The Dunedin City Council's Waipori fund has had its toughest quarter since it was set up in 1998, with sharp declines in equity markets and volatile exchange rates, although positive returns on the bond market because of lower interest rates have provided some good news.
The $69.5 million fund - which has shrunk from $72.6 million at the end of 2007 - was established using the proceeds from the sale of the Waipori electricity generation scheme and has been a valuable contributor to the Dunedin City Council's finances.
Fund chairman Ross Liddell said in a report to the finance and strategy committee this week the fund recorded a loss in value of $2.7 million in the December quarter - the second quarter of the financial year - although cash flow remained strong, with $1.2 million returned.
The global recession continued to deepen, and commodity prices had plunged, but "although there continues to be volatility in equity markets, some stability has started to return to the market".
Mr Liddell said although future income levels from interest would be lower, the result of lower interest rates, rents and dividends should continue to contribute strong cash flows for the fund.
Council finance and corporate support general manager Athol Stephens said councillors should remember the fund policy states its value must be retained.
