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Investment Policy for Expendable Funds

I.    Purpose

This policy defines the management structure governing the investment of Toronto Metropolitan University’s (the “University”) expendable funds and outlines the objectives and principles by which the University shall manage investments.

II.    Scope and Application

This policy applies to all University expendable funds unless the University’s Finance Committee of the Board of Governors (the “Board”) specifically exempts the funds.

III.    Definitions

“Expendable funds” means the University’s cash surplus and unspent balances in operating, ancillary, research and capital funds.

IV.    Policy

1.    Investment Structure

The University shall manage investments of the expendable funds internally or externally through third-party investment managers. The Treasury Unit within Financial Services, is authorized to transact on behalf of the University within the limits of this policy. 

The University may manage expendable funds externally through separately managed accounts or through the investment in pooled funds.

2.    Investment Objectives

The primary objective is to earn a return while minimizing investment risk in order to meet the cash needs of the University. 

The University shall maintain cash levels of expendable funds at a minimum level sufficient to meet projected cash requirements. The University shall invest all remaining funds which are not immediately required for their purpose, regardless of whether they are restricted or unrestricted as to purpose, to earn a reasonable return commensurate with the University’s risk tolerance.

3.    Investment Constraints

a.    Time Horizon

The expendable funds are used to cover the University’s ongoing operational expenses which are generally short-term in nature and therefore have a short-term investment horizon.

b.    Tax Status

The University is a registered charity and a non-taxable entity under the Income Tax Act.

c.    Legal

Pursuant to the Toronto Metropolitan University Act, 1977, the Board has the power to invest the University’s money in such a manner as the Board considers proper, subject to any express limitations or restrictions on investment powers imposed by the terms of the instruments creating any trust.

d.    Liquidity

Liquidity needs are high as the expendable fund investments must be able to be converted to cash quickly to fund the University’s ongoing operational expenses.

4.    Permitted Investments

The University may invest expendable funds only in the following securities:

a.    Cash and Short-Term Investments:

i.    Government of Canada treasury bills, notes, debentures and any obligations unconditionally guaranteed by the federal government of Canada;

ii.    Provincial and municipal treasury bills, notes debentures and any obligations unconditionally guaranteed by the respective governments of Canada;

iii.    Commercial paper and corporate bonds issued by a Canadian corporation;

iv.    Treasury bills and any money market obligations unconditionally guaranteed by the US government;

v.    Bankers Acceptances, Certificates of Deposit and similar instruments issued by a Schedule I or II Canadian Bank or trust company;

vi.    Securitized paper issued by a Canadian bank;

vii.    Investment savings accounts and similar instruments with a Schedule I or II Canadian Bank or trust company; and/or

viii.    Pooled funds and separately managed account investing in the above noted securities.

b.    Fixed income:

i.    Government of Canada treasury bills, bonds, stripped coupons and residuals and NHA guaranteed mortgage backed securities as well as any other debt obligations unconditionally guaranteed by the federal government of Canada;

ii.    Provincial and municipal treasury bills, notes, floating rate notes, bonds, stripped coupons, debentures, and any obligations unconditionally guaranteed by the provincial and municipal governments of Canada;

iii.    Bonds, notes, floating rate notes, certificates of deposit, bankers’ acceptances, and similar instruments issued by a Canadian bank;

iv.    Bonds, debentures, notes, floating rate notes and commercial paper issued by a Canadian corporation; and/or

v.    Pooled funds and separately managed account investing in the above noted securities.

5.    Asset Mix and Rebalancing

The asset mix of the total portfolio of expendable funds, which is set out in the table below, is based on the investment objectives in Section 2.

Asset Class Category

Range

Investment Bank Accounts

0-100%

Money Market

0-100%

Bonds

0-75%

The allocation between the three asset class categories must be consistent with the liquidity profile of the University’s cash requirements and the projected risk/return characteristics of each category.

Further, within each asset class category, the University shall manage credit risk and concentration risk to be consistent with the ‘prudent investor’ principle and the ‘very low’ risk tolerance associated with these assets.

The University may place additional restrictions on an investment manager or investment agent through an Investment Management Agreement and/or Mandate Statement.

The total portfolio is to be rebalanced in accordance with the ranges and limitations outlined in this policy.

6.    Investment Performance Measurement and Monitoring

The Treasury Unit within Financial Services measures the returns generated by the investments of the expendable funds at least quarterly. The composition of the total portfolio will vary over time and the University shall benchmark performance at the sub-portfolio level.

The Chief Financial Officer shall report the composition of the total portfolio to the Finance Committee at least quarterly.

The performance of the sub-portfolio of money market securities is expected to meet or exceed the returns of the FTSE TMX Canada 91-Day T-Bill Index. The performance of the sub-portfolio of bonds is expected to meet or exceed the returns of the FTSE TMX Canada Short-Term Bond Index.