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Investment Policy

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Section 1 - Preamble

(1) This Policy is effective from 24 April 2024.

(2) This Policy is pursuant to:

  1. Deakin University Act 2009 (Vic)
  2. Borrowing and Investment Powers Act 1987 (Vic)
  3. Trustee Act 1958 (Vic).
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Section 2 - Purpose

(3) This Policy establishes the University Investment governance arrangements to be adhered to on responsible and effective management of the University’s financial investments.

(4) This Policy sets out the investment principles underpinning the management of the University’s financial investments and states the University’s intention to incorporate responsible investment in the management of investment funds.

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Section 3 - Scope

(5) This Policy applies to all financial investments monitored by the Investment Committee from funding allocated by University Council.

(6) This Policy does not apply to any equity investments in controlled or associated entities of the University.

(7) This Policy does not apply to the management of financial risks addressed by Treasury policy.

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Section 4 - Policy

(8) In accordance with section 46 of the Deakin University Act 2009 (Vic) the University may invest any money of the University in any manner of investment authorised by the Council.

(9) The Council has established the Investment Policy and the Investment Management Procedure in accordance with which University financial investments must be made.

(10)  The Council has established the Investment Committee with responsibilities set out in the Investment Committee terms of reference, this Investment Policy and the Investment Management Procedure.

(11) The Investment Committee will review the Investment Policy and Investment Management Procedure at least annually and is authorised by the Council to make any amendments arising from these reviews and report them to Council.

(12) Council will review the objectives of the University’s investment funds at least annually.

(13) A broader strategic review of the Investment Policy and Investment Management Procedure will be undertaken at least every three years or at any other time as requested by Council. This strategic review will be initiated by Council, managed by the Office of the Chief Financial Officer and include all members of the Investment Committee, the External Investment Advisor and any other stakeholders that Council deems appropriate.

Investment Principles

(14) The following set of investment principles informs the investment strategy setting process of the University:

  1. Returns/Risk/Volatility
    1. Each investment fund will have its own tailored set of investment objectives that include both a real return target and risk/volatility measures based on a tailored probability of a negative return.
    2. Investment risk will be effectively managed through building portfolios diversified by asset class and external investment managers, aiming for strong real returns over the long-term (10-20 years).
    3. The University will seek to achieve its real return goals while recognising the need to take risks in a considered way.
  2. Asset Allocation
    1. The use of strategic asset allocation will enable the targeting of long-term risks and returns. 
    2. The use of dynamic asset allocation, considering shorter term market views, can be used to enable improved shorter term (1-3 year) risk and return outcomes. Deviations from strategic asset allocations can be made within approved ranges of deviations from the strategic allocations. 
  3. Liquidity
    1. The University will take a considered approach to illiquid investments through the establishment of limits on illiquid investments within funds.
    2. Council may instruct a withdrawal of funds from the Future Fund to pursue a strategic opportunity, with notification provided as soon as possible to enable management of liquidity.
  4. Active Management and Outsourcing
    1. Active management within certain sectors can be utilised to add value over the long term where the incremental contribution to the portfolio – through increased return or reduced risk – warrants the additional cost.
    2. Asset management will be outsourced to appropriately qualified external investment managers, with selection on the basis that their investment and responsible investment approaches are aligned with our values.
  5. Costs and Fees
    1. Fees and transaction costs that count against returns earned will be managed in achieving our return.
  6. Responsible Investment
    1. Environmental, social and governance (ESG) considerations in accordance with Deakin’s values are incorporated into decision-making, seeking to generate sustainable and financial value over the long-term. 

Responsible Investment Principles

(15) The following set of responsible investment principles informs the manner in which all amounts across all asset classes and any external investment managers are invested:

  1. The integration of responsible investment strategies will enhance the ability to generate sustainable and financial value over the long term and will align with the University’s sustainability commitments to integrate environmental, financial and social sustainability considerations, whilst nurturing and enabling the University’s future leaders and to support the enhancement of the quality of life for present and future generations.
  2. The manner and extent to which Deakin incorporates responsible investment issues into investment processes and decision making will vary according to the asset class, objectives and constraints of each investment manager. The materiality of any given ESG factor to investment outcomes determines its prioritisation for consideration within the decision-making process.
  3. Active ownership can help to better understand and manage ESG financial risks and opportunities and influence positive change in the underlying investments.
  4. Working collaboratively with like-minded investors and stakeholders is expected to further the effectiveness of active ownership.
  5. Responsible investment issues are not necessarily static and are likely to change over time. The risks and opportunities faced by the companies in which Deakin invests will change as responsible investment issues evolve.
  6. The External Investment Advisor will provide regular reporting on the Future Fund’s progress in incorporating responsible investment, including the responsible investment approach undertaken by the external investment managers.
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Section 5 - Procedure

(16) The Investment Management Procedure documents how to comply with this Policy. 

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Section 6 - Definitions

(17) For the purpose of this Policy:

  1. Dynamic asset allocation (DAA): the process of adjusting the portfolio’s allocations across asset classes based on prevailing market conditions.
  2. ESG: themes specifically related to Environmental, Social, Governance factors (e.g. climate change, human rights and board composition).
  3. Illiquid investment: an asset that cannot be sold within six months without accepting a significant discount on its carrying value, which includes unlisted property, unlisted infrastructure and private equity.
  4. Responsible investment (RI): involves consideration of environmental, social and governance (ESG) issues when making investment decisions and influencing companies or assets (known as active ownership or stewardship). It complements traditional financial analysis and portfolio construction techniques.
  5. Strategic asset allocation (SAA): the process of allocating investments across asset classes to achieve specific long-term risk-return objectives and goals.