Environment Waikato is planning to transfer $6 million from its investment fund earnings to its income equalisation reserve to balance negative returns over the past year.
This week’s Corporate Services Committee meeting has recommended the transfer – which still leaves a larger capital balance in the investment fund than it began with.
After a disappointing year, to date the fund has had a negative return of $646,000 against budgeted income of $4,896,765.
After a number of good years, in June 1999 the fund was re-capitalised using earnings so that base capital was increased from $68.8 million to $75.2 million. That means more than $6 million can be transferred to reinstate the reserve while still maintaining more than the original capital base.
Corporate Services Group Manager Warren Stevens said the reserve income was needed to continue to subsidise the general rate. A presentation would be made to the Council in June on any changes required to the fund for the next financial year.
The fund was currently over weight in New Zealand fixed interest, and three quarters of all overseas invested funds were hedged to ensure loses were minimised.
Council Chairman Neil Clarke said it was necessary to remind the public that over the lifetime of the fund its average earnings since inception were more than eight percent, despite the past couple of disappointing years.
“Focusing on the recent returns ignores that over time it has been a successful investment. We are guided by the best advice available and Councillors are not making the investment decisions. We are going about this in a most responsible way and have a balanced portfolio.
“It is important from an investment point of view that we have a very balanced portfolio and look at a long term investment, not reacting with a knee-jerk. As trustees, the buck stops with us and we have a responsibility to ensure we invest in a manner that gets the best return. We have little scope to favour any particular activities that appeal to us.”