Boys and Girls Clubs of Canada Foundation
Investment Policies and Goals
Boys and Girls Clubs of Canada Foundation – Investment Policies and Goals
Table of Contents
Section 1 - Purpose .............................................................................................................................................................................. 1
Section 2 - Trustee Responsibilities ..................................................................................................................................................... 2
Section 3 - Funds Overview ................................................................................................................................................................. 3
Section 4 - Objectives........................................................................................................................................................................... 4
Section 5 - Degree of Risk and Diversification ..................................................................................................................................... 5
Section 6 - Permitted Categories of Investments ................................................................................................................................. 6
Section 7 - Asset Allocation Guidelines ................................................................................................................................................ 8
Section 8 - Valuation of Investments .................................................................................................................................................. 10
Section 9 - Investment Manager Structure ......................................................................................................................................... 11
Section 10 - Monitoring....................................................................................................................................................................... 12
Section 11 - Conflicts of Interest......................................................................................................................................................... 13
Section 12 - Loans and Borrowing ..................................................................................................................................................... 14
Section 13 - Voting Rights .................................................................................................................................................................. 15
Section 14 - Policy Review ................................................................................................................................................................. 16
i
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 1 - Purpose
1.1
This statement of investment policies and goals applies to the assets held by the Boys & Girls Clubs of Canada
Foundation. The purpose of the Policy is to formulate those investment principles and guidelines which are
appropriate to the needs and the objectives of the Funds, and to define the management structure and monitoring
procedures adopted for the ongoing operation of the Funds.
1.2
This policy may be changed or modified at any time by the Foundation’s Board of Trustees. Any such change shall
be promptly communicated to the investment manager or managers appointed by the Trustees.
1.3
Any investment manager or other agent or advisor providing services in connection with the investment of the
Funds shall accept and adhere to this Policy.
1
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 2 - Trustee Responsibilities
2.1
The Trustees have the responsibility to administer the Funds and have ultimate responsibility for the prudent
investment of the Funds. The Trustees are responsible for all aspects of the investment of the Funds, including
developing an investment policy, establishing and maintaining an investment manager structure, and monitoring
investment results.
2.2
The Trustee may delegate their responsibilities under this Policy as they deem appropriate.
2.3
The Trustees may adopt regulations which establish the delegated responsibilities and powers and the
corresponding delegates (e.g., investment managers, custodians). In the case of delegation regarding any aspects
of this Policy, the reference to the Trustees herein shall be interpreted as a reference to the appropriate delegate.
In addition, all investments shall be maintained within legal limitations for employee pension plans registered under the Ontario
Pension Benefits Standards Act, and in such manner as meets the legal requirements under the Income Tax Act (Canada).
2
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 3 - Funds Overview
3.1
The Boys and Girls Clubs of Canada Endowment Funds provide support exclusively to the Boys and Girls Clubs of
Canada’s national budget. Original funding of $1 million was raised in 1968 from various sources.
3.2
The J.W. McConnell Trust Fund provides support to clubs, regions, and when deemed appropriate, the National
Organization for:

Research and development

Consultation

Public relations and marketing

Program initiatives

Facilities and equipment
Although not mandatory, applications are normally expected to partially match funds. Original funding was a grant
of $1.5 million in 1985 from the J.W. McConnell Foundation.
3
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 4 - Objectives
4.1
To support the work of the movement in a manner consistent with the terms of the original gifts.
4.2
The expected rate of return is an investment objective which recognizes the nature of the Funds and their liabilities.
The nature of the liabilities could change over time, and accordingly the objective will be reviewed by the Trustees
from time to time in view of the status of the Funds.
4.3
The objective for the Funds is to achieve over four year moving average periods, the total rate of return including
capital gains, dividends, interest and rental income, but net of all investment management and custodial expenses,
as follows:
4.4
A rate of return, net of investment manager expenses, which exceeds the annual change in the Consumer Price
Index for Canada plus 3.5% per annum; and
4.5
A rate of return, net of investment manager expenses in excess of 8.5% per annum.
4.6
On an annual basis, the Funds will retain an amount sufficient to protect the purchasing power of the Funds against
projected; at time of last revision the requirement was set at 2.5%. This reserve amount is to be subject to review
and revision by the Trustees.
4
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 5 - Degree of Risk and Diversification
5.1
The investment objectives for the Funds have been reviewed with regard to the risk tolerance of the Trustees and
characteristics of the Funds. The primary observations are:
5.2
The current assets plus investment income are expected to exceed payments and expenses for the foreseeable
future. It is unlikely that investments have to be realized to provide for grants.
5.3
In view of the nature of the expected liabilities and the financial position of the Funds, an average degree of risk in
terms of short term variability of returns, relative to a broad range of Canadian funds, may be accepted in the
investments in pursuit of long term returns.
5.4
Risk of price fluctuations within the asset classes and the uncertainty of future economic and investment conditions,
dictate prudent diversification through investment in asset classes whose expected return correlations provide
overall risk reduction for the Funds.
5
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 6 - Permitted Categories of Investments
6.1
Subject to other provisions of this Policy, the assets of the Funds may be invested in any or all of the
following asset categories and subcategories of investments. These investments may be obligations or
securities of Canadian or foreign entities. Investments in foreign property, as defined by the Income Tax
Act of Canada to the extent they occur, shall be made so that no amount of income tax becomes payable.
(a) common stocks, convertible debentures or preferred securities;
(b) bonds, debentures, mortgages, notes or other debt instruments of governments, government
agencies, or corporations;
(c) private placements, whether debt or equity, of governments, government agencies or
corporations;
(d) securities, whether debt or equity, of private companies;
(e) mortgage loans;
(f) investment or participation rights in venture capital;
(g) real estate, whether purchased directly, or through closed or open-ended pooled funds, or
through participating debentures or shares of corporations or partnerships formed to invest in real
estate for pension funds;
(h) natural resource properties or participation rights whether purchased directly, or through closed or
open-ended pooled funds, or through participating debentures or shares of corporations or
partnerships formed to invest in natural resources properties for pension funds;
(i)
options, financial or currency futures, warrants or share rights, or other derivative instruments;
(j)
guaranteed investment contracts or equivalent of insurance companies, trust companies, banks
or other eligible issuers, or funds which invest primarily in such instruments;
(k) annuities, deposit administration contracts or other similar instruments regulated by the Canadian
and British Insurance Companies Act (Canada) or comparable provincial law, as amended from
time to time;
(l)
term deposits or similar instruments issued or unconditionally guaranteed by trust companies or
banks;
(m) cash, or money market securities issued by governments, government agencies or corporations;
and
6
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
(n) Mutual, pooled or segregated funds and limited partnerships which may invest in any or all of the
above instruments or assets.
6.2
Unless specifically approved elsewhere in this Statement of Investment Policies and Goals, the Funds
may not be invested in categories or assets excluded from Section 6.1, including but not limited to
investment in: commodities, precious metals or collectibles.
(a) While it is not intended that the fund invest in the forgoing instruments directly, it may invest in
hedge funds or managed futures programs which hold these investments.
6.3
The Funds may utilize derivative financial instruments, provided that such participation is not for
speculative purposes, and is undertaken by suitably qualified investment managers as provided in their
mandates.
6.4
Real estate exposure will be achieved through any one of participation in a professionally managed
diversified real estate pool, passively through exchange traded funds of REITs, actively by direction to
incumbent manager(s) to purchase REIT or by purchase of a fund which invests in REITs. The funds will
not take direct ownership of real estate.
6.5
The fund may invest in Income Trusts, including oil and gas royalty trusts and general business trusts,
either by direction to incumbent managers(s) or by purchase of a diversified fund of Income Trusts.
6.6
The fund may invest in hedge funds, but will not select single strategies or managers. Hedge fund
exposure will only be acquired through investment in a well-diversified, professionally managed fund of
funds.
7
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 7 - Asset Allocation Guidelines
7.1
In view of the foregoing, the policy allocation for the Funds, and the associated range for strategic deviation at any
time, is as follows:
Asset Allocation Ranges
(percentage of funds at market value)
Asset Class
Normal
Canadian Equities
36%
Bonds
36
Minimal
20%
30
Maximum
60%
45
US Equities
17
0
20
International Equities
Hedge Funds
Managed Futures
Real Estate
Private Equity
16
0
0
0
0
0
0
0
0
0
20
10
5
10
5
7.2
Within each asset class, there will be a prudent level of diversification subject to the following limits, based on
market value.
7.3
Equities
In respect of the total equity context of the Funds, including any cash reserves:
(a)
not more than 10% shall be invested in the common stock, preferred shares or other equity issues of any
one corporation;
(b)
as regards Canadian holdings:
(c)
7.4
(i)
investments shall be diversified appropriately among industry groups with no industry group
representing more than 30% thereof in any event,
(ii)
Not more than 8% thereof shall be invested in small capitalization equities defined as having a
total market capitalization less than $200 million and no more than 5% shall be invested in
securities or private placements which are not publicly traded on a recognized stock exchange.
Such small capitalization and non-traded investments are not permitted from non-Canadian
holdings; and
Non-Canadian holdings shall be broadly diversified by region, country and industry.
Debts (bonds)
In respect of the total debt content of the Funds:
8
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
(a)
Not more than 10% shall be invested in the debt issues of any issuer, except for securities of or fully
guaranteed by the Government of Canada or a province of Canada having at least an AA credit rating.
(b)
quality standards for bond investment shall be as follows:
Quality Standards for Bond Investments
Debt Rating
Maximum % of Debt Portfolio
Lower than BBB
BBB
A or lower
AA or higher
5%
10 %
40 %
No limit
The above limits will be applied with some temporary latitude in the event of the down-rating of a security.
7.5
7.6
Short Term Paper
(a)
Any short term portion of the Funds or of an equity, real estate or debt portfolio shall be invested in readily
liquidated securities with a term to maturity (or in the case of floating rate securities, to interest rate reestablishment) of no more than one year, or held in cash.
(b)
All short term investments shall be rated DBRS (Dominion Bond Rating Service) R-1, or equivalent.
Investments may be made in the above asset classes either directly, or by holding units of pooled, segregated or
mutual funds investing in one or more of the asset classes or by participating in a master trust fund if one is
established to commingle the assets of the Funds. The Trustees shall monitor, or cause to be monitored, the
contents of the pooled and/or master trust fund portfolios for their degree of compliance with the foregoing
expectations, and may make or cause to be made such changes in their choice of pooled funds as are deemed
appropriate to meet the objectives of the Policy.
9
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 8 - Valuation of Investments
8.1
Investments in publicly traded securities shall be valued no less frequently than monthly at their market value.
8.2
Investment in pooled funds comprising publicly traded securities shall be valued according to the unit values
published at least monthly by the pooled fund manager.
8.3
If a market valuation of the investment is not readily available, then a fair value shall be determined by the
Manager. For each such non-traded investment, an estimate of fair value shall be supplied to the custodian no less
frequently than quarterly. In all cases, the methodology should be applied consistently over time.
10
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 9 - Investment Manager Structure
9.1
Competent external professional investment manager(s) shall be appointed by the Trustees, when satisfied as to
their suitability and competence to act as agents for the Funds. The Trustees shall also make any Manager
changes, from time to time, as are deemed in the best interest of the Funds and its beneficiaries. To be considered
for appointments, an investment manager should have a suitable investment approach, demonstrated financial
stability, low turnover of personnel, capacity to undertake the account, performance record of at least two years,
and relevant experience and expertise.
11
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 10 - Monitoring
10.1
10.2
The Trustees shall:
(a)
review the assets and net cash flow of the Funds on a regular basis;
(b)
review the current economic outlook and investment plans of the Managers;
(c)
review of the current asset mix, and take any action necessary to ensure compliance with this Policy; and
(d)
Receive and consider statistics on the investment performance of the managers and the Funds.
The Trustees shall monitor the performance of each Manager; such monitoring will include, but not be limited to,
regular meetings as scheduled by the Trustees, quarterly reports from the manager, and ongoing evaluation of
performance relative to standards appropriate to the Mandate and the management contract.
12
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 11 - Conflicts of Interest
11.1
Trustees shall not benefit personally from knowledge gained as Trustees that is not in the public domain nor shall
they make any decisions which may be affected by considerations other than those properly taken into account in
their role as Trustees.
11.2
Should a conflict of interest arise, the Trustees in the actual or perceived conflict, or any person who becomes
aware of a conflict of interest situation, shall immediately disclose the conflict to the Chair of the Board. Any such
party will thereafter abstain from decision-making with respect to the area of conflict, and a written record of the
conflict shall be maintained by the Trustees.
11.3
No part of the Funds shall be loaned to any member of the organization or any legal person owned or controlled by
any of the aforementioned except in accordance with stated investment policies.
11.4
The Trustees shall be satisfied that an appropriate policy regarding conflicts of interest exists and is followed by any
Manager appointed by the Trustees. As a minimum, the Code of Ethics and Standards of Professional Conduct
adopted by the Association of Investment Management and Research (AIMR) shall be expected to apply to such
Manager.
13
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 12 - Loans and Borrowing
12.1
No part of the Funds shall be loaned to any person, partnership or association except as may be determined
permissible by the Trustees provided in this Section or eligible investments described in Section 6.1.
12.2
The Trustees may approve the lending of securities through the custodian, subject to applicable legislation and
provided that a minimum liquid, high quality collateral coverage of at least 105% of the current market value of the
loaned securities is maintained at all times.
12.3
Neither the Trustees nor the Manager may pledge, hypothecate, or otherwise encumber in any way, the assets of
the Funds, except to the extent that temporary overdrafts occur in the normal course of business.
12.4
The Trustees shall not borrow on behalf of the Funds except to a limited and temporary extent for the timely
payment of financial commitments and administrative costs.
14
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 13 - Voting Rights
13.1
The responsibility of exercising and directing voting rights acquired through Fund investments shall normally be
delegated to the Managers, who shall at all times act prudently and in the best interests of the Funds and its
beneficiaries.
13.2
The Trustees reserve the right to direct, or override, the voting decision of the manager(s), if in its view such action
is in the best interests of the Funds and its beneficiaries.
13.3
It is recognized however, that the above constraints and policy on voting rights are not enforceable to the extent
that the Funds are invested in pooled funds.
15
BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS
Section 14 - Policy Review
14.1
This Policy shall be reviewed by the Trustees at least annually, but otherwise whenever a major change is
necessary. Such review may be caused by:
(a)
a fundamental change in the objectives of the Funds;
(b)
significant revisions to the expected on-term trade-off between risk and reward on key asset classes,
normally dependent upon basic economic/political/social factors;
(c)
a major change in the expense expectation;
(d)
shortcomings of the Policy that emerge in its practical application, or substantive modifications that are
recommended to the Trustees by a Manager; and
(e)
Applicable changes in legislation.
16
7100 Woodbine Avenue, Suite 204
Markham, ON L3R 5J2
Tel 905-477-7272
Fax 905-477-2056
www.bgccan.com