February 22, 2012
Investment Policy Statement
For
Epilepsy Ontario
SCOPE OF THIS INVESTMENT POLICY
This statement of investment policy reflects the investment policy, objectives, and
constraints of Epilepsy Ontario’s (“EO”) investments.
PURPOSE OF THIS INVESTMENT POLICY STATEMENT
This statement of investment policy is set forth by the EO Executive Committee in order
to:
1. Define and assign the responsibilities of all involved parties.
2. Establish a clear understanding for all involved parties of the investment goals
and objectives of the funds of the EO.
3. Offer guidance and limitations to all Investment Managers regarding the
investment of EO assets.
4. Identify the criteria against which the investment performance of the organization’s
investments will be measured.
5. Establish a basis for evaluating investment results.
6. Manage funds according to prudent standards and within accepted safety and
credit risk principles.
7. Establish the relevant investment horizon for which EO assets will be managed.
In general, the purpose of this statement is to outline a philosophy and attitude which will
guide the investment management of the assets toward the desired results. It is intended
to be sufficiently specific to be meaningful, yet flexible enough to be practical.
DEFINITIONS
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1.
"Fund" shall mean the Epilepsy Ontario Investment portfolio.
2.
"Executive Committee" shall refer to the Committee authorized to administer the
Fund as specified by applicable ordinance.
3.
"Fiduciary" shall mean any individual or group of individuals that exercise
discretionary authority or control over fund management or any authority or
control over management, disposition or administration of the Fund assets.
4.
"Investment Manager" shall mean any individual, or group of individuals,
employed to manage the investments of all or part of the Fund assets.
5.
"Investment Management Consultant" shall mean any individual or organization
employed to provide advisory services, including advice on investment objectives
and/or asset allocation, manager search, and performance monitoring.
6. "Securities" shall refer to the marketable investment securities which are defined
as acceptable in this statement.
7. "Investment Horizon" shall be the time period over which the investment
objectives, as set forth in this statement, are expected to be met. The investment
horizon for this Fund is 3-5 years.
DEFINITION OF RISK
The Investment Committee realizes that there are many ways to define risk. It believes
that any person or organization involved in the process of managing EO’s assets
understands how it defines risk so that the assets are managed in a manner consistent with
the Fund's objectives and investment strategy as designed in this statement of investment
policy. The Executive Committee considers the tolerance for risk to be classified as
medium to low. That is, comfortable with fluctuations in the portfolio, and the possibility
of larger declines in value, in order to grow the portfolio over time. EO’s risk/return
trade-off is classified as conservative.
GENERAL INVESTMENT PRINCIPLES
1.
Investments shall be made solely in the interest of the Fund.
2.
The Fund shall be invested with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the investment of a fund of like character
and with like aims.
3.
Cash is to be employed productively at all times, by investment in short term cash
equivalents to provide safety, liquidity, and return.
INVESTMENT MANAGEMENT POLICY
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1.
Preservation of Capital - Consistent with their respective investment styles and
philosophies, investment managers should make reasonable efforts to preserve
capital, understanding that losses may occur in individual securities.
2.
Risk Aversion - Understanding that risk is present in all types of securities and
investment styles, the Finance Committee recognizes that some risk is necessary
to produce long-term investment results that are sufficient to meet the Fund's
objectives. However, the investment managers are to make reasonable efforts to
control risk, and will be evaluated regularly to ensure that the risk assumed is
commensurate with the given investment style and objectives.
3. Adherence to Investment Discipline - Investment managers are expected to adhere
to the investment management styles for which they were hired. Managers will be
evaluated regularly for adherence to investment discipline.
4. Liquidity – Epilepsy Ontario will require the ability to deposit and withdraw funds
on a continuous basis. Investment managers therefore should make decisions that
will maximize returns through short term investments, while understanding the
need for liquidity.
INVESTMENT OBJECTIVES
In order to meet its needs, EO’s investment objective emphasizes capital growth with
some focus on income.
The investment goal of EO is to achieve a total return (income and appreciation) of 3 to 5%
after inflation, over a full market cycle (3-5 years). These investment goals are the objective of
the aggregate Fund, and are not meant to be imposed on each investment account (if more
than one account is used).
DELEGATION OF AUTHORITY
The EO Executive Committee is a fiduciary, and is responsible for directing and
monitoring the investment management of EO assets on behalf of Epilepsy Ontario. As
such, the Executive Committee is authorized to delegate certain responsibilities to
professional experts in various fields. These include, but are not limited to:
1. Investment Management Consultant. The consultant may assist the Executive
Committee in: establishing investment policy, objectives, and guidelines; selecting
investment managers; reviewing such managers over time; measuring and
evaluating investment performance; and other tasks as deemed appropriate.
2. Investment Manager. The investment manager has discretion to purchase, sell, or
hold the specific securities that will be used to meet the Fund's investment
objectives.
3. Custodian. The custodian will physically (or through agreement with a subcustodian) maintain possession of securities owned by the Fund, collect dividend
and interest payments, redeem maturing securities, and effect receipt and delivery
following purchases and sales. The custodian may also perform regular
accounting of all assets owned, purchased, or sold, as well as movement of assets
into and out of the Fund accounts.
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4.
Additional specialists such as attorneys, auditors, actuaries, retirement plan
consultants, and others may be employed by the Executive Committee to assist in
meeting its responsibilities and obligations to administer Fund assets prudently.
The Executive Committee may reserve control over investment decisions. Managers will
be held responsible and accountable to achieve the objectives herein stated. While it is
not believed that the limitations will hamper investment managers, each manager should
request modifications which they deem appropriate.
If such experts employed are also deemed to be fiduciaries, they must acknowledge such
in writing. All expenses for such experts must be customary and reasonable, and will be
borne by the Fund as deemed appropriate and necessary.
II. GUIDELINES FOR INVESTING
The following guidelines apply to the three main investment asset classes:
Money Market Funds: Allowable range: Minimum 5%; Maximum 45% of total assets
A quality money market fund will be utilized for the liquidity needs of the portfolio whose
objective is to seek as high a current income as is consistent with liquidity and stability of
principal. The fund will invest in “money market” instruments with remaining maturities of one
year or less, that have been rated by at least one nationally recognized rating agency in the
highest category for short-term debt securities. If non-rated, the securities must be of
comparable quality. These funds must have no fee or very favourable liquidity options.
Equities: Allowable Range - Minimum 0%; Maximum 5% of total assets
The equity component of the portfolio will consist of high-quality, large capitalization, domestic
equity securities traded on either the Toronto Stock Exchange (“TSX”). The securities must be
screened for their above average financial characteristics such as price-to-earnings, return-onequity, debt-to-capital ratios, etc.
No more than 5% of the equity portion of the account will be invested in any one issuer. As
well, not more than 20% of the equity portion of the account will be invested in stocks
contained within the same industry.
It is acceptable to invest in an equity mutual fund(s) adhering to the investment characteristics
identified above, as long as it is a no-load fund and which maintains an expense ratio consistent
with those other funds of similar investment styles as measured by the Lipper and/or
Morningstar rating services.
Prohibited equity investments include: initial public offerings, restricted securities, private
placements, derivatives, options, futures and margined transactions.
EXCEPTIONS TO THE PROHIBITED INVESTMENT POLICY MAY BE MADE ONLY
WHEN ASSETS ARE INVESTED IN A MUTUAL FUND(S), THAT PERIODICALLY
UTILIZES PROHIBITED STRATEGIES TO MITIGATE RISK AND ENHANCE
RETURN.
Fixed Income: Allowable Range- Minimum 35%; Maximum 75% of total assets
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Bond investments will consist solely of taxable, fixed income securities that have an investmentgrade rating (AA-, AA3 or higher) that possess a liquid secondary market.
No more that 5% of the fixed income portfolio will be invested in corporate bonds of the same
issuer. As well, not more than 20% of the fixed income portfolio will be invested in bonds of
issuers in the same industry.
The maximum average maturity of the fixed income portfolio will be 10 years, with not more than
25% of the bond portfolio maturing in more than 10 years.
Prohibited securities include: private placements, derivatives (other than floating-rate coupon
bonds), margined transactions and foreign denominated bonds.
EXCEPTIONS TO THE PROHIBITED INVESTMENT POLICY MAY BE MADE ONLY
WHEN ASSETS ARE INVESTED IN A MUTUAL FUND(S), THAT PERIODICALLY
UTILIZES PROHIBITED STRATEGIES TO MITIGATE RISK AND ENHANCE
RETURN.
II. Standards of Care
1. Prudence
The standard of care to be used by investment officials shall be the “prudent person”
standard1 and shall be applied in the context of managing an overall portfolio. The board of
directors, acting in accordance with written procedures and this investment policy, and
exercising due diligence shall be relieved of personal liability for an individual security’s
credit risk or market price changes, provided deviations from expectations are reported in a
timely fashion and the liquidity and the sale of securities are carried out in accordance with
the terms of this policy.
Investments shall be made with judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence exercise in the management of their
own affairs, not for speculation, but for investment, considering the probable safety of their
capital as well as the probable income to be derived.
2. Ethics and Conflicts of Interest
Directors and agents involved in the investment process shall refrain from personal business
activity that could conflict with the proper execution and management of the investment
program, or that could impair their ability to make impartial decisions.
Directors and agents shall disclose any material interests in financial institutions with which
they conduct business. They shall further disclose any personal financial/investment positions
that could be related to the performance of the investment portfolio. Directors and agents
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Prudent Person Rule is a standard that requires that a fiduciary with funds for investment may invest such
funds only in securities that any reasonable individual interested in receiving a good return of income while
preserving his or her capital would purchase. Historically known as the prudent or reasonable man rule, this
standard does not mandate an individual to possess exceptional or uncanny investment skill. It requires
only that a fiduciary exercise discretion and average intelligence in making investments that would be
generally acceptable as sound.
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shall refrain from undertaking personal investment transactions with the same individual with
which business is conducted on behalf of the corporation.
PERFORMANCE REVIEW AND EVALUATION
Performance reports generated by the Investment Consultant shall be compiled at least
quarterly and communicated to the Executive Committee for review. The investment
performance of total portfolios, as well as asset class components, will be measured
against commonly accepted performance benchmarks. Consideration shall be given to
the extent to which the investment results are consistent with the investment objectives,
goals, and guidelines as set forth in this statement. The Investment Committee intends to
evaluate the portfolio(s) over at least a three year period, but reserves the right to
terminate a manager for any reason including the following:
1.
Investment performance which is significantly less than anticipated given the
discipline employed and the risk parameters established, or unacceptable
justification of poor results.
2.
Failure to adhere to any aspect of this statement of investment policy, including
communication and reporting requirements.
3.
Significant qualitative changes to the investment management organization.
Investment managers shall be reviewed regularly regarding performance, personnel,
strategy, research capabilities, organizational and business matters, and other qualitative
factors that may impact their ability to achieve the desired investment results.
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INVESTMENT POLICY REVIEW
To assure continued relevance of the guidelines, objectives, financial status and capital
markets expectations as established in this statement of investment policy, the Executive
Committee plans to review this investment policy at least annually.
This statement of investment policy is adopted on __________________, ___ 20__ by
the ___________ Board of Directors, executed by the Executive Committee whose
signatures appear below.
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