3.01.15 - Investments
Intent
This investment policy statement (the “Statement”) provides a set of written guidelines for the management of the Society’s investments. The Statement will be reviewed at least annually by the board of directors (“the Board”) (after reviewing the recommendations of the investment committee) to ensure that it continues to reflect the Society’s requirements.
The general objectives of the Statement include:
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Establish the investment objectives, policies, guidelines and eligible securities relating to any investments owned or controlled by the Society and any of its subsidiary organizations as may be applicable.
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Identify the criteria against which the investment performance of the organization’s investments will be measured.
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Communicate the objectives to the Board, staff, investment managers, brokers, donors and funding sources that may have involvement from time to time.
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Serve as a review document to guide the ongoing governance and oversight of the management of the Society’s investments.
Guidelines
Board of Directors
The Board has ultimate authority over and responsibility for the Society’s investments. In order to ensure that the investments meet the required objectives, the Board may:
Appoint an Investment Committee (if required)
The investment committee (the “Committee”) would:
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Review and make recommendations, if any, with respect to the Statement;
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Report as to the compliance with the Statement to the Board;
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Approve any eligible investment products that meet the requirements of the Statement;
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If any new investment products are proposed, obtain the approval of the Board; and
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Maintain an understanding of any legal and regulatory requirements, as applicable, that may apply to the Society’s investments.
The Committee shall be comprised of:
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SSO (ex-officio) and the Chair of the Board of the Society;
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Vice Chair (or Treasurer, if applicable.); and
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A minimum of two other members as decided by the Board or the Committee.
The Committee shall meet, whether in person or by phone or equivalent:
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Semi-annually unless the Committee or Board determines that more regular meetings are required; and
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Each time a new investment product is being assessed.
Procedures
a. General Objectives
The general investment objective of the Society is to manage the Society’s investment funds in such a way as to provide sufficient capital and income to enable the Society to carry out its mission, vision and related activities effectively both in the short term and over the longer term, to preserve its investment capital and minimize the risk of investment losses.
Where possible, the value of the investments within the Society’s life cycle maintenance fund (the “Life Cycle Fund”) and any other fund established for long-term capital purposes should be enhanced so as to at least keep pace with the Calgary Consumer Price Index (“CPI”) on an annual basis (for all items) as posted by Statistics Canada plus a growth expectation of one (1) percent over the longer term (net of any investment fees). While such a return may not necessarily be achievable each year, this objective will be considered met if it so meets the return requirements over a five year rolling average.
The investment committee believes that by benchmarking a rate of growth of CPI plus 1 percent it does not create undue financial risk for the society.
The Society is also required to maintain sufficient reserves for general operations of the Park (for example, the “Operating Reserve”). The value of investments within the Operating Reserve, or any other fund, should be enhanced so as to at least keep pace with the Calgary Consumer Price Index (“CPI”) on an annual basis (for all items) as posted by Statistics Canada plus a growth expectation of one (1) percent over the medium term (net of any investment fees). This fund should remain sufficiently liquid to enable quick access to funds. While such a return may not necessarily be achieved each year, this objective will be considered met if it so meets the return requirements over a three year rolling average.
The investment committee believes that by benchmarking a rate of growth of CPI plus 1 percent it does not create undue financial risk for the society.
To the extent that any endowments or similar donations are made that stipulate certain usage and investment requirements (“Endowment Funds”), if any, those investments within the Endowment Fund shall be invested in such a manner as to be compliant with those requirements and this Statement. In the event that there is a conflict between the requirements of the Endowment Fund and this Statement, the requirements of the Endowment Fund shall take precedence over the applicable terms of this Statement as long as it does not result in a conflict with the achievement of the Society’s vision and mission.
With the above in mind, overall, the Society’s return objectives are ranked as follows:
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Preservation of capital;
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Generation of growth in the capital value of investments in order to preserve their value in real, inflated-adjusted terms;
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Maintenance of sufficient and appropriate liquidity to enable the Society to meet its financial commitments; and
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Generation of growth in the capital value of investments to provide for an increasing rate of income for future disbursements and expenditures.
b. Risk tolerance
Investments should be structured and managed to provide for the generation of the targeted rate of investment return while assuming only the minimum, necessary amount of risk. Risk will be measured in terms of the investment returns and the downside risk (or risk of loss) of the investment. As appropriate, investments will maintain a minimum level of diversification in order to reduce overall risk which may include diversification by asset class, industry sector and geography. As such a higher percentage of the investment portfolio will be invested in cash and fixed income and a lower percentage will be invested in equities.
c. Investment product guidelines
Investment products used within the Society should be designed to meet both the return objective and risk tolerance.
d. Asset mix
Life Cycle Fund
In order to meet the preservation of capital objectives, investment products should have minimum cash plus fixed income exposure of 60%. To allow for enhanced inflation protection and capital growth, investment products may consider an equity exposure not exceeding 40%.
Asset Class Minimum Neutral Maximum
Cash & fixed income 60% 70% 100%
Equity Nil% 30% 40%
Individual investment products will be assessed on their ability to meet both the return and risk objectives. Products falling outside of the above recommended asset mix will be considered if they demonstrate an equivalent risk-controlled strategy with the ability to meet return objectives.
Operating Reserve Fund
In order to meet the preservation of capital objectives, investment products should have minimum cash plus fixed income exposure of 60%. To allow for enhanced inflation protection and capital growth, investment products may consider an equity exposure not exceeding 40%.
Asset Class Minimum Neutral Maximum
Cash & fixed income 60% 70% 100%
Equity Nil% 30% 40%
Individual investment products will be assessed on their ability to meet both the return and risk objectives. Products falling outside of the above recommended asset mix will be considered if they demonstrate an equivalent risk-controlled strategy with the ability to meet return objectives.
As well, as it relates to fixed income products, all such products should be assessed for investment security and ensure that the liquidity requirement is achieved.
e. Performance Benchmarks
One of the primary objectives of these two funds is to outperform a benchmark portfolio over a moving 5-year average (life cycle) and 3 year average (operating reserve). The specific weights are provided in the table below:
FTSE TMX 91 Day T‐Bill Index 10%
FTSE TMX Canada Universe Bond Index 60%
MSCI ACWI World (Net) Total Return Index 30%
f. Permitted Investments
Cash & fixed income Permitted Investments
Cash Equivalents
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Treasury Bills
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Money Market Funds
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STIF Funds
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Commercial Paper
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Banker’s Acceptances
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Certificates of Deposit
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Mutual funds which invest in securities as allowed in this statement
Fixed Income Securities
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Canadian Government and Agency Securities
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Corporate Notes and Bonds
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Mortgage Backed Bonds
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Preferred Stock
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Fixed Income Securities of Foreign Governments and Corporations
Cash & Fixed Income Constraints
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The fixed income portion of the fund will maintain a minimum AA- weighted average credit quality as recognized by Dominion Bond Rating Service (DBRS)
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The fixed income portion of the fund will maintain a maximum 5% exposure to any single corporate security
Equity Permitted Investments
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Common Stocks
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Income Trusts
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Convertible Notes and Bonds
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Convertible Preferred Stocks
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American Depository Receipts (ADRs) of Non-U.S. Companies
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Stocks of Non-U.S. Companies (Ordinary Shares)
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Mutual Funds which invest in securities as allowed in this statement
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"Alternatives", that employ derivative strategies with the aim to reduce risk (exposure to this is
limited to up to 10%)
Equity Investment Constraints
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The equity portion of the fund may not concentrate more than 20% in any industry. Industry classifications are determined utilizing the Global Industry Classification Standard (GICS)
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The equity portion of the fund may hold a maximum of 10% of the portfolio in a single stock
Currency hedging policy
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Currency hedging is not permitted.
g. Approval of eligible investment products
All investment products will be approved by the Board.
If applicable, a Committee will review individual investment products to ensure that they meet risk and return objectives.
Specifically the Committee would review the:
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Investment performance history;
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Investment product objectives and guidelines; and
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If applicable, any managers of the investment products.
The Committee would also be responsible for the annual review of the approved investment products to ensure that they continue to be eligible for investment. If an investment product changes significantly or undergoes any event making it ineligible for investment, the Committee will take action to remove it from its investment portfolio.
h. Appointment of an investment manager
In the event that the Board (or Committee) determines that it is appropriate to utilize an independent investment manager to manage some or all of its investment assets (the “Investment Manager”) or recommend a change in Investment Manager, the approval of the Board will be required for the appointment of the Investment Manager including the level of fees or remuneration payable to the Investment Manager.
The Investment Manager will be required to comply, in writing, with the terms of this Statement. The format of such a requirement will be subject to the consent of the Board.
As required, the Investment Manager shall provide an annual report of its investment activities to the Board unless such a requirement is otherwise waived by the Board.
The investment manager (s) must provide the society with a compliance statement on a quarterly basis.
i. Conflict of interest
No fiduciary will knowingly permit his or her interest to conflict with his or her duties or powers relating to the investment or management of the Society’s assets. Any actual or perceived conflict of interest must be reported to the Board. Such disclosure will be made when the affected individual first becomes, or ought to have become, aware of the conflict or potential conflict. If a conflict does exist, the Board will take all appropriate measures to remedy the situation. Every disclosure of a conflict of interest will be recorded in the minutes of the relevant meeting of the Board.
