Trust Management Celebrates 15 Years
2016 marks our 15th year of working alongside charities and not-for-profits, as New Zealand’s only professional services firm dedicated to the provision of specialised professional services to charities. Thank you to all of our clients, stakeholders, and industry colleagues, for your business and relationships over this journey.
We’re proud of this milestone, and take the opportunity to look back at our company growth since inception, as well as reflecting on some client highlights.
We are proud to be able to say that every client that was with us on Day One, back in 2001, remains a client to this day. Since then, our clients’ assets under management have grown from $400 million to more than $1.2 billion in 2015.
Since our establishment in 2001, Trust Management now works with charities operating across a broad range of sectors including health, education, community, research, religion, care for the young, aged care, relief of poverty and overseas development and aid. Our clients reach spans across Aotearoa, New Zealand to Polynesia and Melanesia.
The raison d'être of Trust Management is to provide clients with the independent and robust advice and the support they need to facilitate good decision-making and governance.
A solid foundation based on helping charities achieve their objectives
Central to Trust Management’s success is our deep understanding of how we can assist charities and not-for-profits achieve their objectives.
Trust Management was established in 2001 by the Anglican Church in Auckland to ensure the assets and investments of the Church’s Trusts were being managed effectively and maximising returns. The company is fully owned by the Anglican Diocese of Auckland to this day.
While the company is managed separately and independently from the Anglican Diocese, with a Board of independent commercial directors, it is through these origins that we have gained a unique perspective on how charitable organisations operate - and how we can help.
Helping trusts reach new heights
When providing our clients with robust and independent advice, we often see many trusts attempting to balance commercial imperatives with their charitable purposes.
Therefore, at times we see our job is to challenge our clients to ensure their strategies remain relevant to their organisation’s core purpose and to their beneficiaries. In these instances, a charity’s mission should not become confused with its investment objectives.
Over the years, we have worked with our clients to design and implement new investment strategies, such as introducing new investment funds to client portfolios to improve diversity, or finding investments that are better aligned with the client’s core values.
Showcasing our approach
We’d like to take a moment to detail an example of the proven and robust approach we take to our clients’ investment portfolios. One of our clients had ownership of residential ground lease lands, allowing its lessees to benefit from a low housing costs. However, we could see that this situation was not advantageous to the Trust’s beneficiaries nor a prudent diversified investment strategy.
Upon consideration of our advice, the Trust agreed to the sale of the ground leases portfolio, and their investment capital grew from approximately $15 million with annual distributions of $500,000, to an excess of $30 million with distributions in the region of $1.6 - $1.7 million each year.
We take pride in challenging, supporting and encouraging our clients to make astute investment decisions that are consistent with their objectives, while ensuring returns are maximised.
Stronger than ever
The 27-person strong team at Trust Management are experts at providing robust investment advice, property asset management advice and governance services.
We have a proven track record of working with charities to help them achieve their objectives, and we look forward to working with our existing clients and more, for the next 15 years and beyond.
Trust Management News
Pursuant to the Financial Markets Conduct Act 2013 all fund managers will be required to be licenced. Trust Management as the Manager of the Trust Investments Group Investment Funds has submitted its application to be licenced as a Managed Investment Scheme (MIS) manager. The licensing process is an indepth review of the system, people, governance, capabilities and competencies of a Manager.
To give some insight into the depth of the licencing process, Trust Management’s application, with supporting papers was over 1000 pages. The licence review process is expected to take a number of months, and we look forward to providing you with more updates as we progress through the licensing process.
For any questions in relation to the licensing process or the impact of the Financial Markets Conduct Act 2013 on the group investment funds, please do not hesitate to contact Shane Coward, General Manager.
Two new articles have been released from our educational series, aimed at giving an oversight of key topics using simple terminology, and easy to understand language. These papers are not intended to be the definitive guide on their given topic, but seek to provide enough of an explanation that readers will be able to understand the overall concepts of each topic.
Accounting for Donated Goods and Services
- A New Accounting Standard for Charities
For all financial periods starting on or after 1st April 2015, Tier 1 and 2 Charities (mainly large and medium size charities) will need to apply the new “not for profit” accounting standards.
Risk and Volatility
There are many risks of investing, such as getting a lower return than expected, the market price falling below the original purchase price, and the value of the investment being volatile. Volatility is the extent to which the price of an investment fluctuates.
Property Fund Acquistion
Trust Management are pleased to advise that in April 2016 an Agreement relating to the building expansion was executed between the Fund and The Warehouse Limited (TWL). The Agreement does not change any of the key terms as was provided for within the existing lease but looks to detail the specifics for the expansion works.
One new element within the Agreement is the introduction of progress payments to be made through the project, with the first payment being paid in April. This is positive as the progress payments will obtain an improvements rental return of 6% pa exceeding the current level of return on cash held by the Fund.
On practical completion of the development (expected to be in February 2017) a new 10 year lease commences with a mechanism for the rental to be 10.5% of the development cost including land. While the latest cost forecast is circa $19m including land the commitment of the Fund has been capped at $20m within the Agreement.
The expansion is low risk for the Fund, with a return based mechanism and a new lease term over the existing and expansion areas to a quality tenant commencing on practical completion.
Due to the size of the completed development relative to the Fund size, the Manager has progressed investigations into selling 50%, or more, of the property on practical completion. The sale would be undertaken after completion of the expansion works so that the development profit has been secured for the Fund.
Economic and Market Outlook
The first three months of the year saw the world’s major share markets decline by an average 2%, despite rallying strongly in March. Market participants remained nervous about the outlook for global economic growth and company profits, although were heartened late in the quarter by the actions and rhetoric of central banks.
Fixed interest markets generated strong quarterly returns of around 4% as investors remained risk averse and inflation expectations were revised down. Rather surprisingly, many commodity prices rebounded significantly off their recent lows.
Economic growth remains relatively anaemic around the world given the highly stimulatory monetary policies and company earnings growth is generally limited. Share markets should nonetheless be supported by the policy environment. Of course, the latter is dependent on actual and expected inflation staying muted.
The longer term outlook for markets looks more clouded, with much depending on the path of US inflation and the extent of the slowdown in China, and the impact these have on global (short-term and long-term) interest rates. Most markets are currently factoring in negligible probability of higher global inflation.
Under most scenarios, returns in all asset classes over the next few years are likely to be significantly lower than those of recent years. Investors are encouraged to maintain a balanced asset allocation.
The Balanced Fund invests in the other five sector funds, and maintains a moderate risk profile with an allocation of approximately 30% Shares, 30% Property and 40% Fixed Interest. While not immune from market volatility, the Fund has a strong focus on the distribution of income and its returns tend to be reasonably stable.
The Fund returned 1.9% in the quarter as fixed interest and property gains more than offset the declines in share markets, providing a further example of the benefit of a balanced asset allocation and well-diversified portfolio.
Returns from here are expected to be lower than those of recent years in view of lower economic growth, modest growth in company earnings and a less favourable monetary policy backdrop.
To 31 March 2016
Inception Date 01/06/2006
The Fund returned 1.3% for the quarter and continues to generate steady and consistent income.
It has been an active quarter for the Fund. In terms of the Fund’s largest asset, further progress was made with The Warehouse for the expansion of its South Island Distribution Centre in the IZone industrial subdivision in Christchurch. Works on site commenced in April. An adjacent strip of land was purchased to increase access flexibility.
Since quarter-end the Fund has purchased a small industrial property at 441 East Tamaki Road which adjoins one of the Fund’s existing investments.
To 31 March 2016
Inception Date 01/03/2001
AUSTRALASIAN SHARE FUND
The Fund returned 3.9% for the quarter versus the benchmark’s 6.1%, but significantly outperformed in the March year (18.3% versus 15.0%). The New Zealand share market continues to perform extremely well compared to other markets around the world.
Corporate activity and solid earnings results underpinned the market. The unexpected lowering of the Official Cash Rate to 2.25% and the decline in long-term interest rates were also supportive factors.
The Australian market also performed reasonably well, to be up 1.8% for the quarter in NZ Dollar terms. Australian stocks comprise close to 20% of the Fund.
The Fund excludes stocks whose major activities involve alcohol, tobacco, armaments, pornography and gambling, and those involved in the production and/or extraction of fossil fuels.
To 31 March 2016
Inception Date 01/12/2002
INTERNATIONAL SHARE FUND
The Fund returned -1.7% for the quarter versus -1.6% for the benchmark. The performance of the world’s major share markets was mixed in local currency terms. The US market was up 0.8%, but (partly on account of strong currencies) Japan was down 12% and most European markets declined more than 5%. Currency hedged and unhedged investors fared similarly over the three months.
For the year to March, the Fund returned 1.2%, with falls in all major share markets over the period offset by the currency gains stemming from the significant fall in the NZ Dollar.
The Fund invests in an indexed product which tracks the MSCI World Index. 50% of the Fund’s foreign exchange exposures are hedged to NZ Dollars.
To 31 March 2016
Inception Date 01/12/2005
NZ BOND FUND
The Fund returned a strong 3.3% for the quarter compared to 3.9% for the benchmark. Long-term yields declined around 0.5% in line with the global trend, making for some large capital gains. Another lowering of the Official Cash Rate in March, to 2.25%, and unexpected strength in the NZ Dollar also buoyed the market.
The Fund continues to target a slightly shorter duration than the benchmark, 3.8 years versus the benchmark's 4.5 years. This strategy is based on the view that global bond yields eventually increase from their current low levels, and offer better opportunities in the future.
The Fund’s strategy prioritises the level and stability of distributed income. It is expected that the proportion of the Fund’s return distributed as income will be higher than in previous years.
To 31 March 2016
Inception Date 01/09/2005
INTERNATIONAL BOND FUND
The Fund returned a very strong 4.6% for the quarter as long term sovereign yields declined by around 0.5%, generating large capital gains. The benchmark Citigroup World Government Bond Index NZ Dollar Hedged returned 4.5%.
Bond markets responded over the period to lower inflationary expectations, continued easy monetary conditions and a high level of risk aversion on the part of investors. A rebound in some commodity prices - notably oil, gold and iron ore - was seemingly ignored by the markets.
The Fund invests in an index fund that tracks the Citigroup Index hedged to Australian dollars. A further hedge is applied to hedge the Australian dollar exposure. The returns tend to lag the benchmark as the cost of hedging is excluded from the benchmark return calculation.
To 31 March 2016
Inception Date 01/09/2005
Under the Financial Markets Conduct Act this communication may be deemed to be an advertisement for an offer of units. Trust Investments Management Limited is the issuer of the units to be issued under the offer to which this advertisement relates. A product disclosure statement for the offer, which sets out the terms and conditions of the offer, is available, and can be obtained at