Ka Wai Ola - Office of Hawaiian Affairs, Volume 11, Number 2, 1 ʻAukake 1994 — Money manager's responsibilities [ARTICLE+ILLUSTRATION]

Money manager's responsibilities

by Abraham Aiona Vice-chairman and Trustee, Maui The trustees take very seriously the fiduciary responsibility with whieh they have been entrusted. As fiduciaries, we must oversee the OHA public land trust with the highest degree of integrity, expertise and professionalism. The more than $150 million investment portfolio is invested for us by some of the brightest minds in the investment business. Last summer, a diligent, competitive manager search

process resulted in the hiring of nine investment managers.

The long-term objective of the OHA land trust investment portfolio is "consistency of investment return through growth and ineome objective with an emphasis on capital appreciation and ineome." To achieve this, the managers invest the portfolio in a diversified blend of

stocks, bonds and money market

instruments. The investment world is like real life.

In life, there is no gain without pain, no return without risk. Similarly, with investments, there is no return without taking some risk. Risk is fluctuation in the return; all investments go up and down. Roughly half the puhlie land trust is invested in

eommon stocks. Many people think "playing the stock market" is like gam-

bling, but it isn't, in the long run. The stock market is like a yo-yo on an up escalator. The trend is up, but between the time you get on and off, you go up and down. More up than down, though, because statistically the stock market goes up 70 percent of the time. In simple terms, it gives a positive return for roughly seven out of ten years, a negative return three out of ten years. Unfortunately, nobody has a crystal ball to tell whieh years will be good for stocks and whieh will be bad. In 1 990, Iraq invaded Kuwait; the Japanese stock market started falling apart; and U.S. stocks returned a minus 3.3 percent for the year. Investors without a long-term perspective pulled their money out of the stock market and missed 1991, when U.S. stocks returned 31 percent, one of the best years ever. The OHA Board of Trustees, with a long-term perspective,

remained ealm during 1990 and therefore benefitted in 1991. During the first quarter of 1994, the stock market went down almost four percent. For those with an understanding of investments, it was not entirely unexpected. After all, as stated earlier, all investments go up and down. Our portfolio didn't go down more than portfolios of similar size. Because we believe the investments are fundamentally sound, we fully expect them to go up over the long term. The market will eome back. It always has. It will eontinue to do so in the future. Our managers invest in stocks to achieve a long-term return on our investment that will not only hedge against inflation, but provide the ineome and appreciation necessary to fund our programs. We have our sights set on long-term growth. Constantly monitoring the portfolio is a necessary part of the process, but a myopic focus on a brief period causes some people to get caught up in the short-term greed and fear that moves the market day to day. We have confidence in the investment professional hired to manage money for OHA. We also have confidence that prudently investing in a diversified portfolio of stocks, bonds and money market instruments will provide OHA the ineome and appreciation necessary to carry us profitably into the future.