KEY POINTS:
Environment Waikato is defending a $13,000 ratepayer-funded trip for two senior officials to an investment conference in Florida.
Although the council paid $175,000 to Russell Investments for its advice over the past six months, ratepayers met the bill for EW chief executive Harry Wilson and chairman Peter
Buckley's economy airfares and food costs while attending a Russell Investments conference in Florida last week.
EW deputy chairman John Fisher said the pair had "weighed up the anticipated backlash" against the benefits of talking to major international fund investors.
He said it was in the public's interest that the pair attend to assist future council decision-making on investment strategy.
The regional council has $84 million of ratepayers' money invested in three funds managed by Russell Investments.
But the council blamed a "recent volatility in international financial markets" for a decline in each over the past four months. In the six months to December 31, EW had budgeted for a return of $2,565,000 on its Russell investments but the return was $874,583 - a shortfall of close to $1.7 million.
Mr Fisher said although the council was disappointed with its global investments, one loss in 11 years was expected and considered conservative.
"It is acknowledged that losses can be a normal part of the investment cycle," he said.
He said the average return on fixed interest had been 7.8 per cent a year, while equities had provided an average of 8.7 per cent since 1995.
But council critic Geoffrey Robinson questioned what a regional council was doing "betting on world sharemarkets", jeopardising the community's assets for only slightly higher returns.
The Port Charles organic farmer and former journalist said the council should be "completely re-evaluating its relationship" with Russell Investments.
"Russell has a basic conflict of interest as it offers EW advice on how to structure its investments, and then it markets to EW its own investment vehicles to fit its advisory recommendations."
He said a result of the investment shortfalls and losses could be higher rates and a reduction in council services for ratepayers.
This was disputed by EW's finance group manager Warren Stevens, who said he didn't expect any shortfalls to affect the level of rates.
He said if the fund didn't deliver budgeted income, the council's equalisation policy would draw on fund reserves to make up the shortfall.
Tony Morgan, who offers sharebroking and portfolio management advice in the Waikato, said he had advised EW to put all its money into bank cash and fixed term deposits.
He said a 7 per cent return on the then $70 million fund would have given about $5 million a year to the council.
"So the above strategy was about being simple, low risk and exactly matching their investment goal."
The council says it will review its investment strategy in July.