Steady Fund Performance in 2014

Thu 09 Oct 2014

The return on the New Plymouth District Council’s Perpetual Investment Fund (PIF) for the year to 30 June 2014 was $12.1 million or 5.7 per cent p.a.

Tasman Farms contributed an $8.1 million net operating profit after tax to the $12.1m investment return.

TIML Chairman Keith Sutton confirmed the total equity of the PIF had increased to $218m after payment of release payments of $5.2m for the year to 30 June 2014.

“The TFL investment continues to realise productivity gains from our farm investment programme in initiatives such as farm conversions, improved pasture growth and utilisation, improved herd quality, better farm management and staff training, and reduced corporate overheads and operating costs.

“Milk production at TFL continued to grow and reached a record 6.72 million kilograms, for which we received a record milk payout last year.

“Milk production is expected to be five to six percent higher again this year, with the business on track for a budget of 7.1m kilograms. The business has also fixed in 70 per cent of its current production at prices within 10 per cent of last year’s record high – so we expect continued good earnings and cashflow in 2015.”

Mr Sutton reiterated: “The PIF is focused on long-term returns and its perpetual investment philosophy and time frame does not focus purely on medium term market cycles or short term price fluctuations.

“Since its establishment in late 2004 the fund has averaged 5.8% per annum return, and delivered investment returns of $144.5 million to NPDC over that period.”

Mr Sutton said: “The balance of the fund also performed as expected. In 2014 in New Zealand dollar terms, the PIF returned 4.7 per cent in fixed income, 8.9 per cent in European and Pacific equities, 9.72 per cent in US equities and 0.6 per cent in emerging markets – all of which were above market benchmarks.”

“The high NZ dollar did have an impact on the carrying value of our international investments in the PIF in 2014, but portfolio currency hedging gains largely offset this.

“Our Tasman Farms investment, returned 7.4% for the year in Australian dollar returns.”

Mr Sutton noted: “The PIF has paid out $174.3m to the New Plymouth District Council, the fund’s owner, since its inception in 2004, with that money being used to provide services and amenities to the local community that would have otherwise had to be funded from rates or be foregone.”

Mr Sutton said: “Recent NPDC policy changes have set release payments at lower sustainable levels, and the Council has deferred its last two quarterly release payments in 2014. The new lower inflation adjusted target for future release payments is 3.3 per cent.”

“I would like to record my appreciation of the efforts of my Directors, especially those who are retiring this year. Elaine Gill has retired after six years’ service, and Sandy Maier will retire this month after 14 years of service to TIML and its predecessors. They have both helped guide TIML safely through some turbulent times in financial markets including the GFC, and their contribution will be greatly missed.

“We are however very fortunate to have appointed Craig Norgate and Jamie Tuuta as their very able replacements.

"The TIML Board are confident we will meet and exceed the new 3.3 per cent release target being utilised for long term planning and release rule calculations. The long term portfolio expected return, at our target asset allocation is 7.6 per cent pa.

“At the new release rule levels the fund should both maintain its real value and deliver a long-term sustainable income stream to benefit the ratepayers, and NPDC, as shareholders of the fund.”

Related link

• Taranaki Investment Management Ltd
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