The climb out of the chasm continues - Quarterly Investment Update by Chief Investment Manager Ian Baster
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130 Little Collins Street
Melbourne VIC 3000
Phone 1800 996 888
Fax (03) 9650 7074
Email info@ucafunds.com.au
Website www.ucafunds.com.au
UCA Funds is a registered business name of
UCA Funds Management Limited, and is a social
enterprise of The Uniting Church in Australia,
Synod of Victoria and Tasmania April 2014
ABN 46 102 469 821 | AFSL 294 147.
The climb out of the
chasm continues
Quarterly Investment Update
by Chief Investment Manager Ian Baster
Watching how the world’s largest economy
recovers from the biggest recession in 70 years
will always be a focus for investors.
This year there has been concern that the US
economic recovery was faltering (perhaps
bad weather caused bad figures), leading to
worries that the Federal Reserve (Fed) would
continue with a very loose monetary policy
which many see as having outlived its
use-by-date. Last year the Fed stated it would
not tighten policy until the unemployment rate
had fallen below 6.5%. In February 2014 this
rate was 6.7%.
The Fed announced on 20 March that it
expected economic activity to expand at Today’s overall unemployment rate (6.7%) is well above the long-run
a moderate pace and labour conditions to average. In the past, the short-term unemployed (those out of work for
improve gradually. Policy would be tightened less than 27 weeks) had a similar unemployment rate to the overall
so that by September 2014 it would be neutral. rate. This has changed following the 2008 recession. For the last five
Further, by March 2015 markets should expect years the short-term unemployment rate has been much lower than the
the federal funds rate to rise from the current overall rate. Today it is 4.5% and the short-term unemployed account
‘zero to 0.25%’ target range, and be 1% by the for about 63% of the overall unemployed. As far as policy makers are
end of 2015 and 2.25% by year end 2016. This concerned those who have been out of work for more than 27 weeks
startled investors, who were not expecting (37% of the unemployed) are to be put on the scrap heap, and seen to
interest rates to rise so quickly or strongly. be obsolescent – perhaps to be regarded in the same way as we notice
rusting cars in farmers’ paddocks.
What happened to the ‘no tightening before
unemployment is below 6.5%’ mantra? Continued page 3
A fund at a glance:
The UCA Cash Portfolio
by Senior Portfolio Manager Noel Bryant
The key features of the UCA Cash Portfolio
What is it?
The UCA Cash Portfolio is an enhanced cash portfolio
that has a fixed unit price with capital guaranteed by The
Uniting Church in Australia Property Trust (Victoria).
What is the investment objective?
The Fund aims to outperform cash management accounts
and compete with term deposits. The current forecast
distribution is 4.0% until the end of 2014.
UCA Cash Portfolio strategic asset allocation
Who can invest?
at 31st March 2014
Not-for-profits or for purpose organisations registered as a
Tax Concession Charity. 49.5% cash and liquid securities
31.5% fixed interest securities
Can I make additional investments? 15.3% first mortgages
Yes, they can be made at any time by cheque or Electronic
3.7% community impact loans
Funds Transfer (EFT). As the Fund is linked to a nominated
bank account, it has a BSB number and can also receive
Current fund size: $580 million
investments by BPay.
Date of inception: 1 July 1985
Any fees?
There are no transaction, entry or exit fees. We also have
a competitive management and expense recovery fee of
0.80% per annum.
How are funds invested?
When can I access my money? Funds are invested ethically under our integrated Ethical
Redemptions are available within 24 hours. However, Investment Policy, and in securities that are investment
redemption requests received by 11.00 a.m. will normally grade or in securities where thorough internal credit
be processed on the same day. analysis has been undertaken.
When do I receive my statement and distributions? The chart above shows our current asset allocation for the
Statements are available monthly by email, usually within UCA Cash Portfolio.
two working days of the end of the month.
We collect the franking credits on dividends payable from
Income distributions are made twice per year. some hybrids and include these in the income distribution.
How do other Investors use the UCA Cash Portfolio? For further reassurance, around 2.8% of the Fund is
Many clients use the UCA Cash Portfolio as a cash currently held in a reserve to further protect capital and
management account to hold surplus liquid funds in smooth distributions.
conjunction with their bank operating account.
I want to invest. What do I do now? I have some questions. Who do I contact?
>> Visit our website and download our UCA Cash >> Contact Josephine Lunghi on 1800 996 888
Portfolio Application Form. or email info@ucafunds.com.au
2
FMN Quarterly Newsletter - April 2014
Security for your investment in
the digital age
By Operations Manager Pauline Gibbs
With the increased use of electronic transactions, online
communications and email, UCA Funds Management is
proactive in reviewing procedures to minimise risk and
increase safety for Investors.
We recently completed a review of our redemption
processes after our first incident of cyber fraud was
identified. As part of this review we have now enhanced
our redemption procedures to ensure any fraudulent
activities will be identified. Redemption forms are in the
process of being updated to include shading of input
boxes for key details, such as the redemption amount,
bank account details, payee details and signatures.
As further protection against major fraud, a comprehensive
bankers bond insurance is in place, and Deloitte Touche
Tohmatsu also reviews all controls to manage the risk of
fraud as part of the annual audit.
Preventative measures in place
We are committed to providing Investors with prompt
and quality service where clients can be confident
their transactions will be processed according to their
expectations. The climb out of the chasm continues
Continued from page 1
Daily procedures ensure all redemption requests are
verified by checking the signatures and bank account America is moving on. Higher interest rates will support a
details against those recorded on the account. Once stronger US dollar, as will the steady trend of balance of
processed, all redemptions are again checked and verified trade surpluses caused by the revolutionary production
prior to authorising the redemption against the original of shale oil and gas - which has transformed the US from
redemption request. being an energy importer (once the world’s biggest oil
importer) to now an energy exporter.
For personal Investors, there are rules for all redemption
requests that only allow redemptions to be processed to a Australia is also running balance of trade surpluses as
bank account which is in the same name as the account. the gap between increasing commodity exports, and
We also verify any new bank account details not previously decreasing capital equipment imports used for building
recorded against a copy of a bank statement to confirm the the (near complete) infrastructure to service the commodity
account details. boom, widens.
As redemptions for not-for-profit or for purpose Both the US dollar and the Australian dollar may
organisation accounts can be made to third parties, all strengthen over the next 12 months.
electronic redemption requests to third parties previously
not recorded on the account will now be confirmed by This means that the structure of the growth portfolios may
telephone with the account signatories. A hard copy be able to have a smaller bias to offshore earnings than
confirmation of the redemption will also be posted to has been the case.
the account holder in addition to any email confirmation
requests received. Our growth portfolios consist of companies that overall
deliver a higher-than-market return on invested capital and
yet allow a distribution yield of about 4.5% per annum.
3
FMN Quarterly Newsletter - April 2014
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Billanook City9 visits
UCA Funds Management
In early April a group of year 9 Billanook College students
visited UCA Funds Management to learn more about what it
means to be an ethical fund manager.
The group of 11 students spent some time chatting with
our CEO Michael Walsh to find out what being an ethical
investor means before splitting into teams to embark on
The Great Ethical Race around the city.
Inspired by the television show “The Amazing Race”,
students explored the city to complete as many tasks on
their race list as possible before heading to their final pit-
stop – Lindt Café on Collins Street.
Some of the tasks included in The Great Ethical Race:
>> Finding well-known places in the CBD, such as St
Michael’s Uniting Church, and sending a picture of the
group at these destinations to us via Twitter.
>> Identifying companies and groups that would be able
to open accounts with UCA Funds Management.
>> Taking a photo of something in the city that represents
positive industries we search for as part of our positive
screening process, such as recycling, employment or
community services.
If you would like to have someone visit your school to talk about
We hope the students enjoyed learning about our industry ethical investing, please contact Josephine Lunghi on 1800 996 888
as much as we enjoyed sharing about it!
FMN Quarterly Newsletter - April 2014 4Taking a stand against coal and unconventional fossil fuels
By Portfolio Manager Tim Starke
Excessive fossil fuel use has been a contentious Approval for the Fossil Fuel Policy was given at a recent
environmental issue for some time. With broadening Standing Committee meeting for The Uniting Church in
concern in the community, UCA Funds Management has Australia, Synod of Victoria and Tasmania, following a joint
publicly announced the decision to create a Fossil Fuel proposal from UCA Funds Management and The Uniting
Policy that will hold more companies accountable for their Church in Australia’s Justice and International Mission unit
environmental impact while still upholding responsible (JIM). The resolution of the proposal acknowledged that
investment stewardship for our clients. while governments play a vital role in reducing greenhouse
gas emissions and addressing the risk of climate change,
The Fossil Fuel Policy adopts a pragmatic and realistic voluntary actions such as the development of the policy
approach to how society can quicken its transition to play a vital role in stepping towards a cleaner world.
cleaner energy solutions. It will ensure that UCA Funds
Management will not directly invest in companies involved Why are we not taking a 100% ban on all fossil fuels?
in the: Although recent anti-fossil fuel campaigning has
encouraged all financial institutions to divest from the
>> Mining and / or exporting of thermal coal (used most current 200 publicly-traded companies involved in fossil
often in coal power plants) fuel mining, we understand that at this stage we need
>> Extraction or refining of unconventional oil, such as to take into consideration the interest in fossil fuels for
shale oil or deep water drilling the progression of renewable energy. This means that
>> Extraction and exporting of unconventional methane a company’s interest in fossil fuels may be offset by a
gas, such as coal seam gas, that involves fracking. major investment in renewable energy sources and their
establishment.
However, natural gas, coking coal (used most often for
steel production), and conventional oil will remain eligible Divestment from the entire Australian fossil fuel industry
for investment. also significantly increases investment concentration and
risk as it’s a new industry which is still progressing in the
The development of the Fossil Fuel Policy forms part of market. Our practical approach helps the shift towards
our current Ethical Investment Policy, which excludes clean energy solutions, and embraces how society will
companies that cause unacceptable damage to the transition to cleaner energy – discouraging emissions-
environment, and will strengthen our screening process intensive and unconventional fossil fuels, and encouraging
to ensure companies involved in fossil fuel activities investment in cleaner conventional fossil fuels whose
considered unsafe for the environment are excluded from extraction process has been proven safe – as well as
investment. allowing us to uphold our investment responsibilities to
you, the Investor.
5
FMN Quarterly Newsletter - April 2014Performance Table to 31 March 2014
Total returns - charity funds
Since
Charity Funds 3 months 6 months 1 year 3 year 5 year 10 year Inception inception Fund
% % % % p.a. % p.a. % p.a. date % p.a. size $m
UCA Cash Portfolio 1.00 2.05 4.34 5.18 5.14 5.65 1 Jul 1985 7.78 580.6‡
UCA Growth Portfolio 0.78 3.59 6.48 6.19 13.57 9.01 1 Jul 1985 10.20 268.8*
UCA Australian
0.99 2.92 6.48 6.84 12.97 9.17 1 Jan 1986 11.01 213.6
Equities Portfolio
Total returns - retail funds
The current interest rate of 3.50% p.a. for the Development Fund and Funeral Fund was effective as at 1st January 2014.
Since
Retail Funds 3 months 6 months 1 year 3 year 5 year 10 year Inception inception Fund
% % % % p.a. % p.a. % p.a. date % p.a. size $m
Uniting Growth Fund 1.98 3.29 6.01 4.60 12.43 7.9 7 Jul 2003 8.39 34.9
Development Fund 0.91 1.83 3.87 4.77 4.71 5.04 # 6.71 †
144.8
Funeral Fund 0.91 1.83 3.87 4.77 4.71 5.04 2 Feb 1997 † 4.4
‡ Figure includes funds invested in the Development Fund and † The Development Fund and Funeral Fund earn the UCA Cash Portfolio
Funeral Fund. rate less a margin that is paid as a grant to the Synod to enable it to
carry out its charitable activities. Changes to this margin may occur
# The inception of the Development Fund predates the Union of the
when adjustments to interest earned in the UCA Cash Portfolio rate
Congregational, Methodist and Presbyterian Churches in 1977 to form
are passed through to the Development Fund and Funeral Fund on a
The Uniting Church in Australia.
deferred basis.
* Figure includes funds invested in UCA Australian Equities Portfolio.
Performance table disclaimer – This performance table is issued by UCA Funds Management (a registered business name of UCA Funds Management
Limited, ABN 46 102 469 821, AFSL 294147). An Offer Document and/or Application for the Portfolios and/or Funds are available from UCA Funds
Management. You should consider the relevant Funds Offer Document and/or Application in deciding whether to acquire, or continue to hold, an
investment in the Portfolio/Fund. Past performance is not a reliable indicator of future performance. This is general information only and does not
constitute financial product advice. Neither UCA Funds Management nor the Portfolios/Funds are prudentially supervised by APRA. Contributions to the
Portfolios/Funds do not obtain the benefit of the depositor protections of the Banking Act 1959.
If you have any questions about the above performance table or any content within this newsletter please contact us by:
Phone 1800 996 888 Email info@ucafunds.com.au
UCA Funds Management has been certified by the Responsible Investment Association Australasia (RIAA) according to the strict
disclosure requirements under the Responsible Investment Certification Program. The Certification Symbol signifies that an
investment product or service takes environmental, social, ethical or governance considerations into account along with financial
returns. Developed in response to investor requests for help in making informed choices, the Symbol and Certification Program
promote consistent, standardised disclosure and education about responsible investment products and services. The Symbol
does not constitute financial advice by RIAA. See www.responsibleinvestment.org for details.
General advice disclaimer – This document is of the nature of general information only and must not in any way be construed or relied upon as
legal or financial advice. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of
any particular person. UCA Funds is a registered business name of UCA Funds Management Limited ABN 46 102 469 821 AFSL 294147. Neither UCA
Funds nor the Funds are prudentially supervised by APRA. Contributions to the Fund do not obtain the benefit of the depositor protection provisions
of the Banking Act 1959. Our Funds are designed for investors who wish to promote the charitable purposes of the Funds.You can also read
