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Each year, the Equity Trustees Charitable Foundation (ECF) distributes more than $6m of charitable giving to for-purpose organisations.

Our investment philosophy is to preserve and grow the real value of capital over the long term while providing clients with the income they need.

As a leading philanthropic funder of the for-purpose sector, together with our core responsibilities as a trustee, we have constant consideration of the best interests of the community, now and into the future.

WHAT ARE WE TRYING TO ACHIEVE?

To create a high level of income that grows over time to fund distributions to your chosen charities.  For the Equity Trustees Charitable Foundation portfolio, this means an investment objective to achieve a total return (capital growth plus income) of 4.5% above CPI over a rolling ten-year period.

HOW DO WE DO THIS?

We are here to secure a better financial future for our charitable trusts and their beneficiaries.

The Equity Trustees Asset Management team acknowledge that the market is not always efficient and a disciplined approach over a long period of time can add significant value.  Our approach at Equity Trustees across all portfolios is to invest in quality companies at reasonable prices.

Quality can be measured through a combination of the following:

Robust and sustainable cashflow generation 
A superior return on equity than the market
A strong balance sheet 
Strong management and Board governance
Excellent industry structure and market positioning 
Growth in earnings.

We aim to access companies at reasonable prices as measured by a range of valuation methodologies such as earnings multiples, dividend yield and discounted cash flow valuations.

We have summarised this approach as ‘Quality at a Reasonable Price’ (QuARP): 
 

Investments objectives

What does it look like?

Equity Trustees Charitable Foundation sub-funds are designed to be perpetual vehicles, allowing you to support your chosen charities forever. As such, there is a long-term investment horizon to maintain the real value of the capital and income while providing the annual distributions to your nominated charities.
 
The priority for our Asset Management team is to ensure your fund’s sustainability, ensuring that your legacy lives on. The team monitors the portfolio’s performance on an ongoing basis, making appropriate and considered changes along the way.
  
Typically, Equities outperforms most asset classes over the long term and is one of the reasons why the portfolio’s asset allocation is weighted so heavily towards this class. Generally, Australian Equities generates a higher income compared to the other classes, largely due to the benefit of franking credits attached to Australian company dividends.  This is necessary to meet the minimum distribution requirements for all sub-funds.

ASSET CLASS  LOW (%) BENCHMARK  ALLOCATION (%)  HIGH (%)
 Australian Equities 60 85.0  100
International Equities 0 10.0   40
Australian Credit 0 3 20
Australian Fixed Income 0 2 40

 

ASSET CLASS  TYPICAL ASSETS HELD
Cash
  • Short-term fixed interest and money market securities with maturity date of less than two years from purchase
  • Term deposits
  • Floating rate notes
Fixed Interest
  • Commonwealth Government bonds
  • State Government bonds
  • Investment -grade corporate bonds
  • Cash and short-term securities
Australian Equities
  • Stocks listed  on the Australian Stock Exchange across a range of industries (e.g. ResMed, CSL, BHP)
International Equities
  • International Exchange Traded Funds

 

As the portfolio performance is monitored and adjustments made on a regular basis, the percentage allocation of each asset class will differ slightly from quarter to quarter.

SOCIALLY RESPONSIBLE INVESTING (SRI)

Equity Trustees has considerable experience in ensuring investments meet responsible investing criteria.  We recognise the importance of labour, environmental, social and governance (ESG) considerations in investment and retain the Morgan Stanley Capital International (MSCI) for ESG overlay on all equity portfolios. 
 
We focus on ESG because it makes good business and financial sense to do so.  In our view, well managed companies that exhibit strong corporate governance and develop and maintain a social licence to operate through strong E and S policies and behaviours will overwhelmingly also prove to have more sustainable and robust businesses and prove to be better investments over the longer term.