Our approach to distribution.
Enabling sustainable support for our region.
In September 2020, Nikau Foundation adopted a new distribution policy, which ensures that grants can be sustainably distributed even in the face of uncertain economic conditions.
It’s a challenge that many foundations face – how to ensure consistent annual funding for good causes when the markets fluctuate as they do. The approach aligns with the distribution policies of some of the largest endowments in the world (Yale and Stanford), which have been using a similar method successfully for decades. This model sets a target distribution rate and smooths out market fluctuations to ensure more-consistent funding year on year.
This will provide greater certainty, which is helpful for both donors and grant recipients. Instead of distributing income and retaining capital gains, as we did previously, this revised policy focuses on long-term return expectations, allowing us to ride through market peaks and troughs and make more-consistent distributions. It has also given us the opportunity to diversify our portfolio, removing limitations of favouring investment in companies that pay high dividends.
2020/2021 financial year’s distributions were higher than last year’s thanks to the consistent application of this policy. This is a great outcome given the low-yield environment and current market volatility. The total return achieved on our funds was well above the long-term expected rate of return allowing us to build a buffer for future market volatility to ensure consistent payment of distributions.
