Red Deer & District Community Foundation
2) FINANCIAL POLICIES
1. Investment Policy:
1.1 The Red Deer and District Community Foundation supports investment options targeted at the long-term growth of the investment fund and the ability of the investment fund to generate sufficient income in excess of associated costs. Therefore, investment selections will be made with a 10 to 20 year horizon and results shall be reviewed annually and reported quarterly against appropriate benchmarks.
1.2 In accordance with the above, the Foundation will take into consideration consumer price index and inflation in their net income calculations and by establishing a limit for the amount of grants disbursed annually.
2. Investment Objectives:
2.1 Through the donations and gifts of community members, the Foundation has established an endowment fund (“the Fund”). The objective of the Foundation, as stated in their incorporation by-laws, is to use the income generated by the funds entrusted to it, together with such portion of the capital of such funds and gifts as the respective donors may direct, for charitable, philanthropic, humanitarian, educational, recreational, cultural and benevolent purposes in the City of Red Deer and surrounding district. To accomplish this goal the Foundation will endeavour to invest its funds with the objective of preserving the capital pool while generating sufficient income to cover associated costs and meet community needs.
2.2 The Fund’s performance will be evaluated over five year rolling periods. It is expected to exceed, after fund management expenses, the return computed by linking quarterly returns using the target weights of the benchmarks in Section 6.1: Asset Mix.
3. Finance Committee:
3.1 The Foundation will appoint a Finance and Investment Committee at the first meeting after the Annual General Meeting each year.
3.2 a) The Committee shall consist of not less than 3 (three) members comprised of 2 (two) Directors and members at large as required and appointed by the Board.
b) The Board Chair and Chief Executive Officer, shall be ex-officio, non-voting members of the Committee.
c) Committee members should have a working knowledge of investments and accounting practices. The Chair of the Committee should have an investment or accounting designation.
d) To maintain consistency and independence a new member should be appointed to the Committee at least every 2 (two) years.
3.3 The primary responsibilities of the Finance and Investment Committee shall be the oversight of the Fund and supervision of all persons who have duties related to the Fund and all organizations appointed to provide services to the Fund.
3.4 The Finance and Investment Committee shall meet with the Investment Manager(s) at least once per year and review all reports submitted by the Investment Manager(s). They shall subsequently provide semi-annual reports to the Board regarding the operation, management and performance of the Fund.
3.5 On an annual basis the Finance and Investment Committee shall review the Investment Policy and make recommendations to the Board regarding amendments to the policy.
3.6 Based on a formal evaluation process, the Finance and Investment Committee may recommend changes in the appointment of Investment Manager(s) if they consider it to be in the best interest of the Fund and the Foundation.
3.7 Changes to asset allocation, fund composition, or Investment Manager(s) must first have the majority support of the Finance and Investment Committee followed by majority approval of the Board.
4. Fund Administration:
4.1 The Finance and Investment Committee shall appoint one or more Investment Manager(s) and one or more Custodian(s) for the Fund. The primary responsibility of the Investment Manager(s) is the day-to-day operations of the Fund in adherence to the Foundation Investment Policy. The primary responsibilities of the Custodian(s) are to hold the assets of the Fund, to keep records, to separately identify changes to capital and revenue and to provide the Foundation with monthly reports regarding investments held by the Fund.
5. The Investment Manager(s):
5.1 Investment Manager(s) appointed by the Foundation will have demonstrated a suitable investment approach, financial and organizational stability, capacity to undertake the account, performance record of at least two years of relevant experience and expertise, and other factors deemed appropriate by the Finance and Investment Committee.
5.2 Upon appointment by the Finance and Investment Committee the Investment Manager(s) will be provided a six month period in which to establish the Fund according to the parameter of this policy. Thereafter, the performance of the designated portfolio will be reviewed on a quarterly basis and evaluated against current appropriate benchmarks and the parameters of this policy.
5.3 The Investment Manager(s) will provide the Finance and Investment Committee with quarterly written reports, which will include portfolio evaluation, performance summary in comparison to established benchmarks, a statement of compliance with this policy and other such information deemed relevant by the Manager and/or the Finance and Investment Committee. Sufficient notice shall be provided if additional information is required.
5.4 On a semi-annual basis, the Investment Manager(s) shall further report on economic outlook, markets, and tactics or strategies planned.
5 The Investment Manager(s) shall report directly to the Chief Executive Officer of the Foundation with respect to the day-to-day matters of the Fund, including monthly transaction details.
5.6 The Investment Manager(s) will keep records identifying capital and revenue and may therefore keep one account, which will at all times include capitalized revenue.
5.7 The Investment Manager(s) shall exercise the care, diligence and skill in the investment of the designated portfolio that a reasonable and prudent person would to avoid undue risk of loss and obtain a reasonable return.
5.8 The Investment Manager(s) is authorized to adjust the designated portfolio to meet objectives consistent with the parameters set herein.
6. Fund Parameters:
6.1. Asset Mix:In keeping with the Foundation’s Investment Philosophy, the asset mix of the Fund will be focused towards a long-term investment horizon of minimizing risk and optimizing returns. Each Investment Manager assigned a portfolio by the Finance and Investment Committee shall adhere to the permissible range for each asset class. The normal policy for permissible ranges for each asset class indicates minimum and maximum positions as a percentage of the Fund’s total market value and is as follows:
|Asset Class||Min %||Target %||Max %||Benchmark|
|Cash & Equivalents||0%||5%||15%||FTSE TMX 91 Day T-Bill Index|
|Canadian Bonds||30%||35%||50%||FTSE TMX Canada Universe Bond Index|
|Total Cash & Bonds||30%||40%||55%|
|Canadian Large Cap Equity||10%||15%||35%||S&P/TSX Composite Total Return Index|
|Canadian Small Cap Equity||0%||7.5%||10%||BMO Small Cap (Weighted) Total Return Index|
|U.S. Equity||10%||15%||30%||S&P 500 Total Return Index|
|International Equity||10%||15%||30%||MSCI EAFE (Net) Total Return Index|
|Global Small Cap Equity||0%||7.5%||10%||Russell Global Small Cap Total Return Index (Gross)|
6.2 Quantitative Parameters:
In view of the foregoing and calculated on the basis of market value at all times, the following general parameters shall apply:Cash/Cash
a) Not more than 5% of the portfolio’s market value may be invested in any one corporate issue.
a) Not more than 5% of the Fund or 10% of the Equity component shall be invested in common stock, preferred shares or other equity issues of any one corporation.
b) Equity in any one corporation shall not exceed 5% of the equity of the corporation.
c) Maximum small cap weight is 20% of the market value of the total portfolio
d) The Fund shall not be invested in any single industry group representing more than 30% of the Canadian Equity portfolio, as represented by the S&P/TSX Composite Index. Bonds: a) The bond portfolio must hold a minimum of 30% in Government of Canada bonds.
b) Not more than 40% of the Bond portfolio may be invested in issues of any one province or provincial guarantee.
c) Not more than 10% of the Bond portfolio may be invested in any one corporation or municipality and not more than 5% in any on issue.
6.3 Qualitative Parameters:
In compliance with its by-laws, the Foundation shall have the power to “invest any money of or in the possession of the Foundation in any property in which a trustee may invest trust money, pursuant to the laws of the Province of Alberta, or in which a life insurance company may invest funds under the Canadian and British Insurance Companies Act, Statutes of Canada, 1932; pursuant to any order of a Justice of the Court of Queen’s Bench of Alberta.” The Canadian and British Insurance Companies Act (1932) has been replaced by the Insurance Companies Act (Canada)
6.3.1 All investments must be made in accordance with the Insurance Companies Act (Canada).
6.3.2 The Short Term Reserves/Commercial Paper are limited to government paper and high quality rated at R-1 or better by the Dominion Bond Rating Service.
6.3.3 The Bonds must be rated at “A” or better by the lowest rating of the Dominion Bond Rating Service or the Canadian Bond Rating Service at time of purchase. Any bond dropping below “BBB” will be eliminated from the portfolio within 120 days.
7.1 All recommendations will be made within the context of the objectives, asset allocation guidelines and constraints as set out in this policy.
7.2 Any intended deviation from above, resulting from exceptional circumstance, must receive prior approval by the Board of Directors.
7.3 These policies will remain in effect until changed or modified by the Board. Where applicable, such changes shall be promptly communicated to the Finance and investment Committee and Investment Manager(s).
Date Approved: November 1996, March 2015, March 2016
Date Revised: February 2001