• Section 1 - Purpose
• Section 2 - Application
• Section 3 - Roles and Responsibilities
• Section 4 - Investment Purpose
• Short Term Investments
• Long Term Fund
• Endowment Fund
• Section 5 - Investment Principles
• Section 6 - Long Term Investment Model
• Section 7 - Investment Strategy
• Short Term Investments
• Long Term Fund
• Endowment Fund
• Section 8 - Investment Considerations
• Maintenance of Liquidity
• Preservation of Capital and Purchasing Power
• Credit Risk
• Interest Rate Risk
• Trust Monies
• Direct Investments
• Derivatives (Hedging Foreign Currency Exchange Rate Risk)
• Section 9 - Statement of Responsible Investment
• QUT Steps Toward Social and Responsible Investment
• Section 10 - Investment Parameters and Credit Requirements
• Section 11 - Investment Management
• Prudent Person Standard
• Balance Sheet Management
• Treasury Management
• Investment Fund Managers
• Section 12 - Performance and Reporting
• Performance Measurement
• Monitoring of Fund Manager
• Responding to Abnormal or Extraordinary Events
• Breach of Policy
• Reporting
• Section 13 - Definitions
•  
• Section 14 - Delegations

Section 1 - Purpose

(1) This Policy outlines how the University undertakes financial investments to support its strategic goals across education, research and community.

Section 2 - Application

(2) This Policy applies to the investment of all surplus funds held by the University and undertaken in accordance with the Queensland University of Technology Act 1998, Statutory Bodies Financial Arrangements Act 1982 and Financial Accountability Act 2009, and associated regulations and standards.

Section 3 - Roles and Responsibilities

Section 4 - Investment Purpose

(3) The University holds investments in three separate categories, Short Term Investments, the Long Term Fund and the Endowment Fund. Each of these serve a distinct purpose in helping the University achieve its strategic goals. The investment purpose of each of the categories is described below, with further details regarding each category included in section G/3.2.7 Investment strategy.

Short Term Investments

(4) Ensure there is sufficient liquidity to meet operating expenses over a one to three year time horizon.

Long Term Fund

(5) The Long Term Fund exists to help grow QUT’s balance sheet and to increase its financial strength over the long term. This provides QUT with a greater ability to finance long term strategic initiatives that are aligned with its mission, which is to provide transformative education and research relevant to our communities.

Endowment Fund

(6) The Endowment Fund exists to provide for scholarship and grant payments for current and future beneficiaries of the endowments into perpetuity.

Section 5 - Investment Principles

(7) Investment principles (or beliefs) comprise what we know, or think we know, about the factors that influence investment returns. Some investment principles can be stated with a high degree of certainty, whilst others are more open to debate or interpretation. Collectively, they reflect the views held by the University and so they should guide decision making and shape the University’s approach to investing, with particular regards to the assets in the Long Term Fund and the Endowment Fund. Having a well-thought-out set of explicit principles will help guide the University’s investment decision making by enhancing discipline and consistency, efficiently settling differences of opinion and improving transparency.

1. strong governance arrangements enable QUT to make good investment decisions, consistent with the purpose of its funds;
2. QUT can better manage risk and enhance portfolio efficiency by diversifying across a range of asset classes;
3. QUT adopts a long term view when determining the appropriate investment strategy for its funds;
4. the investment strategy should focus on maximising the expected return (for a given level of risk) rather than minimising risk (for a given or expected rate of return);
5. QUT recognises its responsibility to invest sustainably, by integrating Environmental, Social and Governance considerations into the management of its funds;
6. QUT’s fund Manager(s) can employ dynamic management to assist the funds to take advantage of changing market conditions and opportunities;
7. QUT’s fund Manager(s) can employ active management where it is expected to outperform a passive approach, net of all costs.

(8) Whilst the implementation of the University’s investment strategy is largely beyond its control, given the outsourced nature of the investment model, the funds should still be invested in a way that is consistent with the University’s investment principles. Therefore, the University should clearly communicate its investment principles with its fund Manager(s) and use these to assess and monitor the alignment of the fund Manager(s) investment approach with its beliefs.

Section 6 - Long Term Investment Model

(9) The University applies an outsourced investment model to the long term investment categories by engaging external professional investment managers to actively manage its long term investments. The University has adopted this model to ensure the efficient implementation of the long term investment funds and to reduce the complexity involved with managing the investment portfolios internally.

(10) The outsourced investment model sees the University maintaining responsibility for setting the investment purpose, investment principles and the investment strategy (with the appropriate advice from external advisors and the fund managers). However, the University will delegate the portfolio management and implementation of the Long Term Fund and the Endowment Fund, with the University oversighting and monitoring the Fund Manager's performance and continued alignment with the University’s investment principles and desired investment strategy.

(11) The following table summarises the roles and responsibilities of QUT and its Fund Manager.

Section 7 - Investment Strategy

(12) QUT’s investable funds are to be aligned to the liability profile and cash flow (liquidity) needs of the University, and fall within the following categories:

Short Term Investments

Long Term Fund

Endowment Fund

Section 8 - Investment Considerations

Maintenance of Liquidity

(13) The University maintains a deposit and withdrawal account with an approved financial institution for its day-to-day operating transactions, pursuant to section 31 of the Statutory Bodies Financial Arrangements Act 1982 (SBFA Act). In addition to the balances held in its bank account for routine operating requirements, the investment portfolio will maintain sufficient liquidity to meet all reasonably anticipated operating cash flow requirements of the University, as and when they fall due, without incurring significant transaction costs due to being required to sell an investment. For these purposes, illiquid investments are defined as investments that are not publicly traded in sufficient volume to facilitate, under most market conditions, prompt sale without severe market price effect.

(14) In the event that the University experiences financial distress or a specific liquidity event occurs with regards to the operational budget, it is anticipated that the following liquidity hierarchy will be utilised to address the liquidity stress:

1. Operating Cash / Working Capital;
2. Short Term Investments;
3. Borrowings;
4. Long Term Fund.

Preservation of Capital and Purchasing Power

(15) Preservation of capital and purchasing power are key objectives of the investment portfolio. Short term investments are to be managed in a manner that seeks an appropriate return whilst ensuring security of the principal balance. Long term investments seek to earn an appropriate return that also maintains the purchasing power of the overall portfolio for future generations. This requires managing credit and interest rate risk within given risk management parameters and avoiding any transactions that would prejudice confidence in the University or its associated entities.

Credit Risk

(16) The Treasury Manager will evaluate and assess credit risk prior to investment. Credit risk is the risk of loss due to the failure of an investment issuer or guarantor. The Treasury Manager will minimise credit risk in the investment portfolio by pre-qualifying all transactions including the brokers / securities dealers with which the University does business, diversifying the portfolio and limiting transactions to secure investments.

Interest Rate Risk

(17) The Treasury Manager shall seek to minimise the risk of a change in the market value of the portfolio because of a change in interest rates, by considering the cash flow requirements of the University and structuring the portfolio accordingly. This will avoid having to sell securities prior to maturity in the open market. Secondly, interest rate risk can be limited by investing in shorter term securities.

Trust Monies

(18) Trust monies must be invested in accordance with the requirements of the Statutory Bodies Financial Arrangements Act 1982 and the Queensland University of Technology Act 1998 (section 52). Trust monies may be included with other University monies in a common investment fund and income distributed from this fund among the participants in the common fund will be in direct proportion to each contribution.

(19) Trust monies shall be held in capital secure and liquid investment types.

Direct Investments

(20) QUT may on occasions receive direct investments such as shares or property through donations, bequests or as a result of research and commercialisation activities. The University's intention is to divest itself of such investments as soon as practicable, though in limited circumstances direct investments may be held for strategic purposes. All sales should be conducted with the objective of maximising investment returns for the University and ensuring arms-length transactions are maintained.

Derivatives (Hedging Foreign Currency Exchange Rate Risk)

(21) The University may enter into derivative transactions, for known purchases only, to hedge against foreign currency exchange rate risk subject to the requirements of the Statutory Bodies Financial Arrangements Act 1982 (Part 7). Speculative transactions are not permitted.

(22) Foreign currency transactions are generally performed based on a daily spot rate provided by the University's foreign currency supplier. In limited circumstances large planned transactions, such as annual library transactions or large equipment purchases, may need to be paid in foreign currencies. These transactions may be hedged to offset exchange rate variations.

(23) Each transaction requires prior approval from the Associate Director, Financial Control, and must be reported each month to the Treasurer of Queensland with sufficient details as required in the Statutory Bodies Financial Arrangements Act 1982 (Section 55). All hedging transactions will be included in the regular report to Finance and Planning Committee.

Section 9 - Statement of Responsible Investment

(24) As a major Australian university, QUT ambitiously positions itself as the university for the real world of today and tomorrow. We recognise our important responsibility to be an institution that is not only environmentally and socially responsible but also financially sustainable.

(25) In practical terms, this means that QUT is committed to an orderly and considered transition away from investment in fossil fuel companies while simultaneously ensuring that QUT continues to build the broader funding base essential for our future.

(26) In line with this commitment, we have reviewed QUT's investments relative to climate risk and instituted changes to the University's investment strategy.

QUT Steps Toward Social and Responsible Investment

1. QUT has no fossil fuel direct investments.
2. While we recognise that the fossil fuel industry is a significant contributor to Queensland's regional economy and presents a significant opportunity for QUT to influence this sector through the provision of leadership education and research, we are working with our independent investment manager, Queensland Investment Corporation (QIC), to manage investments so that no fossil fuel investments of material significance form part of the QUT investment portfolio.
3. We have engaged Queensland Investment Corporation (QIC) as external funds manager to ensure that QUT's investment pool is directed to ethical and appropriate investments within a framework of responsibility relative to climate risk.
4. Queensland Investment Corporation (QIC) became a signatory in 2008 to the United Nations-backed Principles for Responsible Investment Initiative (UNPRI). They report annually on their environmental, social and corporate governance (ESG) activities.
5. Finance and Planning Committee takes an active role in monitoring and reporting on QUT's revised investment strategy in order to ensure sustained financial return in line with social and responsible investment.

Section 10 - Investment Parameters and Credit Requirements

(27) For investments at call or for a fixed term of not more than one year the University is permitted, under sections 44 and 45 of the Statutory Bodies Financial Arrangements Act 1982, to use investments with a financial institution rating by Standard and Poor's (Australia) Pty Ltd (S&P) of A1+, A1, Aam or AAAm.

(28) For investments at call or for a fixed term of greater than one year but not more than three years the University is permitted, under section 45 of the Statutory Bodies Financial Arrangements Act 1982, to use investments with a financial institution rating by S&P of AA, AA+ or AAA.

(29) The following tables show the credit ratings and counterparty limits for the University.

(30) For the purposes of QUT's investment portfolio, the percentage limits apply effective from the date of purchase as a percentage of the market value of the portfolio.

(31) On an annual basis Finance and Planning Committee will endorse, on recommendation from the Associate Director, Financial Control, a list of financial institutions meeting the above requirements to which QUT’s investments must be confined.

Section 11 - Investment Management

Prudent Person Standard

(32) The standard of prudence must be used when managing the University's investment portfolio. Investments are to be managed with the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons. This includes having in place appropriate reporting requirements to ensure that investments are reviewed and monitored regularly.

Balance Sheet Management

(33) Council on the advice of Finance and Planning Committee, annually approves a rolling three-year Consolidated Operating Budget and five-year Capital Management Plan (CMP). Council considers as part of the Budget process, the mix of assets on the balance sheet the University is expected to hold into the future. Assets fall within various categories but include primarily:

1. Tangible assets - property, plant and equipment;
2. Intangible assets - technology developments;
3. Financial assets - short term and long term investments held in financial institutions and based on financial markets.

(34) Council endeavours to strategically position QUT with an operating margin and these surpluses become part of the financial assets which provide the University with reserves to deliver strategic goals over a five year Capital Management Plan, as well as manage unexpected, short term internal or external events.

(35) Council may periodically, after considering strategic and environmental risks and with appropriate advice provided by management, choose to materially alter the balance sheet asset mix in order to deliver QUT’s strategic goals. This may include various financing options including but not limited to: utilising existing cash reserves; liquidating financial investments; and various leasing and other external borrowing options.

Treasury Management

(36) The Associate Director, Financial Control, is responsible for overseeing the management of investment categories. This strategy ensures an appropriate return on investment aligned to the University's capital requirements and includes asset allocations, financial institution and financial instrument selection.

(37) The QUT Treasury Manager is required to manage the University's investment portfolio in accordance with this Policy. Documented treasury procedures must incorporate appropriate internal controls and segregation of duties. The investment quantum and duration decisions are aligned to the University's short term, long term, and endowment cash flow requirements. Information is sourced across three timeframes for informing cash flow and investment management decisions, whilst assessing short term liquidity needs and longer term balance sheet considerations:

1. Yearly - where the yearly cash requirement is projected for five years ahead. This information is sourced from the three-year Consolidated Operating Budget and five-year Capital Management Plan (CMP).
2. Monthly - where the monthly cash requirement is projected for 12 months ahead. This information is sourced from the Governance and Performance and Finance departments.
3. Daily - where a daily cash requirement is projected for 30 days ahead. This information is prepared with inputs from key areas of payroll, accounts payable, accounts receivable and capital, investments and loans.

(38) Investments shall be made at the most advantageous rate available at the time for the particular investment type, and in a way that is considered the most appropriate given the circumstances.

(39) With respect to any new investment within the underlying investment pools offered by Queensland Investment Corporation (QIC), approval from the Associate Director, Financial Control, alone is sufficient, as QIC as the investment manager' has already been approved for investment purposes by Finance and Planning Committee.

(40) Transfers of monies from the University's accounts require sign-off from two authorised signatories.

Investment Fund Managers

(41) The University applies an outsourced investment model to long term investment categories by engaging external professional investment managers to actively manage its long term investments. The Statutory Bodies Financial Arrangements Act 1982 restricts the appointment of long term investment managers to Queensland Investment Corporation (QIC) and Queensland Treasury Corporation (QTC) without separate approval by the Queensland State Treasurer.

(42) QUT has retained QIC and QTC as investment and cash fund managers, and may engage other fund managers from time to time subject to the appropriate approvals.

(43) QUT has Category 3 investment power under the SBFA Act and Regulation, which lists approved investment arrangements managed or offered by QTC and QIC at Schedule 7 Part 1 and 2. QUT also has access to additional QIC investment products where approved by the Queensland State Treasurer.

(44) At times where markets are highly volatile and recognising there will always be peaks and troughs over the longer investment cycle, the University will rely on its long term investment manager, QIC, to dynamically position the long term investment portfolio within Strategic Asset Allocation ranges agreed for the relevant investment pools.

Section 12 - Performance and Reporting

Performance Measurement

(45) The short term investments will be benchmarked against an appropriate Queensland Treasury Corporation index.

(46) The long term investment and endowment portfolios shall be measured using the market value of the portfolio (including withdrawals and deposits, and total performance of the portfolio), compared to the Consumer Price Index (CPI) plus a benchmark target return. The University's Investment Manager (QIC) will measure and benchmark themselves against the University’s chosen reference portfolio for each of the Long Term Fund and the Endowment Fund.

(47) Finance and Resourcing Planning will conduct periodic meetings throughout each year with the QIC investment team to ensure the quantitative and qualitative aspects of the manager are closely monitored and are tracking to expectations.

Monitoring of Fund Manager

(48) The University will monitor the Fund Manager to ensure continued alignment of their investment approach and implementation of the long term investments with the University’s investment principles and the investment strategy of the Long Term Fund and the Endowment Fund.

(49) Annually, analysis of the investment strategy and particularly the forward looking risk and return expectations of each fund should be provided by the Fund Manager.

(50) Periodically, the University should also undertake a broader review of the Fund Manager to ensure the alignment of the Fund Manager’s investment approach with the University’s investment principles and assess the Fund Manager’s ability to effectively manage and implement the Long Term Fund and the Endowment Fund in line with their respective investment strategy.

Responding to Abnormal or Extraordinary Events

(51) Where issues are identified outside of the normal budget cycles, arising from either internal requirements or external influences, and have the capacity to materially impact on the University's plans and budgets, Finance and Planning Committee may review QUT's investments strategy to facilitate alignment and achievement of the University's operational and strategic plans.

Breach of Policy

(52) Any breach of this investment policy must be reported to the Associate Director, Financial Control immediately. Action must be taken to resolve the breach within 24 hours of the breach being detected. The Vice-President (Finance) and Chief Financial Officer will report the breach and actions taken to address the breach to the next meeting of Risk and Audit Committee.

Reporting

(53) The Vice-President (Finance) and Chief Financial Officer reports to:

1. Finance and Planning Committee, periodically throughout each year, the investments and financing strategies and performance.
2. Risk and Audit Committee, at least annually, on compliance with relevant legislation and the university's investment policy.

(54) Finance and Planning Committee and Risk and Audit Committee reports to Council on investment issues relevant to their terms of reference as required.

Section 13 - Definitions

Section 14 - Delegations

(55) Refer to Register of Authorities and Delegations (VC145, VC146) (QUT staff access only).