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Investing effectively starts with a reassessment of risk

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Profit margins in the residential senior living sector continue to decline as the covid response continues to bite. Indeed, as at 31 December 2021, residential care providers were running an average deficit of $10.311 per resident, per day. This deficit is including the additional $10 per resident per day government funding.

This has a clear knock-on effect on the ability of providers to protect their balance sheets and ultimately grow and enhance their facilities. 

Whilst improving the care of older Australians is a priority for the new Labor Government, there is still a lot of uncertainty around the future of funding. We do know continuous change is on the horizon and this is expected to lead to a more competitive marketplace which could increase pressures on revenue further. That is why action needs to be taken now, as small changes can make meaningful differences over the longer term.

As we wait for further clarification on policy, one area that can and should be prioritised by boards is investment and liquidity risk. Whilst cash rates are increasing, inflation remains high and so now is the critical time to review your Investment Management Strategy (IMS) and Liquidity Management Strategy (LMS) to ensure it is fit for purpose. It is also a time to test whether the risk framework in place is still appropriate in this new and changing environment.

Risk tolerance and liquidity needs will be unique to each provider but the approach across the industry has tended to be highly conservative. Whilst this will remain appropriate for some when the tolerance for investment and liquidity risk is too low, the risk of failure is heightened. In some cases it could even be the difference between being loss and profit-making.

For example, if more cash than necessary is being held on the balance sheet, inflation risk is amplified and opportunity costs exist. In times where profit margins are razor-thin or non-existent, senior living leaders need to use the levers available to them to improve financial performance. This is particularly important in the NFP sector where the levels of cash held as a percentage of debt was on average 39% as at December, 2021

Even incremental investment gains can make a meaningful difference. For example, an organisation with $10M of excess cash in term deposits could have made $1.9M extra if it had been invested in a conservative portfolio with 40% in growth assets (such as equities) over the past five years. Increase the growth weighting to 60% in a diversified portfolio and the difference grows to $2.5M2.


5 years invested

 Capital Growth
Income   Total Return

 The difference it would have made

 Term Deposits
 $ 0   
 $ 677K
 $ 677K
 $ 1,558K 
 $ 969K 
 $ 2,527K
 +$ 1,860K
 $ 2,025K 
 $ 1,129K 
 $ 3,154K 
 +$ 2,477K


It is important to note that investing effectively is only one piece of a very complex puzzle. In order to be successful in this shifting landscape, senior living providers need to consider an array of strategic options including examining current resources available, strategies to diversify income streams, acquisition and/or merger strategies, divesting non-core activities, and redevelopment projects, workforce planning and IT strategies.

After all, it will be the organisations that are prepared to do deep strategic analysis – and do it now – who will succeed.


Perpetual works with some of the country’s largest not-for-profit organisations, as trustee, investment manager and advisor. We can help you put in place the Governance structures required to ensure the assets on your balance sheet are put to work to optimise risk-managed financial returns in a way that is suitable for your individual requirements. For more information on risk and liquidity management and whether your balance sheet is working as effectively as it could be please contact David or Anthony.


[1] StewartBrown Senior living Financial Performance Survey December 2021
[2] StewartBrown Senior living Financial Performance Survey December 2021
[3] The is just an example and is no guarantee of future market performance. Investing can result in positive or negative returns

Anthony Hamawi
Manager, NFP and Aged Care
David Hurley
Senior Financial Adviser, Perpetual Private
Anthony Hamawi

Anthony Hamawi

Manager, NFP and Aged Care

Anthony is responsible for the development of new relationships and business opportunities from within the philanthropic and not-for-profit sectors. His specific areas of focus are engaging boards and executives of not-for-profits with respect to investment management and the delivery of strategic business support to not-for-profit clients.

He also focuses on working with not-for-profit entities and endowments to define investment policy and strategy, to manage and protect their investment assets. 

Anthony has a Bachelor of Commerce (Finance & Financial Planning) and an Advanced Diploma of Financial Planning.

David Hurley

David Hurley

Senior Financial Adviser, Perpetual Private

David is a Senior Financial Adviser at Perpetual Private, with over 10 years’ experience in accounting and financial services. He specialises in working with not-for-profit organisations to deliver tailored governance and investment advice, which closely aligns with organisational values. David has a deep understanding of the unique needs of not-for-profit and Senior Living organisations, allowing him to assist in the careful development of investment policy and investment management strategies, as well as portfolio construction.

In the face of ever changing economic and market conditions, David looks to guide his clients to balance short term needs with long term sustainability. He has a particular focus on working with Senior Lliving providers on investment strategy, in an environment of low interest rates, high inflation, legislative change and uncertain liquidity requirements.

David is part of a dedicated team managing over A$1.2 billion across not-for-profit and senior living clients, family offices and philanthropic trusts. This allows David to engage with boards, executives and philanthropists from the not-for-profit sector, connecting them with Perpetual’s philanthropic experts and educational resources.

David holds a Bachelor of Commerce (Corp. Fin.) from the University of Adelaide, a Graduate Diploma in Financial Planning, is a Registered Tax (financial) Adviser and has completed the CFA Level I Exam.

This has been prepared by Fordham Business Advisors Pty Ltd (Fordham) ABN 77 140 981 853 and Perpetual Trustee Company Limited (PTCo) ABN 42 000 001 007, AFSL 236643. Perpetual Private advice and services are provided by PTCo. To view the Perpetual Private's Financial Services Guide, please click here. Fordham’s liability is limited by a scheme approved under Professional Standards Legislation. It is general information only and is not intended to provide you with advice or take into account your objectives,financial situation or needs. You should consider, with a financial adviser, whether the information is suitable for your circumstances. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. This information is believed to be accurate at the time of compilation and is provided in good faith. Fordham is part of the Perpetual Limitedgroup. This document is dated February 2022.