Since the end of March, most financial markets have performed well. Share markets have continued to bounce back following the February/March Covid-19 related selling, while defensive assets such as bonds have also performed well as interest rates around the world and in New Zealand have continued to fall.
The US share market (S&P 500 Index), for example, had its strongest monthly return since 1987, underscoring the importance of staying the course even in the midst of significant uncertainty and volatility.
Appointment of Matthew Goldsack
General Manager Investments
Matthew Goldsack, has been appointed General Manager Investments of Trust Management. Matthew joins Trust Management from his previous role of 12 years with BT Funds Management (Westpac) where he was Head of Investment Solutions and responsible for the management of over $14 billion.
Matthew was responsible for the BT fund-of-funds solutions with significant input into manager selection. During his tenure, the BT internal investment team spun out to form the independently-owned Salt Funds Management.
Prior to joining Westpac/BT in late 2008, Matthew was the Head of Research for Axa Global Investors.
John Williams, Investment Manager Retirement
John Williams has decided that it is time that he spends more time with his family which now includes three grandchildren and as such, after joining Trust Management at the start of 2015, John will be retiring from Trust Management in late February 2020 in advance of his and Joy’s move to Christchurch.
Over the last five years John has been responsible not only for providing advice to our existing clients but also assisting with the establishment of a number of new client relationships. As many of you have remarked to me over the years, John’s ability to convert sometimes complex investment theories into simple terms (often using sporting analogies!) has put our clients at ease and allowed them to feel confident with the investment decisions they have made. The performance and stability of the returns earned from your investments stands as testament to the quality of the advice John has given.
So, while it is with sadness that we advise you of John’s retirement, we do wish John and Joy all the very best for their next adventure. Having known John for these past five years we can assure you he will not become a stranger to any of us at Trust Management!
Deforestation Investor Statement
In line with our ethical investment policy and the principle of ‘first do no harm’, Trust Management has lent its voice to an engagement initiative which identifies risk in industries which rely on deforestation.
230 institutional investors representing USD $16.2 trillion in assets under management are calling on companies to take urgent action in light of the devastating fires in the Amazon, which have been fueled in part by the deforestation happening at an alarming rate in Brazil and Bolivia.
The engagement initiative calls for appropriate disclosure of deforestation risk exposure by companies and implementation of policy towards no deforestation.
Sharon Zollner Seminar
We were delighted to have Sharon Zollner, Chief Economist ANZ present to our clients in late August.
Sharon gave us a detailed assessment of New Zealand’s economic outlook, covering all the key indicators such as GDP growth, inflation, house prices, the labour market, household debt, the external position and terms of trade, and the government accounts. Bank capital and credit availability also featured in her presentation.
2019 - What to Watch
Global markets face something of a hangover now that the long party of recent years - a period of easy monetary policies, low volatility, political stability and strong corporate earnings growth - may be over.
2018 - What Happened?!
In the end 2018 was a year to forget. It was something of a turning point in financial markets, punctuated by trade wars, rising interest rates, a fickle political climate and some high volatility.
It marked the end of 10 years of unconventional monetary policy of artificially low interest rates and quantitative easing.
Hedging Currency Risk
Investing in international markets has benefits and costs. A key risk that needs to be carefully managed is the prospect of adverse exchange rate movements. This risk can be hedged using currency contracts.
Strategic Asset Allocation - Balanced Fund
In October 2016, Trust Management reviewed the strategic asset allocation of the Balanced Fund in light of revisions to the long-term financial market assumptions of each asset class.
The review focused on the Fund’s allocation to International Fixed Interest, which had become a much less attractive asset class with a lower expected return and higher risk profile than assumed previously.
The Efficient Frontier
The Efficient Frontier is a tool that enables investors to choose their target asset allocation, or the exposure to each asset class. The Efficient Frontier represents the set of optimal portfolios, those that offer the highest expected return for each level of risk.
Another clean bill of health
Trust is important to our Clients and is at the heart of our business. Trust Management engages the professional services firm PwC to carry out independent audits of its processes and internal controls to assure our clients that our systems and internal control procedures are robust and based on best practice.
The outcome of PwC’s most recent audit means our clients can have complete confidence in the way we look after their organisations and manage their financial affairs.
Calculating Investment Performance
Trustees of charities need to regularly monitor the returns of their investment portfolios. Returns can be measured in different ways and it is important Trustees understand what is being presented to them.
Investors typically expend considerable resources to determine their strategic asset allocation. Unless there is a change in investment objectives, or a fundamental shift in financial markets, it is important that the agreed strategy is maintained.
Trust Investments - International Share Fund screens out Tobacco and Controversial Weapons
Trust Management is pleased to advise that the Trust Investments International Share Fund will be screening out companies whose primary business activity is tobacco and controversial weapons, while still providing a broad exposure to the asset class and reasonably close tracking of the index.
Fund Management Team of the Year
Trust Management is pleased to announce that it has won the Fund Management Team of the Year award for the second year running, for the Trust Investments - Property Fund.
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. Some investments are much more volatile than others.
Key Features of Shares
Most investment portfolios of charities have an allocation to shares. A share represents a stake in a company. A typical share fund includes shares in a wide range of different companies.
Diversification and Asset Class Correlations
Diversification is an often touted and misunderstood investment principle. Diversification means splitting funds among a group of investments instead of concentrating funds in a single asset, single asset class, or highly correlated asset classes.
How Unit Pricing Works
This article seeks to explain how unit pricing works, and how the use of unit pricing and registry systems provide equitable outcomes for all investors and/or account holders.
Most investment portfolios of charities have an allocation to bonds. Bonds are less risky than shares, but may still generate negative returns from time to time. A bond can be thought of like a loan...
Balanced Fund Review
On an annual basis we review the investment strategy and asset allocation of each of our Funds. We recently completed our review of the Balanced Fund, a copy of which is available via the link below.
The review concludes that the Fund is highly suited to charitable investors who require a balanced, highly diversified investment portfolio with a strong focus on income.
The three and five year income and capital returns of the Balanced Fund have achieved its investment objectives and exceeded our expectations.
Trust Management launches 101 Series
Trust Management provides services to a diverse range of charities. The services we offer cover a wide range of disciplines and the Trustees who serve on the Boards of our clients come from varied backgrounds, some with in-depth commercial knowledge in specific areas others committed volunteers who have had little exposure to the investment or business world.
It is with this diversity of knowledge in mind, that Trust Management is developing an educational series of papers, aimed at giving a basic oversight of key topics using simple terminology, in easy to understand language. These papers are not intended to be the definitive guide on their given topic, but seek to provide enough explanation that readers will be able to understand the overall concepts of each topic.
John Williams appointed to NZX's SmartShares Board
John Williams, Investment Manager for Trust Management, has been appointed as an independent Director of the NZX's SmartShares Board.
John heads up Trust Management's investment advisory and investment management functions.
Fossil Fuels Screen
Over the past several months, Trust Management has been extensively researching the impact of excluding companies whose major business activity is the extraction and/or production of fossil fuels, from our Sustainable Australasian Share Fund.
We summarise the outcome of the research conducted and the changes to our Fund in the attached article.
Managing Bonds for Income - A Change in Approach
Trust Management continually evaluates the way in which we manage our clients’ assets and we are always striving to deliver investment products and services focused on the needs of charities.
To this end, we have been conducting extensive research and modelling on an alternative management style for New Zealand Bonds, a management style which focuses on the generation of income.
Income from your portfolio
Relative bond and dividend yields have changed post the Global Financial Crisis, and while this may be a temporary shift, charities need to be aware of the implications and temper their expectations for income.
This new relationship poses a challenge for all investors, particularly fiduciaries with an investment objective of making distributions to beneficiaries.
Trust Management Appoints John Williams
Trust Management is pleased to annouce the appointment of John Williams as Investment Manager.
John's most recent roles have been with Vanguard Australia and Russell Investments. John brings an extensive range of experience, skills and expertise to the role.
Fixed Interest Investment Policies
This article originally appeared in the Asia Pacific Risk Management newsletter. It is reproduced here with the kind permission of Roger Kerr, the Principal of APRM. At the time of writing this article Roger was a Director of Trust Management Limited.
The article describes common problems which APRM has observed with charities and community trusts fixed interest investment policies.
Invest or Distribute Funds
We often see cases where charities have made ’investment decisions’ to support local businesses or economic activities.
It is crucial for trusts and charities to make the distinction between investing and distributing, as the two objectives require very different types of thinking, planning and strategies.
A recent story in the media has highlighted a problem of trusts and charities confusing their objectives and, as a result, losing considerable sums of money.