Investment Policy for Non-Expendable Funds

• Related Documents:  Investment Policy for Expendable Funds
• Owner: Financial Services
  
• Approver:  Board of Governors (Finance Committee)
• Approval Date(s): 2007 (as Investment Policy), September 2018, January 2024

I.    Purpose

This policy defines the management structure governing the investment of the University's Non-expendable Funds, and outlines the objectives and principles by which the University shall manage the investment of such funds.

II.    Scope and Application

This policy applies to all Non-expendable Funds unless the University’s Finance Committee of the Board exempts the application of this Policy to specific Non-expendable Funds.

This policy does not apply to the assets of the Toronto Metropolitan University Pension Plan as those assets are governed by the Statement of Investment Policy and Procedures for the Toronto Metropolitan University Pension Plan.

III.    Definitions

“Board” means the Board of Governors of the University.

“Non-expendable Funds” means the University’s restricted and unrestricted endowment funds. It does not include the stabilization reserve or other Board-exempted investment programs.

“Total Return” means the return on investments measured as the aggregate gain or loss generated from interest income, dividends, and realized and unrealized capital gains.

“University” means Toronto Metropolitan University.

IV.    Policy

1.    Investment Structure

The University shall invest Non-expendable Funds in pooled funds or separately managed accounts managed externally by third-party investment managers.

In the case where an investment is made in a pooled fund or separately managed account, the third-party’s investment policy and guidelines of the pooled fund or separately managed account may supersede this policy.

2.    Investment Objectives

The objective of the Investment of Non-expendable Funds is to generate a total return at a level that is sufficient to meet the University’s obligations for specific purposes, by balancing the University’s present spending needs with its expected future requirements.

The investment of Non-expendable Funds should be made with the aim to generate a total return at a level that is sufficient to ensure that the preservation of endowment capital is maintained, and the specific purpose obligations are met.

3.    Investment Constraints

a.    Time Horizon

The Non-expendable Funds have a long-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, the Board has the power to invest the University’s money in such a manner as it considers proper, subject to any express limitations or restrictions on investment powers imposed by the terms of the instruments creating any trust.

Funds restricted for endowment are subject to the investment standards prescribed in the Ontario Trustee Act.

d.    Liquidity

The University uses Non-expendable Funds to meet its endowment spending needs as determined by the Endowment Funds Policy. Spending requirements are fairly stable and predictable.

The University must maintain sufficient liquidity in the investment portfolio to cover annual spending.

e.    Environmental, Social, & Governance

The respective investment funds’ active investment managers must consider qualitative and quantitative factors affecting financial performance of existing and potential investments, including environmental, social and governance factors.

These factors may be included as part of the investment manager’s decision criteria when evaluating investment opportunities.

4.    Permitted Investments

The University may invest Non-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 respective governments of Canada;

ii.    Provincial and municipal treasury bills, notes debentures and any obligations unconditionally guaranteed by the provincial and municipal 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 National Housing Act 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;

v.    Private credit; and/or

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

c.    Equities:

i.    publicly traded common stocks, convertible debentures, share purchase warrants, exchangeable shares, share purchase rights or preferred shares of Canadian or foreign companies;

ii.    units in real estate investment trusts (“REITS”) and income trusts that are publicly traded;

iii.    exchange traded funds;

iv.    private equity; and/or

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

d.    Real Assets:

i.    infrastructure;

ii.    agriculture; and

iii.    real estate; and/or

iv.    Pooled funds and separately managed accounts investing in the above noted securities.

5.    Asset Mix and Rebalancing

The combined exposure to Cash & Money Market and Bonds shall not be lower than 10%. The combined exposure to public equities shall not be lower than 30% and shall not exceed 90%.

*The asset mix Target and respective minimum and maximums do not apply to the stabilization reserve.

Rebalancing between asset classes within balanced fund(s) is conducted by the investment manager(s).

The University is responsible for managing flows between the stabilization reserve and the endowment and making withdrawals to cover disbursements and expenses as necessary.

6.    Investment Performance Measurement and Monitoring

The returns generated by the investments of the Non-expendable Funds are required to be measured at least quarterly. Performance of the total portfolio is expected to exceed the returns of a weighted average benchmark based on the targets specified in Section 5 over rolling four-year periods. On a quarterly basis, the performance of the total portfolio must be compared against a benchmark calculated as the weighted average of each investment manager’s respective benchmark, weighted by each investment manager’s target weight within the overall fund.

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

V.    Jurisdiction

The Chief Financial Officer is responsible for the application of this Policy and for the creation of such Procedures and guidelines as necessary or desirable to give effect to this Policy.

The Finance Committee of the Board has responsibility for oversight of this Policy.