The return to health of the Dunedin City Council's multimillion-dollar Waipori Fund should not encourage councillors to consider selling it, the fund's head has warned.
The message from Dunedin City Treasury Ltd chairman Ross Liddell came as he presented an update on the fund to yesterday's finance, strategy and development committee meeting.
His report showed the fund's value was $76.3 million at June 30 this year, up from $69.7 million at the same point last year, and up from $56 million since the fund's creation in 1999.
The latest annual result still represented a $4.3 million fall in the real value of the fund in the past year, after inflation adjustments and distributions to the council were included.
However, that was actually a $4 million improvement on the expected position at the start of the year, councillors were told.
Then, the drop in the fund's value stood at $8.3 million because previous distributions to the council had gone beyond what the fund earned, a council staff report said.
Mr Liddell said the result could have been even better if not for $2 million in distributions to the council and a bad month for the fund's investments, which cost it $1.1 million in June.
Despite that, he remained upbeat: ''The Waipori Fund has had a very good year.''
However, the result, coupled with predictions of more stable international markets ahead, prompted Cr Lee Vandervis to question whether the time was right to consider cashing in the fund.
The money could then be used to pay down council debt, he suggested.
Mr Liddell cautioned against that, pointing to the fund's contribution to council coffers.
Since its creation in 1999, after the forced sale of the Waipori electricity scheme, the fund's investments had earned $61.1 million, of which $40.7 million had been distributed to the council, the staff report said.
''I would be holding on to it,'' Mr Liddell said.
''It's easy to pay off a bit of debt and then you turn around and buy something else, and then you have got debt again.''
The comments came after some councillors previously raised concerns the council was in breach of the fund's policy by taking more from the fund than it made, thereby lowering its capital value.
The fund's directors had also expressed concern at the declining real value of the fund.
The concerns had prompted suggestions the fund should be cashed in or used as a bank to pay for council borrowing, although the ideas have so far come to nothing.
Yesterday, Cr Teresa Stevenson wanted to know whether the fund's portfolio of shares could be shifted more towards investments in Dunedin.
The fund's national and international portfolio included about 12.5% invested in New Zealand, which Mr Liddell said was ''quite big'' given the ''tiny'' New Zealand economy.
However, the fund was conservative and there were few opportunities to invest in Dunedin, he believed.
''There's lots of Dunedin businesses, but not too many of them are listed,'' he said.
Despite that, council services and development general manager Dr Sue Bidrose, responding to a question from Cr Jinty MacTavish, said a staff report on ethical investment opportunities was close to completion.
It would be completed within ''two or three weeks'' and be presented to the incoming council after local body elections, she said.
