I recently attended the annual Commonfund forum in Orlando Florida. This forum is put on every year, free of charge, by Commonfund, a global asset management firm that was a pioneer in long-term investing for nonprofits and other institutions.
On the second day, one of the panel discussions I attended was “Imagining What’s Next for the Global Economy.” It was facilitated by Sue Herera from CNBC and the panelists were Julia Coronado, president and founder of MacroPolicy Perspectives, Mark Anson Ph.D. CEO and CIO of Commonfund, and Vikram Mansharamani Ph.D., a global trendwatcher.
They talked about the global economic impacts of what is happening in Russia and Ukraine and the impacts this has on China and Iran. I won’t take you through the entire 45-minute discussion, but this did get me thinking about the impacts to the Native Hawaiian Trust (NHT) and how most of the general public does not understand how OHA utilizes the trust and how it allows OHA to leverage the Public Land Trust (PLT) to directly impact our beneficiaries.
Currently, OHA uses a 20-quarter average of the NHT to spend 5% of its operating budget. This includes all salaries and benefits, except for grants and all other operating expenses. For the fiscal year 2021, that amount was just under $18M.
The $15.1M that OHA receives annually from the PLT goes directly to OHA’s granting program and into the hands of our beneficiaries.
The legislation that OHA advocates for every year to increase its share of the PLT to get the full amount of the 20% of those revenues would significantly increase OHAs ability to better the conditions of Native Hawaiians, as this would increase the dollars that flow through grants. OHA would be able to create new granting and possibly loan opportunities for Native Hawaiians.
This would allow OHA to create a mortgage down payment program as I laid out last month. This would allow OHA to create an agriculture-specific grant program to assist the state with its food security. The possibilities are endless as to what OHA would be able to do with such an increase.
But I digress. The NHT has grown at a modest average of 7% annually. As you can see, with a 5% spend that is a narrow margin. There are three major things I have been working on during my time in office to address this issue.
First was the reorganization of the governance of OHA that I chaired and was unanimously adopted by the Board of Trustees. This began the process of separating policy from OHA and the NHT. These policies continue to be worked on currently.
The second was to begin the process of tying OHA’s land holdings to the NHT. This will allow for a rebalancing of the portfolio and eliminate the need for expensive hedge funds and generate greater returns for the portfolio while actually lowering risk.
Lastly, we are looking at a new hybrid approach to the spending policy. A straight 5% spend allows for huge peaks and valleys in the spending when the financial markets are either very bullish or very bearish. This hybrid approach will incorporate the Consumer Price Index, among other factors, that will smooth the spending line out for a more predictable spending model off of which to budget. Studies have shown that such a spend model will increase overall spend over time while reducing those peaks and valleys.
I hope this has made understanding the NHT and OHA’s spending a little easier to digest.