Endowment Policy

1. The purpose of our policy

This policy establishes the principles underpinning the administration and investment of Adelaide University endowment funds.

2. Who our policy applies to

2.1 Inclusions

This policy applies to the management of funds that are endowed upon Adelaide University and invested, on request, in either a perpetual or non-perpetual fund. 

2.2 Exclusions

It does not apply to the management of cash or investment of Adelaide University funds, which are governed by our Treasury Policy. 

3. Our endowment principles 

Management and investment of our endowed funds is governed by the overarching objective of maximising returns while balancing risk, to meet the funds financial commitments and support AU's long-term strategic goals. 

Our principles for this policy are: 

3.1 We invest endowed funds to preserve capital and generate investment returns that deliver lasting impact

We invest perpetual funds in asset classes in accordance with Council approved asset allocation ranges to: 

• preserve the capital of funds, where required 
• generate sufficient income from the capital to meet the specific or general purpose of the funds, and 
• achieve an average investment return target of CPI + 4% p.a. (net of all fund manager fees) over a rolling 10-year period. 

3.2 We endeavour to provide a regular and consistent distribution

We manage perpetual funds to provide distributions up to a maximum of 5% of the value of the fund each year, depending on the extent to which the distribution is required to fund current expenditure, and subject to the following:

• In years where the investment return exceeds CPI +5%, the Fund will seek to distribute up to 5%.  Returns above CPI +5% will be reinvested in the Fund and held as a notional reserve;
• In years where the investment return is between CPI +3% to CPI +5%, the notional reserve may be drawn to distribute up to 5%.  Where the notional reserve is fully drawn, the capital value of the corpus may be drawn on, subject always to the terms of the applicable trust, at the discretion of the Vice-Chancellor ; and
• In years where the investment return is below CPI +3%, the distribution will be restricted to 3% unless the notional reserve has the capacity to allow a distribution up to 5% whereby a distribution of up to 5% may be made.  If the notional reserve does not have sufficient capacity to allow a distribution of up to 5%, the capital value of the corpus may be drawn on to allow a return of up to 5% subject always to the terms of the applicable trust.  The decision to restrict the distribution level will be made by the Vice-Chancellor. 

3.3 We invest perpetual funds within approved parameters

Perpetual funds must be invested in allowable investments in accordance with the approved ranges for each asset class as specified in Attachment 1 – Allowable Asset Ranges and Asset Allocation. Asset allocations must remain within these approved ranges.  

3.4 We maintain sufficient liquidity to meet our obligations

Perpetual funds must maintain sufficient liquidity to meet current or potential obligations when they fall due. 

3.5 We set minimum capital thresholds to ensure endowment viability

Adelaide University will determine the minimum initial capital amount required to establish an endowed fund, ensuring that distributions are sufficient to achieve the intended purpose and are administratively sustainable. 

3.6 We manage currency risk within approved asset allocation limits

Currency risk is managed by external fund managers within limits set by the Finance Committee when determining the annual asset allocation. 

3.7 We invest non-perpetual funds for short-term access and purpose alignment

Non-perpetual funds will be invested to enable timely distributions for their intended purpose, while maintaining liquidity and targeting returns above the Reserve Bank of Australia Cash Rate. Investments of non-perpetual funds will be limited to Cash and Fixed Interest assets, as specified in Attachment 1, with a focus on instruments that are readibly convertible to cash and typically have a term of less than 12 months.  

3.8 We embed responsible investment principles into investment decisions

Environmental, Social and Governance (ESG) considerations will be applied to any perpetual and non perpetual investment selection to meet the following objectives: 

• Our values are reflected in Adelaide University’s investment portfolio. 
• Our investment approach is aligned to the principles of our [Sustainability Strategy] and encourages exclusions on certain investments where there is mis-alignment with those principles.

To fulfil these objectives, appointed fund managers must be signatories to the United Nations Principles for Responsible Investment or members of the Responsible Investment Association Australasia. 

3.9 We exclude investments that conflict with our ethical standards

Adelaide University does not invest in specific industries or activites that are inconsistent with the ESG considerations above. A limited tolerance is applied to acknowledge that some investments may have minor indirect exposure to these activities while remaining acceptable from an ethical perspective.  Perpetual and non-perpetual funds must not be invested in public equities or corporate bonds issued by any listed company:  

• that manufactures tobacco products 
• that manufactures controversial weapons (including components produced exclusively for use in such weapons), such as cluster munitions, biological or chemical weapons, and land mines 
• that derives 10% or more of total revenue from the ownership and exploitation of its fossil fuel reserves, including thermal coal, oil, and gas.  Adelaide University may consider an exemption where a company that is actively transitioning to renewables exceeds 50% of revenue from renewables,  This exemption may be approved in accordance with section 3.11. 

3.10 We manage share gifts to preserve value and comply with donor intent

Direct (in specie) share gifts should be sold as soon as practicable and the proceeds reinvested in the endowment fund unless donor instructions or exceptional circumstances justify retention. 

3.11 We make investment decisions in line with our delegations and oversight frameworks

Perpetual fund investment decisions are made in accordance with the Delegation Policy. Investments or withdrawals with a value below 5% of the perpetual investment portfolio may be approved by the Chief Financial Officer (CFO) without the approval  of the Finance Committee, provided that the aggregate of such investments or withdrawals does not exceed 5% of the portfolio value between Finance Committee meetings. Any investment or withdrawal, or series of investments or withdrawals that would result in more than 5% of the portfolio value being transacted between meetings must be referred to the Finance Committee for approval.

All non perpetual fund investments may be approved by the CFO without the endorsement of Finance Committee. 

All other investment decisions or significant changes to the overall fund investments may be approved by the CFO, at their discretion, following endorsement from the Finance Committee. 

4. Monitoring and Review 

As per their terms of reference, the Finance Committee reports to the Council and monitors the endowment fund’s investment performance. 

The Finance Committee must be provided with a summary of any discretion exercised by the Vice Chancellor in relation to distribution from the perpetual fund in any given year. 

Adelaide University will appoint independent investment advisor(s) to review and provide advice on the endowment fund’s investment portfolio. Custodial services may also be appointed to ensure safekeeping, transaction settlement, and reporting of investment holdings. 

In the event of non-compliance with this policy, the Chair of the Finance Committee must be notified via the Chief Financial Officer and Deputy Vice Chancellor – Corporate within five business days of becoming aware of the non-compliance. A rectification plan must be provided as soon as practicable. 

5. Definitions used in our policy

Please refer to our Adelaide University glossary for a full list of our definitions.

Corpus means the original amount of money endowed, without including any returns or interest generated. 

Non-perpetual means short term liquid investments in nature that require certainty of returns with minimal investment risk.

Notional reserve means the value of the fund over and above the original corpus. 

Perpetual means long term investments with the intention of providing continuous funding support. 

6. How our policy is governed

Our policy is categorised, approved and owned in line with the governance structure of Adelaide University and the offices and officers listed below. 

7. Legislation and other documents related to our policy

8. History of changes

At the time of writing, some organisational details within Adelaide University are still evolving. Square brackets [ ] are used to indicate placeholders or areas where information may be refine, clarified or confirmed. These will be updated as the Universtiy's arrangements are finalised.

Attachment 1: Allowable asset ranges and asset allocation

Only investments in the following asset classes are permitted unless otherwise endorsed by the Finance Committee:  

Perpetual funds 

Non-perpetual funds