SRI Portfolio returns vs benchmarks

Model portfolio and index portfolio returns to 30 September 2022

Index returns to 30 September 2022

The indices used to calculate the index portfolio returns are as follows:

Notes:

Due to the general lack of availability of SRI index data, this analysis compares SRI model portfolio returns with

All returns are in New Zealand dollars

Model portfolios are designed and supplied by the Consilium Investment Committee (CIC)

Growth assets refer to investments in shares and property

Income assets refer to investments in cash and fixed interest

Model portfolio returns are net of underlying management fees, but gross of custodial and adviser monitoring fees unscreened market indices each asset

Long term expected returns are based on the CIC’s 2018/2019 strategic asset allocation review. These expected returns are net of underlying manager fees, but gross of custodial and adviser monitoring fees

Individual portfolios that deviate from the model portfolios will experience different returns

Past returns are no guarantee of future returns

Partner Firms monitoring certificate from Consilium Investment Committee (CIC) for the quarter ended 30-Sep-22

Quarterly monitoring:

In the Partner Firm Service Agreement and Consilium Investment Committee Policy and Procedures Manual, the CIC outlined the following process for reviewing underlying investments.

All investment securities are reviewed on a quarterly basis and performance is measured against appropriate benchmark indices. Where a security’s performance is consistent with its mandate and in line with broad style and/or asset class returns, no further action will generally be taken.

However, a security may be placed on an ‘enhanced due diligence’ list, and subjected to a higher degree of scrutiny, for any of the following reasons:

- A change in the primary portfolio manager

- A significant change in the fund management company’s majority owner or ownership structure

- A more than 25% fall in the fund’s assets under management over a rolling one- year period (due to outflows, not market movement)

- Total fund assets falling below our minimum fund size thresholds at any time

- A change in the fund’s investment style, diversification and/or risk factor tilting

- An increase in the fund’s fees

- The fund exhibited quarterly tracking error versus a relevant benchmark outside its monitoring thresholds

- The fund exhibited a persistent deviation in tracking error versus a relevant benchmark outside its monitoring thresholds, measured over a rolling three-year basis, and allowing a volatility threshold appropriate for each fund

- An extraordinary event which, in the opinion of the Investment Committee, may impact on the manager’s ability to comply with the fund mandate in future

New flagged actions from monitoring for the quarter ended 30-Sep-22

We completed the monitoring of all of the above aspects for all underlying funds in your portfolios and found the following:

1. Hedged funds managed by Dimensional: Change in key party

During the quarter, Dimensional announced they have engaged with BNP Paribas as an FX Hedge Counterparty

We will be undertaking an analysis of the flag over the coming weeks, and we are aiming to have completed papers summarising our findings within the next three months.

Update on prior flagged actions:

1. Vanguard Ethically Conscious International Shares Index Fund: Change in personnel Investigation COMPLETE. We are satisfied that the ongoing management and support of the Vanguard funds will not be materially affected by this change, due to:

1. The fact that the fund mandates are stable, well established and unchanged.

2. The investment mandates follow an index replication investment process which significantly minimises the degree of discretion any individual portfolio manager can have in the funds’ allocation.

3. At any point in time, the Head of Equity indexing is well supported by a large team of portfolio managers with many years’ experience within Vanguard.

Dimensional Five-Year Diversified Fixed Int. Trust NZD Class: 3-year underperformance to 30/Jun/2022

Investigation COMPLETE. Following our analysis of the trust – specifically, the performance attribution – the CIC is satisfied the trust’s underperformance for the three years was due to structural elements of the trust relative to its benchmark. The trusts overweights to sources of higher expected returns such as the steeper yield curves of different nations and the trust’s small corporate bond exposure, duration profile and compositional differences within each currency allocation have been the primary sources of underperformance.

Damon O'Brien Head of Investments and CIC Chairperson

Date: 24 November 2022