How the Foundation Board Manages Foundation Member Funds

May 31, 2016

In April 2016 Foundation member funds totaled $905,156. The Foundation also manages the Newcastle Art Gallery Redevelopment funds which currently total $1.15M. For many years the Foundation Board has actively managed the Foundation funds via a Board Finance and Investment subcommittee. The subcommittee currently consists of the Treasurer Joshua Walsh, the Chairman Judy Hart and Director Mark Stephens who is the convener. In addition to ensure depth of experience and capability two additional non board members have been invited to participate in the subcommittee. These are Rob Henderson (previous Foundation Chairman) and Bruce Arnott (previous Foundation Treasurer and Bradken CFO as well as current Chairman of Phoenix Health Fund). Consequently the subcommittee has three sophisticated investors.

The Finance and Investment subcommittee operates to the Foundation Investment Policy Statement. This policy is reviewed and approved by the Board annually and has been developed with the assistance of Philip Smith the Cutcher & Neale investment services partner. The policy document provides a framework identifying the risk and investment strategies appropriate for the Foundation Funds when considering capital preservation and growth to ensure members funds maintain and grow value. As a charitable organization the Foundation maintains a tax free status and consequently can maximize the value provided by dividend imputation credits. This provides considerable advantage and consequently the portfolio is biased towards high dividend yielding Australian listed company shares. The current portfolio mix is listed in the table below along with the investment policy allowed ranges for each investment category.

The Finance and Investment subcommittee meets at least four times a year and also seeks an external review of the portfolio generally on an annual basis. In 2016FY this was performed by Cutcher & Neale where they have reviewed the overall portfolio and given recommendations for investment opportunities. The F&I subcommittee acted on all recommendations. Investments are made with a long term view.

Historically the Foundation investments have been very successful and have delivered better overall returns than professional retail funds. From 2002 the Foundation investments have provided an average of 7.4% growth p.a. compared to the average retail funds of 5.3% over the same period. The cumulative impact of this is that the Foundation investments are 31.5% ahead of the Retail Funds.


For many years the investment returns were almost solely delivering the $50,000 p.a. on average supporting the Foundation donations to the Newcastle Art Gallery. This was achieved whilst also increasing the capital base. More recently the Foundation has received improved donations to support significant acquisitions for the Gallery.

The Art Gallery Redevelopment funds are managed separately to the member funds. The investment policy approved by the Board allows up to 50% of the redevelopment funds to be invested in low risk diversified companies. Currently 75% is invested in cash and 25% in Listed Investment Companies and securitised capital notes. These investments are all high yielding and can be divested at any time if the funds are required for the Gallery redevelopment.

Members are welcome at any time to request a view of the current investment portfolio and Investment Policy. The Board wants members to feel confident that their funds are being managed with strong governance that preserves capital while also ensuring a reasonable level of return.


Mark Stephens.