Industry Focus

SOCIAL SECTOR A time to invest In this low-interest financial environment, it's important for Social Sector organisations to recognise alternative investment options that can maximise wealth creation WORDS: STEVE DAMMERER Given the need to stimulate slowing growth in Australia, the Reserve Bank has now lowered interest rates to historical lows. This has made it more difficult for Not for Profit (NFP) organisations to maintain the level of income required to fund the programs that are core to the delivery of essential services to the significant number of communities in need, while concurrently maintaining and growing their corpus fund. As a board member or senior staff member, you would have already recognised this issue and be facing difficult decisions around how to maintain sustainable levels of income from your organisation's funds that are currently invested in interest bearing accounts. This income may be required to fund your activities in the community, which means that as your income drops you need to look more carefully at managing your expenses such as staff costs, rent, communications and utilities. In these times it is more important than ever to squeeze every ounce of value out of every dollar raised. It's important to make the most of your cash reserves and assets to generate more opportunities for your organisation. One area that is often overlooked is the potential of higher returns by taking on some additional managed risk that can be moderated through diversification across asset classes. Generally speaking, we find a high proportion of NFP organisations do not invest money in any other asset classes outside of cash. Common reasons given for this are: 1. he comfort of knowing that all T monies are safely maintained in the bank deposits. 2. ew organisations have any formal F frameworks to guide how funds should be invested. 3. ll investments other than cash, by A their nature, involve an increased level of risk. 10 Industry Focus While these are all valid issues, you may be surprised at the tailored options available to your organisation. Investing conservatively in various asset classes can generate attractive income and potentially provide capital growth. The table below is a good demonstration of the comparative performance of various asset classes set in both a 'defensive' and 'moderate' risk asset allocation to the end of June 2013. While the near-term numbers look impressive when compared with the returns of cash, the important comparative analysis focus for NFP organisations should be the longer-term relative performance that covers a more realistic reflection of market cycles and sustainable returns. Westpac Social Sector clients have access to specialists within BT Financial Group who understand the challenge of investing funds in markets that are more volatile than Term Deposits over the longer term. The BT Private Portfolio platform, in particular, has a very strong track record of supporting NFP organisations because it maintains a strategy of staying the course with sensible, sustainable investing with careful management through all economic cycles. If your organisation could benefit from investing funds across various asset classes in a professionally managed structure that is aligned to your organisation's objectives, please contact your local Social Sector specialist banker who will arrange an appointment with a BT investment manager. Westpac Social Sector Banking has put together the Guide to Investing Money for Community Organisations to help you understand what your options might be, what the different types of investments are, what risks are involved in each and how you can use your new-found knowledge to increase your NFP's corpus fund. Please email us at socialsectorbanking@westpac.com.au to request your free hard copy guide or download it as a PDF from www.westpac. com.au/socialsectorbanking. Steve Dammerer is Head of Managed Accounts & PEL, Equity & Gearing Solutions, Insurance & Investments at BT Financial Group. Comparative performance of various asset classes Asset Class 1 Year 3 Years (pa) 5 Years (pa) 10 Years (pa) Australian Shares 22.64% 8.21% 3.06% 9.93% International Shares 24.57% 16.60% 5.30% 8.63% Australian Property 24.22% 13.44% 0.29% 2.89% Australian Fixed Interest 2.78% 6.84% 7.83% 6.08% Cash 3.28% 4.32% 4.46% 5.27% Defensive Asset Allocation* 8.74% 7.43% 5.41% 6.27% Moderate Asset Allocation* 11.97% 8.23% 4.81% 6.55% * ource: Recommended asset allocations frameworks published by BT Advice Research and S Strategy

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