Returns on funds policy

The return on a named fund in this context is the combination of income (interest, dividends etc) and changes to investment valuations.
The Foundations’ objectives in allocating these returns is to

  • Provide at least in part for the costs in administering The Foundation
  • Provide ongoing levels of distributions which recipient organisations can rely on for budgeting
  • to maintain the level of the named fund at its original capital value as a minimum
  • When the level of returns permit, to provide some level of offset against the effects of inflation on the capital value of the named fund.

To achieve these objectives the Foundation will make an annual allocation for each named fund of

  • 1% of the average capital value of the fund in that year towards the cost of administering The Foundation
  • 5% of the average capital value of the fund in that year for distribution to recipient organisations
  • Any return in excess of 6% will be added to the capital value of the fund.

The Trustees acknowledge that in the early years of a named fund it may become necessary to erode the original capital value in order to achieve these allocations but that a return to the original capital value in the shortest possible time is of paramount importance.

The Trustees reserve the right to vary the nominated percentages as circumstances require.
For the purpose of this policy all un-named funds shall be aggregated and treated as a single named fund.

Anticipated Investment and Return.

The American model which the Opotiki Community Foundation is modeling itself on, has averaged a 9% return. The Foundation is assuming the same (as an average, over time), so:

  • 1% is taken as an administration charge,
  • 5% is distributed to charities and and any excess is added to the capital value of the fund.

For example, if someone left $100,000 to the Opotiki Community Foundation in a Named Endowment Fund, we envisage earning $9000 investment income in the first year. From this investment income The Foundation will allow:

  • $1000 for administration,
  • $5000 for distribution to local charities
  • The remainder ($3000) will be reinvested.

Thus, at the end of the first year that fund will now be worth $103,000.