University of Saskatchewan

Financial Services Division (FSD)

Endowments/Trusts/Investments

The University has developed policies to ensure the prudent investment of funds and outline practices for the distribution of investment income and endowment spending.

Policies

Philosophy

The primary investment objective of the Investment Pools is to ensure the safety of principal, maintain sufficient liquidity for operating purposes and maximize earnings for the Funds. The University investment policies are approved by the Board of Governors and are reviewed annually.

Investment Managers

The University may choose to invest using either internal or external investment managers. The method used to select an external manager includes a subjective evaluation of the manager's investment strategy, historical results, consistency with university policies and guidelines and other attributes as may be determined by an Internal Investment Committee. The University utilizes such expertise as is required to carry out the selection including specialized consultants.
Investment managers have full investment discretion consistent with the objectives of the University, the legislative restrictions imposed upon it and the policies set by the Board of Governors.
Investment managers report to the University in a manner that is required in the approved investment policies and are subject to performance review and evaluation on an annual basis.

Investment Pools

The Investment Pools consist of cash and investments that are "owned" by various University Funds. These Funds include Operating, Capital, Trust and Endowments. The Investment Pools are split into 2 investment categories:

Fixed Income Investment Pool (FIP)

- holds investments that will not likely be required in the short term but because of the horizon for their possible use and a lower risk tolerance, are invested in short to medium term fixed income investments. Funds invested include trust funds and expendable funds that are expected to be spent within a five year time horizon. The objective of the pool is to achieve an annualized rate of return consistent with short term bonds. This category is managed by external investment manager Baker Gilmore & Associates.

Long Term Investment Pool (LTP)

- holds investments that have a higher risk tolerance. There is some liquidity required to allow for purchases and sales but the asset mix is more equity based. Funds invested include endowments, funds functioning as endowments and other funds that are not expected to be spent for at least five years. The objective of the pool is to produce an annualized rate of return of 5% in excess of CPI. This category is managed by external investment managers Jarislowsky Fraser, Franklin Templeton, Barclays Global Investors, Hillsdale, Pier 21 and LaSalle Real Estate Investment.

Investment Income Allocation

The Fixed Income Investment Pool (FIP) and Long Term Investment Pool (LTP) are similar to mutual funds as investors purchase units in the pools. Funds held in the FIP or LTP are allocated investment earnings on a pro-rata share of actual earnings based on the number of units owned.
Funds that are held on a short-term basis and which are eligible for investment earnings under university policy are allocated investment earnings based on the Government of Canada 30 day Treasury bill rate.

Investment Pools Asset Allocation

The Internal Investment Committee annually reviews the asset mix policy which will provide, over the long term, the best balance between investment returns and an acceptable level of risk for each pool. The asset allocation for the Investment Pools as at June 2010 is:

ASSET CLASS

INVESTMENT MANAGER

LONG TERM POOL ASSET BENCHMARK %

FIXED INCOME POOL ASSET BENCHMARK %

Equities

 

 

 

Canadian equities

Jarislowsky Fraser

15.0%

 

Small cap Canadian equities

Hillsdale

5.0%

 

Global (ex-Canada) equities

Franklin Templeton

20.0%

 

Global (ex-Canada) equities

Pier 21

20.0%

 

Total Equities

 

60.0%

 

Real Estate

La Salle Real Estate

5.0%

 

Fixed Income

 

 

 

Bonds (Universe Index)

Barclays Global Investors

35.0%

 

Bonds (Universe Index)

Baker Gilmore

 

20.0%

Short Term Bonds & Cash

Baker Gilmore

 

80.0%

Cash

 

 

 

Total Fixed Income

 

100.0%

100.0%

Ratest of Return

Following are the Net Rates of Return for the Investment Pools for the fiscal period May 1 to April 30:

FISCAL YEAR

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Mid Term/Fixed Income Pool*

4.7%

5.1%

6.4%

4.7%

5.5%

5.5%

3.3%

1.0%

4.3%

5.3%

6.5%

4.7%

Fixed Income Benchmark **

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

4.2%

5.5%

7.5%

2.4%

Long Term Investment Pool*

5.4%

6.1%

8.6%

5.4%

-8.4%

15.8%

8.1%

8.4%

12.1%

-4.2%

-17.3%

12.7%

Benchmark**

n/a

10.2%

5.2%

2.9%

-13.0%

18.4%

6.2%

10.8%

10.1%

-1.4%

-18.8%

14.2%

* Rates of return are net of administration and management fees.
** The benchmark is comprised of a weighted portfolio.

Spending Policy

The spending rate for endowed funds is set annually by Financial Services Division based on the University Spending Policy approved in 2005. Each fiscal year the spending rate is increased by inflation (CPI at December 31) at the discretion of the Board of Governors. 

Beginning in May 2006, endowed funds receive a monthly allocation to their spendable fund based on 1/12th of the annual spending rate and the fund’s number of units at the beginning of each month. The spending rates for fiscal years and unit values at May 1 are noted in the table below. Due to the severity of the economic downturn in 2008, the spending rate per unit was de-indexed to 4.50 on May 1, 2009.

 

SPENDING RATE PER UNIT

MARKET VALUE PER UNIT AT MAY 1

2005-2006

4.500

100.000

2006-2007

4.617

109.500

2007-2008

4.719

117.532

2008-2009

4.855

107.842

2009-2010

4.500

86.140

2010-1011 4.500

93.525