The Trustees of the Golden Leaves Trust (‘The Trustees’) are required to ensure the adequacy of funds to cover the cost of funerals when they occur. The portfolios are subject to an actuarial review to demonstrate that it has the financial stability to meet its projected liabilities.
The Trustees have delegated responsibility for the investment management of the Trust’s assets to authorised professionals regulated by the Financial Conduct Authority (the ‘Portfolio Manager(s)’).
The Trustees have appointed consulting actuaries to provide oversight of the Portfolio’s investment risk and return.
The Trust’s assets are classified as UK situs for tax purposes.
The primary investment objective is to maintain and enhance the real value of the Trust’s investments in order to meet the requisite funeral costs.
The Trustees have agreed that the target return objective should be the GBP RPI +3% over the investment cycle. This is to be achieved adopting a balanced risk approach and within the investment constraints stipulated by the FCA regulated unit trusts which include but are not limited to the following:
UK Trust
Investments may span a range of developed and emerging markets globally but will maintain at least 60% exposure to UK assets. A higher proportion of the Fund’s assets than 60% will ordinarily be exposed to UK assets, however during periods such as times of adverse market conditions the Fund may be exposed up to a maximum of 40% in a combination of cash and non-UK assets. UK assets include debt securities issued by, or shares in, companies which are domiciled, incorporated or conduct a significant part of their business in the UK. The Fund will also have at least 20% exposure to debt securities issued by the UK government and will have a maximum of 60% exposure to equities.
International Trust
The Fund’s investments may span a range of developed and emerging markets globally with no particular maximum or minimum exposure to any one market, geographical region, sector or currency. The Fund will have at least 20% exposure to debt securities and a maximum of 60% exposure to equities.
Further constraints are set out in the remainder of this document. However, within these constraints, the Portfolio Manager(s) have the discretion to vary the asset allocation as they deem appropriate.
At present, there are no annual distribution or income requirements. A total return investment approach should be taken with the investment of the assets.
The Trustees acknowledge that, in order to achieve its real return objective, the Portfolio will be invested in assets and strategies whose values will fluctuate and could potentially decline.
The Trust has a long-term (ten year) investment horizon and intends to remain invested in the markets over difficult market periods.
The Trust is not currently reliant on investment income to fund expenses. The main risks to the long-term sustainability of the trust assets are a collapse in its income, coupled with higher than anticipated growth in current expenses. Assets should be invested to ensure that at any given point in time, the Trust carries sufficient resources to cover the cost of all funerals should they occur on the same day.
The Portfolio should target a risk profile of approximately 40% to 60% of the volatility of world equities over rolling 36 month periods.
The Trust’s investment portfolios can be invested widely and should be diversified by asset class and by security subject to the constraints set out in this policy statement. Asset classes may include:
The following assets are excluded:
If it is proposed that investments should be made in instruments that contain assets not covered in the eligible assets section, such a proposal must be considered by the Trustees.
The Trustees do not wish to impose any specific ethical investment policy on its Portfolio Manager(s), however they do wish to retain the flexibility to offer plan holders the option of access to socially responsible investments if they prefer them. In any event, the Portfolio Manager(s) should look to ensure that their investments are compliant with the UN Principles of Responsible Investment, which consider environmental, societal and governance issues.
The Portfolio shall not be leveraged, other than for the purpose of frictional trading overdrafts. Stock lending is prohibited.
Derivatives and derivative products are allowed for the purpose of hedging only.
The Portfolio should be suitably diversified so as to give reasonable assurance that the investment objectives are achieved notwithstanding any significant loss in value of individual investments.
a) Equity diversification
The maximum exposure to a single equity at a time of purchase is 3%. The maximum exposure post- purchase is set at 5%. No holding more than 1% of market
capitalisation of any individual stock should be held within the Portfolio.
b) Collective investment diversification
The maximum exposure to any one collective investment vehicle at a time of purchase is 10%. The maximum exposure post-purchase is set at 15%. No more than 1% of the total size of any collective investment vehicle can be held within the Portfolio.
The maximum exposure to ETFs, where the underlying is one of the G10 major market equity indices, is 15% per single investment. Maximum exposure to any other ETF is set at 7.5% per single investment. No more than 1% of the total size of any ETF can be held within the Portfolio.
c) Spread of credits
Not more than 10% of the net asset value of the Portfolio will at any time be maintained with any one bank or deposit taking institution other than cash deposits with the Portfolio’s bankers pending investment.
Not more than 20% of the net asset value of the Portfolio may at any time be invested in securities issued or guaranteed by any single Government other than the UK Government for which no concentration limit applies.
For all other issuers not more than 5% of the net asset value of the Portfolio will be invested in securities issued or guaranteed by a single borrower.
Not more than 2% of any single issue may be held at any time.
d) Commodity concentration limits
The maximum exposure to a single commodity is 5% of the total value of the Portfolio, with the exception of Gold where the maximum limit stands at 10%.
A “Balanced Asset” strategic asset allocation is to be adopted for the Portfolios.
The Trustees have agreed that the performance of the Portfolio will be monitored against a target return objective, a Composite Benchmark and an appropriate Peer Group.
a) Target Return
The Target Return is the GBP RPI +3% over the investment cycle.
b) Composite Benchmark
A Composite Benchmark for the “Balanced Asset” strategic asset allocation.
c) Peer Group Comparison
The Peer Group comparator is the ARC GBP Balanced Asset Private Client Index.
The suitability of these comparative indices will be reviewed on an annual basis.
The Trustees considers that both active and passive styles have merit. The Trustees expects the Portfolio Manager(s) to consider both and recommend the approach that is anticipated to generate the best return after taking into account cost and risk. A blend of strategies should be considered.
The base, accounting and reporting currency of the Portfolio is Sterling.
The Portfolio can be invested in currencies other than the base currency and currency hedging is permitted.
The Trust’s surplus cash assets should be invested with diverse institutions with a minimum rating of A- or in a diversified money market fund.
Exposure to investments directly or indirectly exposed to fixed income instruments that are below investment grade is limited to 10% of the value of the Portfolio.
For the avoidance of doubt, investment grade shall be read to mean BBB- or higher as rated by S&P or Fitch or Baa3 or higher as rated by Moody’s.
It is proposed that with the exception of fixed income securities held for liability matching purposes, the weighted average duration of the fixed income portion of the Portfolio should not exceed ten years.
The Trust’s anticipated distribution requirements from the Portfolio are nil. In the event this changes a target income will be agreed with the Portfolio Manager(s) on an annual basis, to enable effective budgeting and cash flow management.
The Trustees wish to maintain a high degree of liquidity in the Portfolio at all times.
Traditional investments should have daily liquidity. 100% of alternative investments should be realisable within one month. For the avoidance of doubt, ‘realisable’ means the period from instruction to receipt of proceeds.
The Trust invests on behalf of its beneficiaries over an average time period of ten years.
The Trust will appoint FCA regulated professional investment management firms to manage its investments on a discretionary basis.
The Portfolio Manager(s) are required to produce a valuation and performance report quarterly (the financial year-end is 31st March). The Portfolio Manager(s) will be required to present to the Trustees as agreed from time to time.
The Portfolio Manager(s) will be required to self-certify in writing adherence to the investment guidelines on an annual basis.
The Portfolio Manager(s) will be required to undertake to provide a liquidity schedule for the portfolio on an annual basis. This should define the percentage value of the portfolio which can be realised from decision to sell, to receipt of proceeds, within the following periods: < one week, one week to one month, one month or more.
The Portfolio Manager(s) will also be required to provide a fully inclusive fee report, detailing the Total Expense Ratio charged to the Portfolio on an annual basis. This should include and detail any portfolio management fees charged by the investment manager, any third party annual management fees on underlying funds or investment products held within the Portfolio and any other fees or commissions charged to the Portfolio. Any third-party fees which are rebated to the Portfolio Manager(s) from third parties should also be listed separately.
This Investment Policy Statement was prepared on behalf of the Trustees to provide a framework for the management of its investment assets. It will be formally reviewed on an annual basis to ensure continuing appropriateness and consistency with The Trust’s strategic aims. However, if the circumstances of The Trust or economic conditions change significantly, an ad hoc review may be appropriate.
