Diversified Portfolio

Investment Principles and Beliefs

The policies, standards and procedures are documented in a Statement of Investment Policies and Objectives (SIPO) and have been set by the trustees on the basis of investment principles and beliefs.

The principles that drive the current approach are:
1.    Asset allocation is the prime determinant of the performance of a portfolio over the long-term.
2.    Risk and return are strongly and positively related.
3.    Diversification can be used to reduce volatility.
4.    Taxation and the costs of investment management can materially affect the net returns earned by investors.
5.    The market prices of illiquid assets reflect a premium to investors (in the form of additional investment return) for bearing the risk of not being able to sell the assets on demand at their market value.
 
The beliefs that drive the current approach are:
1.    The quality of the governance of an investment program has a direct effect on the level of risk-adjusted returns generated by the program.
2.    The extent to which active management is worthwhile varies across markets.
3.    There is an incremental, predictable return associated with the hedging of foreign currency risk in a New Zealand-domiciled portfolio due to the existence of an exchange risk premium.
4.    Investors with a long-term horizon can outperform more short-term focused investors over the long-run.

Structure of Governance

The trust consists of a board of six trustees that are elected by Consumers for terms of four years. Trustees continuously review and adopt global best practices in the oversight of the trust’s portfolio.  The day-to-day operations of the trust are managed by a General Manager and staff.

Trustees recognise that specialist advice and/or services may be required in the areas of taxation, portfolio management and investment management, and seek the assistance of third-party providers as required. Professional advisors must be independent of investment managers and providers of managed fund products.

The trustees have appointed an investment advisor to provide strategic advice, to assist the trustees to develop their investment policies and to help evaluate the performance of the Diversification Portfolio and the Trust’s investment managers.  The appointed investment advisor is Fidato Advisory Ltd. The trust’s lead consultant, Dr. Edward Schuck, has a strong background in investments with 20 years of experience advising community and electricity trusts, iwi, superannuation schemes and Crown financial institutions. He is a Licensed Independent Trustee and holds several investment-related governance roles.
 
Our strategic objectives for our investments are:

To invest the assets of the Diversification Portfolio with the aim of generating sufficient total investment returns over the long-term to:

•    Meet the costs of managing the Diversification Portfolio;
•    Comply with the distribution policy; and
•    Maintain the real (inflation-adjusted) value of the Diversification Portfolio to maintain fairness between present and future generations.

Investment strategy

• Global equities
• Australasian equities
• Private Infrastructure (Global)
• Private Real Estate (Australasian)
• Private Equity
• Private Debt (NZ)
• NZ Cash

Strategic Asset Allocation

The SAA adopted by the trustees as the target mix of asset classes to which the Diversification Portfolio will be managed, as a matter of policy, is shown below: