• Section 1 - Summary
• Section 2 - Scope
• Section 3 - Definitions
• Section 4 - Policy / Regulation
• Section 5 - Procedures
• Part A – Summary of Roles and Responsibilities
• Part B – Procedures
• Schedule A: Performance Benchmarks
• Schedule B: Asset Allocation Ranges

Section 1 - Summary

(1) This Procedure outlines the process of monitoring and evaluating Victoria University’s (VU, the University) investment funds and should be read in conjunction with the Investment Policy. 

Section 2 - Scope

(2) This Procedure applies to University Finance staff, Council and its sub-committees, of the University involved in the management of investment funds.

Section 3 - Definitions

(3) Nil.

Section 4 - Policy / Regulation

(4) See Investment Policy.

Section 5 - Procedures

Part A – Summary of Roles and Responsibilities

Part B – Procedures

Structure of Investment Portfolios and Investment Objectives

(8) The University will identify separate and distinct purposes for the funds available for investment and manage them as an independent investment portfolio.

(9) The University has determined the following separate investment portfolios are to be established:
a.    Treasury Operations Portfolio (TOP) - This portfolio is focused over the short term, with an investment horizon rolling over 12 months.
b.    Longer Term Investment Portfolio (LTIP) - This portfolio is currently focused over the medium term, with an investment horizon of around 2 to 4 years.

(10) The CFO, in consultation with the Finance and Investment Committee, will determine the appropriate level of assets to be held as investment funds within the portfolios from time to time, taking into consideration liquidity and expenditure requirements.

Treasury Operations Portfolio (TOP)    

(11) This portfolio is to be managed in a risk-averse manner. The basis for an investment of this portfolio is that a loss of capital over a financial year would be undesirable. This portfolio is managed to minimise the risk of negative return over any financial year. However, given the recognition that in extreme market conditions, a negative return is possible.

(12) This portfolio is to be managed on a 12-month investment horizon.

(13) The investment objectives for this portfolio are:
a.    Investment returns: To manage the cash and cash-like investments specific to upcoming spending requirements.
b.    Risk: The likelihood of returns being lower than inflation is to be negligible. There is minimal appetite for negative returns.
c.    Constraint: Liquidity will be managed to meet the spending requirements as they arise.
d.    Performance measurement: To achieve, over rolling one year periods, an average before fees and taxes annual return that is at least equal to the benchmark return.

(14) Consistent with the nature of the portfolio and its investment objectives, the Treasury Funds will be invested for up to 24 months in the strategic asset allocation, as shown in Schedule B (below).

Longer Term Investment Portfolio (LTIP)

(15) A longer term investment horizon applies to this portfolio, to obtain a rate of return that is 2.0% above the rate of inflation (as measured by CPI) after fees and taxes. Despite this objective, a decline in market value in any one year should not be a major concern provided the investment risk objective is met.

(16) The LTIP is held to meet:
a.    the adequate levels of capital reserves to safeguard the long term viability of the University.
b.    the strategic planning initiatives of the University, including capital works and restructuring opportunities.
c.    the supplemental income funding for strategic, operational initiatives.
d.    the preservation of the real value of capital for trust and endowment funds.
e.    the annual cash distribution requirements of trust and endowment funds for the payment of scholarships.

(17) The investment objectives for the portfolio are:
a.    Investment return: To achieve a rate of return that is 2.0% above the rate of inflation (as measured by CPI), over rolling three year periods, after fees and taxes and incorporating franking credits. The probability of achieving CPI + 2.0% over the long term should be at least 55%.
b.    Income return: To achieve a level of income that is at least 3.0% per annum.
c.    Risk: The likelihood of negative return will be no more than 1 in every 4.5 years.
d.    Performance measurement: Over rolling three year periods, achieve an average before fees and taxes return that is at least equal to the benchmark return. The benchmark return will be calculated as the weighted average of the strategic benchmark weights using returns of the asset class benchmarks, as stated in Schedule A (below).

(18) The risk profile of the University has been determined to be moderate, with an allocation to growth assets of around 50%. Consistent with the nature of the funds, risk profile and the investment objectives, the strategic asset allocation is shown in Schedule B2 (below).

Authorised signatories

(19) The positions within the University that are authorised signatories for approved investment transactions are documented in the University's Delegations and Authorisations Policy and associated schedules of delegation.

(20) The Investment Manager requires that any two authorised signatories sign an authority to proceed or trading instruction to make or redeem investments on behalf of the University for all Investment Transactions, in accordance with the University's Investment Policy and Procedure.

Administration

(21) In respect of the administration of the University funds:

1. All investment assets must be held in the name of Victoria University and its subsidiaries (as applicable) who will retain full legal ownership.
2. All correspondence and documents relating to the investments of either portfolio may be held by the Investment Manager who will be obliged to provide full access and transfer of this information upon request.

Reporting

(22) The Investment Manager will prepare and provide comprehensive monthly reporting to University management and quarterly reporting to the Finance and Investment Committee. The Finance and Investment Committee will provide an investment performance report to the Council as and when required by Council. 

(23) The reporting to be provided by the Investment Manager to include:
a.    The return on an investment expressed as a percentage.
b.    The return on each portfolio compared to its benchmark return.
c.    The return on each portfolio compared to its peer median return where the peer measure is taken from the relevant Chant West Implemented Consulting Survey universe.
d.    The percentage of exposure to each asset class compared to the target allocation as determined by this policy, including any comments on the major movements or any major disparities.
e.    Any other data required by the Finance and Investment Committee.
f.    The Investment Manager will report on Ethical, Social and Governance, (ESG) matter such as engagement activities, proxy voting and the ESG ratings of the investment vehicles in which the University is invested on an annual basis.

Schedule A: Performance Benchmarks

Schedule B: Asset Allocation Ranges

B.1 Treasury Operations Portfolio

B.2 Longer Term Investment Portfolio