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)

- The Fixed Income Pool 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)

- The Long Term Investment Pool 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 over the long term of 4.50% in excess of CPI (5.0% prior to June 2012).This category is managed by external investment managers Franklin Templeton, Blackrock, Hillsdale, Pier 21, Picton Mahoney, Sionna, Bentall Kennedy, LaSalle Real Estate Investment and Lynx Asset Management.

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 August 2014 is:

ASSET CLASS INVESTMENT MANAGER LONG TERM POOL ASSET BENCHMARK % FIXED INCOME POOL ASSET BENCHMARK %
Equities
Canadian equities Picton Mahoney 6.5%
Sionna 6.5%
Small cap Canadian equities Hillsdale 4.0%
Global (ex-Canada) equities Franklin Templeton 19.0%
Global equities Pier 21 19.0%
Total Equities 55.0%
Real Estate La Salle & Bentall Kennedy 10.0%
Managed Futures Lynx Asset Management 10.0%
Fixed Income
Bonds (Universe Index) Blackrock 25.0%
Bonds (Universe Index) Baker Gilmore 20.0%
Short Term Bonds & Cash Baker Gilmore 80.0%
Total Fixed Income 25.0% 100.0%

Total

100.0%

100.0%

Rates of Return

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

FISCAL YEAR

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010 2011 2012 2013 2014

Mid Term/Fixed Income Pool*

5.6%

6.9%

5.2%

6.0%

6.4%

3.8%

1.5%

4.8%

5.7%

6.5%

4.7% 4.8% 4.2% 3.4% 0.4%

Long Term Investment Pool*

6.6%

9.1%

5.9%

-7.9%

16.3%

8.6%

8.8%

12.6%

-3.7%

-17.3%

12.7% 9.2% 1.3% 13.2% 17.4%

* Rates of return: net of investment management fees

Annual returns for the fiscal years from 2003 to 2013 for the long-term pool are summarized below. University investment and spending policies are aligned to ensure that investment returns, measured over the long term, support annual spending policies and are sufficient to grow the endowments by inflation.   As indicated in the chart below, the ten year annualized return for period ending April 2013 was 6.5 per cent which exceeds the goals established in both the university spending and investment policies. 

Spending Policy

The spending rate for endowed funds is set annually by Financial Services Division based on the University Spending Policy approved in 2005. The policy allows the spending rate to be adjusted annually 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.

Effective May 1, 2014 the annual spending rate remained at 4%.

 

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

2010-2011 4.500

93.525

2011-2012

4.500

97.327

2012-2013

4.250

93.574

2013-2014

4.000

102.175

2014-2015

4.000

117.491