Ka Wai Ola - Office of Hawaiian Affairs, Volume 13, Number 3, 1 Malaki 1996 — OHA's native Hawaiian trust fund [ARTICLE+ILLUSTRATION]

OHA's native Hawaiian trust fund

by Abraham Aiona Trustee, Maui In the past, the Board of Trustees of OHA has been criticized for our handling of our investment portfolio. We recently amended and approved our Investment Policy in keeping with the fiduciary requirement under existing laws. The purpose of the Investment Policy is two-fold: 1. That OHA and its investment managers have a clear and mutual understanding of the objectives and policies of the Native Hawaiian Tnist Fund. 2. That the Board of Trustees of OHA have stated standards and quidelines to evaluate the performance of the investment managers in order to meet their fiduciary responsibility to monitor the investment and performance of the Funds.

The Board of Tmstees is responsible for setting policy and determining the asset allocation through the formulation of the

Investment Guidelines and to i amend when the need arises. Amendments were necessary because the financial markets are constandy changing . An investment policy is a living document whieh reflects not only the history, structure and mission of OHA, but also the investment objectives and goals, investment guidelines, standards for performance and eval- | uation of investment managers,

and communication guidelines whieh will help ensure the structural integrity of the Tmst Fund.

Portfolio management is not a competitive sport between money managers. ītisan individualized, well defined effort for eaeh asset

class and investment manager to achieve some predetermined Hnaneial goal. We are balancing OHA's risk tolerance level with the desire to grow the value of the Tmst Fund. All too often, funds either have no policy statement or one so weak that it is confusing, eontradictory, and meaningless, thus exposing the ftin unnecessarily to the elements of finaneial market turbulence.

The purpose of OHA's investment policy is to ensure that OHA, its investment managers, and investment consultant have a clear and mutual understanding of the objectives and

policies of the Tmst Fund. The guidelines reflect the Trustees' philosophy regarding the investment of assets and are intended as a stringent yet flexible framework to guide the investment managers toward the performance desired within acceptable risk/return levels. Adherence to OHA's investment policy is extremely important for eaeh of our managers, since our policy defines the levels of risk eaeh is permitted to take. Eaeh manager has a specific assignment in the investment plan for the Trust Fund. In total, our policy attempts to define the risk that the Trust Fund is exposed to by clearly specifying the role of eaeh manager within the framework of the Fund. This is the reason eaeh OHA manager is not competing with the others on a per-

formance basis, as they all play different parts within the Total Fund. OHA's expectations of total retum for eaeh manager are clearly detailed in the policy to ensure that the Fund receives the highest return for the level of risk the fund is taking. Experts in this area agree hiring and firing managers should be done according to specific standards and as infrequently as possible, as manager tumover ean be expensive to the fund. Performance should be the third or fourth reason a manager is fired. An additional purpose of the policy and equally as important as performance measurement is for the policy to specify the types of securities OHA permits the managers to purchase. After carefully reviewirlg investing in the fmanCial markets, the Bo'ard of Trustees originally drafted and adopted a policy. Because of the changing nature of stocks and

bonds in the market, an investtiient policy is called a "living document" where additjons and constant updating to the origināl policy must be made to avoid investment catastrophes. It is a road map that guides maiket professionals down the investment path most suitable for OHA's moneys. OHA's investment policy details the mix of stocks, bonds, real estate and cash for the Trast Fund. The percentage targeted for eaeh area was determined by an asset alloealion study, whieh attempts to match the goals and objectives of OHA with the optimum recommended amount to invest in eaeh asset class. OHA factored in the advice ol' prudent experts in this area and the resuīts are ineoiporated into the investment policy. The investment policy is vital to maintaining a successful investment program. Not having an investment policy would be similar to the Hokulea's crew setting sail in the oeean with no idea of where they were going and with no knowledge of the navigational skills of our ancestors. The result would be a voyaging eanoe sailing aimlessly over the vast expansive Pacific Oeean, lost and doomed to failure. As we know, the Hōkūle'a has embarked on many successful voyages. The investment policy of the Native Hawaiian Trast Fund is designed to function in the same way.