industry & research
campusreview.com.au
Capital ideas
Financial pressures are
forcing universities to rethink
the ways they invest.
By Kirstie Chlopicki
A
ustralia’s universities are facing an
uncertain economic future, but
they’re rising to the challenge of
adapting to change, an expert says.
Mathew Simpson, head of corporate
markets and distribution (managed
portfolios) at FIIG Securities, addressed
finance executives from Australia’s leading
universities at the recent Higher Ed Services
conference on the topic.
In an increasingly competitive
international market, and with federal
government budget cuts looming,
universities are facing increased pressure
to adopt new strategies and prepare for the
future, Simpson said. And it’s a future he
hopes he will be able to help them navigate
successfully.
“I think it’s very well documented that
the higher education sector is experiencing
financial pressure,” he said. “The challenge
for educational institutions is that capital
base is stressed, which means there may
be cuts, and we’ve got to look at what
alternatives are available.
“We aim to help universities navigate into
solutions that are relatively low risk, and
help broaden their scope in terms of who
they invest their cash with.
“Universities are now beginning to
change the way they invest, and this
evolution is happening very quickly.”
Simpson said higher education providers
were facing a number of economic
pressures, from uncertain funding sources
to staying competitive internationally
and maximising returns in a low interest
rate market.
As these institutions continue to
prioritise capital protection, liquidity and
conservative investment policies, many
have been forced to compromise on yield
and investment growth.
“The unique nature of university
funding sources and cashflow seasonality,
coupled with a sustained historically low
interest rate environment, is triggering
many universities to rethink their capital
management processes,” Simpson said.
“Today, universities with funds in term
deposits are receiving one per cent less
than five years ago, and over five per cent
less than 10 years ago. That alone indicates
the need for treasury teams to look at new
options that will work harder to increase
returns and get better outcomes for their
money while not sacrificing adherence to
rightly conservative investment policies.
“Many higher education institutions
have their funds sitting in a small subset
of available investment opportunities
due to strict investment policies and the
perceived risks with alternative options.
However, many are starting to look at the
opportunities associated with engaging a
wider competitive universe of issuers and
security types.
“There has been a move to broaden
the sk