This procedure sets out the requirements for monitoring and reporting the investment and performance of all monies (including monies held in trust and surplus funds) that are subject to the control of James Cook University.
The University has authority, granted by the Queensland Treasurer, to exercise investment powers under Part 6 of the Statutory Bodies Financial Arrangement Act 1982 (Qld) (SBFA Act). The University’s investing activities may be constrained by such limitations, caveats or restrictions specified by the Queensland Treasurer from time to time and/or such other regulation deemed relevant. Any such limitations in existence at the date of this procedure have been incorporated into this procedure. The procedure will be revised and reissued for any subsequent changes in legislation.
This procedure aims to:
This procedure includes guidelines for:
The amount of funds available for investment is limited by the demands on funds for financing and operating activities of the University. Financing or operating decisions may therefore significantly increase or decrease the level of the cash portfolio and hence the potential investment returns to the University.
Management decisions with significant impact on operating cash flows will be evaluated to determine if alternate financing arrangements can be entered into so as to optimise the consequent return from such investment activities net of alternative financing arrangements.
Restricted funds are accounted for within the Restricted Fund Pool. This Fund Pool has specific spending requirements each year and funds are invested to meet the requirements for both income and growth.
The primary objectives in the investment of assets shall be:
To provide absolute security and accessibility for regular transactions.
To provide a high degree of security and accessibility and a competitive interest rate.
To exceed the Target Rate of Return (see below) over rolling five (5) year periods.
Target Rate of Return
To equal or exceed a return (after fees) of:
A competitive rate relative to similar banking facilities in the market
A competitive rate relative to the weighted term of the investment e.g. for investments with a one year weighted term the USB Warburg Australian Bank Bill Index/BBSW over rolling one-year periods
A combined return from income and growth which:
Note 1: Asset Class Benchmarks will be determined by the Finance Committee in consultation with the Fund Manager(s); form part of the written contract; and be periodically reviewed.
Note 2: For budgeting purposes, the University may wish, from time to time, to determine an absolute value of realised returns (i.e. a cash sum) which will be communicated to the Fund Manager(s), as necessary, on a timely basis.
Volatility of Returns
The rate of return for managed funds is designed to achieve a balanced return of current income and modest growth of principal in the short to medium term and to emphasise long term growth of principal while avoiding excessive risk. In order to achieve its objectives it is understood that investment will experience volatility and consequently fluctuations in market value. The University will tolerate volatility as measured against the volatility of a comparable market index in each asset class and, for the portfolio as a whole, the volatility of a composite index based on the strategic asset allocation. The indices (e.g. the ASX All Ordinaries index) used as a measure of a Fund Manager’s performance will also be used to benchmark what is acceptable volatility.
Measurement of Rate of Return
Investment Returns are measured on the basis of total performance which captures in a single measure; changes in the capital value of assets held (where applicable), income from managed investment portfolio assets, proceeds of sales of assets sold and cost of assets acquired.
Distribution of Investment Returns
Investment Returns, for internal purposes, are measured on the basis of the aggregate return from realised capital gains/losses and income from all investment portfolio assets less fees and expenses. (Refer FMPM 510: Policy – Internal Interest Distribution).
Investment returns generated from cash surpluses are considered to be available for the general purposes of the University and are distributed via the Budget process.
There is a difference between the Measurement of Rate of Return convention of the Managed Portfolio and the calculation of internal investment returns defined above. The total return for the Managed Portfolio takes to account unrealised market value gains and losses as at reporting dates based on the market value of the portfolio at that date. However, the internal return takes into account only realised gains or losses i.e. converted into real cash increments/decrements.
Delegation of Authority
Delegations as outlined in the University’s Financial Delegations Register in Table 8: Investments.
In addition 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.
The specific responsibilities of Council relating to investment management includes:
The specific responsibilities of Finance Committee relating to investment management include:
Deputy Vice Chancellor, Services and Resources
The Deputy Vice Chancellor, Services and Resources provides information and reporting to Finance Committee with respect to all aspects of the investing activities including but not limited to:
The University’s contract with the Fund Manager can be terminated at any time without penalty based upon the conditions specified below. Each Fund Manager appointed by the University will be provided with a copy of this procedure and must acknowledge, in writing, its acceptance of responsibility for investing University funds.
Each Fund Manager agrees to comply with the requirements of the University’s FMPM 300: Policy - Investments, FMPM 301: Procedure - Investments and FMPM 302: Authorised Limits - Investments as annexed to their contract including any alterations thereto as agreed between the parties. Fund Managers are not responsible for ensuring discretionary investments managers comply with the FMPM requirements.
The terms of appointment of each Fund Manager will allow the Fund Manager to provide investment advice and recommendations either on an advisory or discretionary basis for the assets placed under its jurisdiction while observing and operating within this procedure.
Specific responsibilities of the Fund Manager(s) include:
Performance reports shall be compiled at least quarterly by Fund Managers. The report, including commentary, will, as a minimum, be required to contain the following:
Investment Reports (excluding appendix) will not usually exceed 8 pages in length.
On an annual basis and at the time of mid-year reporting, the Fund Managers will provide a “health check” report of their own organisation including:
All major cash flows arising from financing or operating decisions which impact (favourably or adversely) on available funds for investment are to be reported to Finance Committee.
An investment Report of Tertiary Portfolio Funds including a section - Cash Portfolio Funds - detailing the performance of the Cash Portfolio will be prepared by the Director, Financial and Business Services and submitted quarterly to Finance Committee in line with scheduled meetings..
Review and Evaluation
The investment performance of total portfolios, as well as asset class components, will be measured against the performance of the Asset Class Benchmarks agreed with the Fund Manager(s).
The Finance Committee will consider the extent to which the investment results are consistent with the investment objectives, goals and guidelines set forth in this procedure.
Fund Manager(s) shall be reviewed over at least a three-year (3) rolling period regarding performance, personnel strategy, research capabilities, organisational and business matters, and other qualitative factors that may impact their ability to achieve the desired investment results. The University reserves the right to terminate a Manager for any reason including but not limited to the following:
Asset Allocations are used in this procedure to describe a preferred mix of classes of investments toward which the portfolio is aimed.
From time to time the actual mix may vary from that approved by Finance Committee. A temporary variance of up to 5% will be tolerated. Variances which continue for more than 2 quarters shall be reviewed by the Finance Committee to determine whether:
The allocation between asset classes as approved by Finance Committee is specified in FMPM 302: Authorised Limits - Investments.
The investible funds should match the cash flow needs of the University deemed by the Director, Financial and Business Services after preparing the University’s budget. Once the Director, Financial and Business Services has determined that the cash flow requirements can be met, funds may be invested for the required term. In this regard, it is appropriate for the Director, Financial and Business Services to be conservative (i.e where possible, the investments should not be broken to meet cash flow obligations).
It is the responsibility of the Director, Financial and Business Services to assess the cost of direct investment management by the University relative to the return generated. This should be compared with the cost of investing funds with a capital guaranteed cash fund (for example, the QTC Capital Guaranteed Cash Fund).
In making managed fund investment decisions (i.e. managed funds), the University will aim to engage a fund manager(s) which:
In order to mitigate the University’s exposure to ESG risks within managed funds, the University will:
Statutory Bodies Financial Arrangement Act 1982 (Qld)
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NOTE: Printed copies of this policy are uncontrolled, and currency can only be assured at the time of printing.
Deputy Vice Chancellor, Services and Resources
Deputy Vice Chancellor, Services and Resources
Date for next Major Review (in accordance with the Policy Handbook)
NOTE: A minor amendment will not result in a change of the next major review date.
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 to align with FMPM 300 Investment Policy.
Director Financial and Business Services
Policy Sponsor and Approval Authority updated to reflect the approved Policy and Delegations Framework
Quality Standards and Policy