Australian Wildlife Conservancy (AWC) has an ambitious goal to grow its newly established endowment fund to $100 million in the next decade, and to get there, the not-for-profit is counting on gradually building an investment track record and securing more direct support from sponsors.  

With $5 million in seed capital from AWC’s balance sheet and the Martin Copley Will Trust, the endowment is around seven months into operation and has enlisted JANA as its asset consultant.  

Naturally, the most compelling reason for setting up the fund is to establish a “permanent capital base” for the not-for-profit, says AWC chair Nick Butcher, who also used to be the global co-head of infrastructure and energy at Macquarie Capital.  

“That was seen as really important for AWC as we’ve grown larger and matured that we were diversifying our income sources, and we were looking to longer-term funding sources, rather than just an annual cycle of funding support,” Butcher tells Investment Magazine. 

“We’re a conservation organisation that owns and manages land for the very long term, potentially in perpetuity…so matching that commitment with long-term funding sources was seen as important.” 

But another motivation is that the endowment fund can become an avenue for donor engagement. 

“We are seeing increasing trend amongst a large number of our donors to think about legacy, and how they might actually contribute to something that’s permanent in the conservation sector,” Butcher says. 

“So we felt creating an endowment fund could tap into [their] desire to be giving or bequesting a permanent funding opportunity.” 

The fund is still in capital deployment mode, Butcher says, but overall it has “very low tolerance” for the risk of capital loss. It has a CPI-plus objective on a 10-year rolling basis but the specific target was not disclosed.  

Close to 45 per cent of the AWC endowment is allocated to listed equities and bonds and 40 per cent to unlisted assets, including real asset, private equity and credit. JANA not-for-profit consultant Kevin Fernando says the fund is mainly exposed to core strategies in private markets.  

“Core exposures give you exactly what we want from those asset classes. We want them to be diversifiers – to provide both the diversification to equities, but also a diversified income stream to interest income from bonds and dividends from equity,” he says.  

Comfortable with illiquidity

While that income can be used to fund project expenditure, team overhead or other organisational maintenance costs, Butcher says the point is not to draw from the endowment regularly.  

“We’ve always managed AWC conservatively in the sense that we wanted to maintain some level of cash buffer that continues to maintain our operations,” Butcher says. 

“We are comfortable with a proportion [of endowment capital] being held in illiquid assets.” 

Over the years, AWC has had a “Sustainability Fund” board subcommittee that oversees the investment of surplus financial assets, currently chaired by co-founder and co-chief investment officer of Platinum Asset Management Andrew Clifford.  

“We do maintain a separate, shorter-term, more liquid pool of capital…the endowment fund is very specifically focused on that long term funding source,” Butcher says.  

Due to AWC’s land management, wildlife conservation and ecological research works, it may seem that the organisation has a natural affiliation with ESG-driven investment, but Butcher says the endowment fund won’t specifically direct capital into investment areas such as natural capital. 

The responsible investment and ESG policies of managers AWC endowment is allocating to would be important, but the most important consideration is risk-adjusted returns.  

“We’ve taken the view that all of our work is specifically for that conservation mission, and what the endowment fund is doing is creating an additional income stream to invest into that,” he says.  

AWC was established in 1991 when its founder Martin Copley purchased the Karakamia Wildlife Sanctuary in Western Australia, and over the years has had leasing arrangements with landholders and partnerships with traditional owners to conduct conservation works.  

JANA’s Fernando argues AWC has been a natural capital allocator since its inception.  

“The opportunity set in natural capital outside of agriculture and timberland, I would say at the moment is very narrow and very limited, in particular in biodiversity,” he says. 

“As that evolves over time, certainly we’d love to see the opportunity to include some of that in the endowment fund, as long as it also meets the return objectives.”