The study, which examined the investment performance of 11 of the country’s 12 community trust funds over a three-year period, found the trusts’ cost local communities $127.9 million.
The report’s author, Dr Helen Roberts, of the university’s accountancy and finance department, has called for a Government review of the trusts’ financial operations, while the trusts collectively have said they ‘‘fundamentally disagree’’ with the report.
The report said the Otago Community Trust’s community was $15.8 million worse off, while Community Trust South missed out on $10.1 million.
Community trusts invest in not-for-profit groups that make a positive contribution to the community.
The study examined how well the trusts managed their fund investments compared with Simplicity Funds, which is also a charity.
Trusts had outsourced their investment decisions to independent fund managers and that strategy had proven ‘‘very costly’’, Dr Roberts said. Given the trusts had a fixed pool of money which local organisations depended on, the underperformance was a ‘‘serious concern’’, she said.
She believed the trusts were not maximising the amount of money they could make for their communities.
She also believed the trustees’ intentions were right, but more accountability was needed from them.
‘‘If are they are going to appoint fund managers, we need to make sure there intent is right and they make sure that it done in a way that maximises the return for the community.’’
She wanted Associate Minister of Finance Dr Megan Woods to review the study's findings.
‘‘This is a significant amount of money that belongs to the New Zealand public and we need to make sure they [decisions] are being made with the right amount of financial experience.’’
When contacted Otago Community Trust chief executive Barbara Bridger declined to comment and referred the ODT to a statement issued by Trust Waikato chief executive Dennis Turton on behalf of all trusts.
In it, Mr Turton said they had various concerns with the way the report had been prepared, including a fundamental disagreement that the short-term performance of Simplicity was an appropriate benchmark for analysing long-term community trust outcomes.
‘‘None of our trusts use an exclusively passive or an exclusively active strategy,’’ he said.
‘‘There are global standards for performance comparison that could have been utilised to provide more accurate and relevant results.
‘‘We have not received an explanation as to why Simplicity, a passive fund for retail investors, was selected as the most appropriate benchmark.’’
Other key concerns included a lack of control for differences to isolate the effects of a passive versus active management style, the three-year timeframe when trusts operated as inter-generational funds, and the lack of classification of asset classes other than equities, property and fixed income.
The paper also did not explicitly address the different context of each trust. Trusts had discretion over the amount they distributed to communities. Some of the criticisms also rested in part on an implicit assumption trustees participated in all investment decisions, which was incorrect, Mr Turton said.
A spokeswoman for Dr Woods said the minister had not yet had a chance to look at the report in detail and would be asking officials for advice on it.
