds to meet cash requirements in both the short and the long term. The investment strategy will therefore take into account:
- the expected time horizon of the cash requirements;
- the expected return outcomes of the available asset classes;
- the volatility or variability of the returns of these asset classes;
- the longevity of the University’s investment horizon; and
- the income tax status of the University.
The University’s general principles and underlying goals are:
- Investments shall be made solely in the interest of the University.
- Investments shall be made with care, skill, prudence and diligence.
- Investment of funds shall be so diversified as to minimise the risk of large losses, unless under the circumstances it is clearly prudent not to do so.
- The University may employ one or more investment managers to attain its investment objectives.
- Cash is to be employed productively at all times, by investment in short-term cash equivalents to provide safety, liquidity and returns.
In priority, the order of investment activities shall be preservation of capital, maintenance of liquidity, and return on investments.
Preservation of Capital
Preservation of capital shall be the principal objective of the investment portfolio. Investments are to be performed in a manner that seeks to ensure security of principal of the overall portfolio. This includes managing credit and interest rate risk within the given risk management parameters and avoiding any transactions that would prejudice confidence in the University or its associated entities.
Maintenance of Liquidity
Pursuant to section 31 of the SBFA Act, the University maintains a deposit and withdrawal account for its day-to-day operating transactions which does not have an approved overdraft facility.
- In addition to the balances held in its bank account for routine operating requirements, the investment portfolio will maintain sufficient liquidity to meet all reasonably anticipated operating cash flow requirements of the University, as and when they fall due, without incurring significant transaction costs due to being required to sell an investment.
Return on Investments
The University’s investment portfolio is expected to achieve a market average rate of return and take into account the University’s risk tolerance and current interest rates, budget considerations, and the economic cycle. Any additional return target set by the Investment Sub-Committee will also consider the risk limitations, prudent investment principles and cash flow characteristics identified within this Policy.
Comparison of Performance
For performance purposes, the University’s investment portfolio will be compared to relevant market indices (where available). Asset Class Benchmarks will be determined by Investment Sub–Committee in consultation with the Fund Manager(s). The benchmark target is to be set equal to or above the benchmark yield and consider the expected types of securities held in each portfolio.
In comparing performance, the portfolio will be market valued and take into account all coupons, deposits and withdrawals to/from the portfolio.
Portfolio Implementation and Responsibility
Delegation of Authority
The University Council has delegated to Finance Committee the responsibility for monitoring the investment and performance of all moneys (including moneys held in trust) that are subject to its control consistent with this Policy and legislation.
Delegation must be exercised within the authorised limits set out in FMPM 302: Authorised Limits – Investments and by those with the appropriate authority as set out in the JCU Financial Delegations Register – Table 8: Investments
The Director, Financial and Business Services will establish internal controls and processes that will ensure investment objectives are met and that the investment portfolios are protected for loss, theft or inappropriate use.
For the purposes of this Policy, investible funds are the investment moneys available for investment at any one time and include the University’s bank account balance. Included in this balance is any moneys held by the University on behalf of external parties (for example, developer contributions). However, this Policy does not apply to moneys held on trust for third parties where those funds are subject to specific conditions.
The University has been granted Category 3 Investment powers under Part 6 Section 46 of the SBFA Act. Additionally the University has appointed an Investment Manager under Part 7 Section 59 of the SBFA Act and as such, the University’s portfolio can be invested in the following areas:
- Deposits with banks and financial institutions which are regulated against the Australian Prudential Regulation Authority (APRA);
- Cash Securities;
- Fixed Interest Securities and Debt Instruments;
- Listed Australian Shares;
- Listed International Shares;
- Trusts and Portfolios managed by investment management organisations;
- Alternative Assets; and
- Other assets as approved by Finance Committee.
This Policy prohibits any investment carried out for speculative purposes
The following investments are prohibited by this Investment Policy:
- Principal only investments or securities that provide potentially nil or negative cash flow;
- Stand-alone securities issued that have underlying futures, options, forward contracts and swaps of any kind;
- Securities issued in non-Australian dollars;
- Deposits with banks and financial institutions that are not APRA regulated; or
- Illiquid investments.
Investment returns from the University’s investment portfolio support operational revenues, provide for payments on liabilities and underpin endowment mandates. In making these investment decisions, the University also considers its wider responsibilities as an investor.
The University’s sustainable investment approach is based on its belief that:
- It is important to act responsibly and represent the University’s strategic intent when investing. The University expects the fund managers it appoints and the companies it invests in, to operate responsibly and be good corporate citizens;
- Active ownership enables investors to influence companies to act responsibly and is important to create sustainable investment returns for present and future generations;
- Environmental, social and governance (ESG) factors can positively impact investment risk and returns and contribute to sustainable growth. Direct investments in companies that engage in activities inconsistent with ESG principles are discouraged.
The University’s investment portfolio comprises at-call cash, cash term deposits and managed funds.
In making managed fund investment decisions (i.e. managed funds), the University will aim to engage a fund manager(s) which enables the University to inform, monitor and report on alignment with its sustainable investment approach and has a mechanism for reporting ESG KPI’s.
As a matter of course, the University prefers to use its influence as an investor to engage with its managers and portfolio companies to address sustainability concerns. The University will only exclude investments as a matter of last resort where engagement has not, or is unlikely to be effective.
Portfolio investment parameters and credit requirements
For investments at call or for a fixed term of not more than one year the University is permitted, under sections 44 and 45 of the SBFA Act, to use investments with a financial institution rating by Standard and Poor's (Australia) Pty Ltd (S&P) of A-1+, A-1, AAm or AAAm.
For investments at call or for a fixed term of greater than one year but not more than three years the University is permitted, under section 45 of the SBFA Act, to use investments with a financial institution rating by S&P of AA, AA+ or AAA.
The University’s credit ratings and counterpart limits are specified in FMPM 302: Authorised Limits - Investments.
New Investment Products
A new investment product requires a full risk assessment by management (including compliance with the SBFA Act) and requires approval by the Finance Committee.
Any breach of this Investment Policy is to be reported to the Deputy Vice Chancellor, Services and Resources and rectified within 24 hours of the breach occurring. The Deputy Vice Chancellor, Services and Resources will report the breach to the Investment Sub-Committee at its next meeting.
Where the University holds an investment that is downgraded below the minimum acceptable rating level, as prescribed under regulation for the investment arrangement, The University shall within 28 days after the change becomes known, either obtain the Queensland Government Treasurer’s approval for continuing with the investment arrangement or sell the investment arrangement (including, for example, withdrawing a deposit).
Safekeeping and Custody
Each transaction will require written confirmation by the broker or the dealer or the institution. The University will hold security documents, or alternatively a third party custodian authorised by the Deputy Vice Chancellor, Services and Resources and evidenced by safekeeping receipts, may hold security documents.
The University may engage with appropriately qualified advisors to obtain market information in respect of available investments and rates of return.
All transactions undertaken on behalf of the investment portfolio of the University will be executed either by the University directly, or by the engaged funds manager.
Related policy instruments
Related documents and legislation
NOTE: Printed copies of this policy are uncontrolled, and currency can only be assured at the time of printing.
Deputy Vice Chancellor, Services & Resources
Date for next Major Review in accordance with the Policy Handbook
Approval date - the date the approval authority approved the establishment, minor or major amendment or disestablishment
Implementation Date - the date the policy was published in the Policy Library and is the date the policy takes effect
Reviewed in accordance with Mercer’s ESG workshop outcomes and procedure removed.
Director, Finance and Business Services
Amendments as detailed in Item 11 - Finance Committee Minutes (6/14) 30/11/2014
Finance Committee (6/11)
|Investment, surplus funds|