Common Fund Management

As of 31 March 2017, the Common Fund held $106.7 million (2016 $104.4 million) of client funds, representing around 130,000 individual accounts along with Trust and property accounts. All client accounts in the Common Fund are eligible to receive distributable income in accordance with the Māori Trustee Act 1953.

Value of Common Fund managed

Under section 26 of the Māori Trustee Act 1953, distributable income is paid to all account holders with balances at the end of the month. The total value of distributable income paid to account holders for the year was $3.4 million (2016 $4.1 million).

Net Distributable Income After Tax

	Common Fund
	2017 $000	2016 $000
Common Fund investment income	4,342	5,002
Māori Trustee Common Fund management fee	(793)	(762)
Supplementary fee	(130)	(156)
Distributable income	3,419	4,084
Tax withheld	(625)	(773)
Net distributable income after tax	2,794	3,311

The management aims of the Common Fund are to:

generate income for account holders that exceeds interest from short-term deposits with a bank over the same term
preserve capital credited or deposited, and
grow the value of account holders’ accounts.

Common Fund income

Common Fund Asset Allocation

The Common Fund is managed within a Statement of Investment Parameters and Objectives (SIPO) framework that reflects the governing legislation of the Māori Trustee Act 1953 and the Trustee Act 1956. The Investment and Credit Committee approves the SIPO, including any exceptions. Within this framework, the Māori Trustee takes a conservative approach to investment strategy and selections, with investments restricted to bank deposits and investment-grade bonds.

Gross Performance of Common Fund

The investment performance of the Common Fund is above the benchmark, producing a rolling 12 month return of 3.35 percent (2016 4.19%) as at 31 March 2017, while the benchmark 12 month rolling Reserve Bank of New Zealand six month retail deposit rate dropped to 3.23 percent (2016 3.52%). The Common Fund’s lower return this year is largely due to maturing higher-yielding fixed-rate bonds being reinvested in a lower interest rate environment. It’s expected returns will increase this coming year because both short-term interest rates and bond yields have started to rise.

The growth rate of the Common Fund has slowed to just over 2 percent from a traditional 10 percent. Growth comes from rent roll growth, enterprise income from farms and orchards, investment income growth, and decisions by owners and Trustees to retain funds in their trusts for potential future development. This past year has seen much greater outflows for investment in land development than in the past as well as lower investment returns, due to prevailing low interest rates.