Clarifying South Waikato Investment Fund status

South Waikato District Council lost $ 720,000 in investments between July 2011 to September 2011.

The loss comes from the South Waikato Investment Fund which was created with shares from Power Co.

In July 2011 the fund lost about $ 315,000 – associated mainly with the gain in the Kiwi dollar against the American dollar.

The remainder of the $ 405,000 lost in August and September 2011 was attributed to market movements.

Investments made by the South Waikato District Council are actioned by the Treasury Management Oversight Committee.

District council chief executive officer David Hall said the money invested did not come directly from ratepayers.

‘‘Technically all council funds are ratepayer money. However ratepayers did not actually contribute money from their pockets to this fund.

‘‘The funds in SWIF originally came from Power Co shares. The Power Co trustees in the South Waikato opted for investment and this is what forms the capital base of the SWIF,’’ Mr Hall said.

The SWIF is a long- term investment account.

‘‘With any long term investment there are good years and bad years, ups and downs,’’ Mr Hall said. ‘‘Investment advice indicates that shares will outperform cash investments in the long-term. Last year for example we actually went up by close to $1m. We took a knock this past financial year but latest figures show that last month the fluctuation reserve went up by $301,000. The share loss for the financial year to the end of October is now $418,000.’’

The SWIF account currently holds $6m dollars in shares offshore.

South Waikato Investment Fund at a glance

Capital: $21.7m (this is the actual shares from Power Co)

The council have inflationproofed this, which has added about $3m to the fund.

On top of that is the fluctuation reserve.

This reserve caters for market changes; it is this reserve that the December report indicates lost $720,000. This fund is currently in deficit of $0.9m.