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Source: MIL-OSI Submissions

Source: Rata Foundation

Some of the strongest global market returns in history led to a record gross return of 17.7% or $98 million for Rātā Foundation’s investment portfolio in the financial year ending March 31, 2021.
“The strong return has been supported by the recovery in global equity markets since significant falls in the first quarter of 2020 as the COVID-19 pandemic took hold,” Rātā Chief Executive Leighton Evans says as part of the Trust’s annual review.
At the end of the 2020 financial year, Rātā’s Accumulated Income Reserve took a hit as investment markets responded negatively to the emerging threat of the pandemic.
“The strong returns in the 2021 financial year have restored the Reserve to well above pre-pandemic levels,” Evans says.
“The Reserve position strengthened further in the first quarter of the new financial year (June 2021 quarter),” he says.
“Looking ahead, while we can’t expect returns to be as strong as the 2021 financial year, the investment strategy adopted by Rātā, supported by the strong reserve position, is expected to see us through a wide range of possible scenarios covering the potential for rising interest rates, surging inflation, and bursting asset price bubbles,” Evans says.
“This strategy ensures that we can continue to support our communities year in, year out, come what may,” he says.
Rātā’s investment team expects market returns in the near future to be below the levels seen over the last five to 10 years.
“Recognising this, and seeking to maintain distributions at current levels, early in 2020 we reviewed our investment portfolio and our new investment strategy will be fully in place by March 31, 2022,” Evans says.
“We are in the process of incorporating more growth assets (equities, property, and infrastructure) and less defensive assets (bonds and cash) than previously.
“We’ve done this by introducing allocations to more unlisted investments (private equity, private debt, and unlisted infrastructure) to contain the overall level of equity risk in the portfolio,” he says.
As part of its investment strategy, Rātā’s Trustees expect higher returns on the private market investments to compensate for the higher fees and additional risks associated with them.
Recognising that private market investments are expensive relative to listed alternatives, Rātā introduced a passive allocation (60%) within its Global Developed Market Equities portfolio last December to help keep overall investment management fees at an acceptable level.
“Rātā continues to use active investment managers across the remainder of the portfolio where we believe these managers can outperform the relevant market benchmark,” Evans says.
“We also note that as a relatively large investor, in many cases we can negotiate competitive fees with our investment managers, especially relative to retail investors,” he says.
Rātā continues to strengthen its responsible investment framework, emphasising integration of environmental, social and governance (ESG) factors, reducing the portfolio’s carbon intensity to mitigate climate change and committing to further improvements over time.
For example, during 2021 Rātā revamped its Global Equities portfolio by introducing an allocation to a sustainable investment strategy that focuses on investing in companies with a strong alignment to the United Nation’s Sustainable Development Goals.
Rātā Foundation’s Annual Consolidated Financial Statements to March 31, 2021 is available on its website.