INVESTMENT AND CAPITAL MANAGEMENT REPORT

Investment and Capital Management (ICM) is charged with managing the University of Sydney’s endowment and trust assets, investment funds and commercial real estate investments. Given the perpetual nature of the University’s donated funds, ICM seeks to generate an optimal risk adjusted total return through the employment of a structured long-term investment philosophy based around strategic asset allocation targets.

Investment performance

Over the period 1995 to 2007, the University of Sydney’s Investment Portfolio (comprising both short-term operating funds and the long-term endowed funds plus reserves) experienced strong growth in market value. Whilst the global financial crisis in 2008 resulted in a reversal of the trend, 2009 saw a resumption of the growth in the value of the portfolio. The principal drivers of the overall growth were the University’s professional approach to managing the portfolio and the strategic allocation of investment funds towards growth assets.

At the end of 2009, the Investment Portfolio totalled $937 million.

Long-term funds performance

2009 witnessed a strong rebound in equity markets across the world as developed economies stabilised. Following the worst year on record in 2008, the Australian equity market ended 2009 up by 37.6 percent and the MSCI World (ex-Australia)Accumulation Index (hedged) closed the year 26.8 percent higher.

The return on the University’s long-term funds was above the relevant NSW Treasury Corporation Hour Glass Facility over the
three- and five-year periods. The NSW Treasury Corporation Hour Glass Facilities are managed funds catering for the investment
needs of New South Wales government authorities and businesses and is comparable to the University’s long-term funds in nature as well as being the legal benchmark for ICM’s long-term funds.

Composition of long-term funds

Bequest and donated endowed funds form the majority of the University’s long-term funds. Under the University’s strategic and
tactical asset allocation framework, around 70 percent of the investable funds are allocated to growth investments with the
balance in debt investments (considered a ‘defensive’ asset class). Growth assets comprise a range of asset classes (including
alternative assets) and are managed externally by professional fund managers.

At the end of December 2009, the benchmark target weights for the approved asset classes were as follows:

Management of the Investment Portfolio

The ICM team is highly experienced with several members having in excess of 15 years in the financial markets. All University funds invested in debt securities are managed internally by the team, while funds invested in growth assets are managed externally by professional sector specialist managers.

Our external consultant adviser assists the ICM team with external manager selection and refining the Investment Portfolio’s
strategic asset allocation. The consultant adviser also provides quarterly reports that enable the University to monitor its
managers against a rigorous compliance framework.

Governance

Investment and Capital Management is overseen by the University Senate via its Investment and Commercialisation
Committee (ICC). ICC’s terms of reference extend to all areas of investment and commercialisation activity within the University, including the development and oversight of investment and commercialisation policies, strategic objectives and investment performance.