Investment Policy

INVESTMENT OBJECTIVES

The primary objectives in investing assets of the Pooled Fund shall be:

1. The preservation and enhancement of the capital’s purchasing power through adequate diversification in high quality investments and based on a long-term investment horizon.
2. The achievement of a superior investment return obtainable within the boundaries of an acceptable degree of risk
3. To maintain a payout rate sufficiently below the anticipated long-term annual return to achieve the stated goals
   

As of April 1, 2004 the payout rate has been set at 5 %, meaning that 5% of a fund’s capital will be available for charitable spending annually.

INVESTMENT GUIDELINES

The Pooled Fund shall be invested, using external managers, in fixed income, equities, and alternative investments in such proportions as may be established from time to time by the Investment Committee and as approved by the Executives of the Jewish Community Foundation and FEDERATION CJA. Liquidity, flexibility and preservation of capital, while earning a responsible return are primary considerations in the management of the assets. A review of the asset mix will occur at regular intervals to ensure that it remains appropriate to the Foundation requirements and current legislation. The target earnings level is 8% annually.

Diversification in choosing asset classes and within asset classes is stressed. For the most part “managers of managers” are chosen for equities and hedge fund investments.

INVESTMENT MANAGEMENT

The Pooled Fund shall be administered under the guidance of the “Investment Committee” whose responsibilities include:

• Development of investment strategies and philosophies
• Investment objectives and decisions
• Asset mix targets and ranges
• Appointment and termination of investment managers
• Evaluating investment manager performance

ASSET MIX  (revised May 2010)

The virtually infinite time horizon of the fund dictates the adoption of a long-term asset mix policy favoring a high investment in equities along the following parameters:



Illiquid Assets
Illiquid Assets are defined as assets which are illiquid for more than 1 year. The target for illiquid investments will be up to 20 percent of the Foundation’s portfolio.

A review of the asset mix will occur at regular intervals to ensure that it remains appropriate to the Foundation's requirements.

Rebalancing
It is the Foundation’s policy to rebalance to its target asset allocation on a regular basis so as not to deviate significantly from the return and risk profile of the investment portfolio. The Foundation’s portfolio will be evaluated regularly, and rebalancing trades will be determined based on compliance with the investment policy and perceived tactical opportunities or risks.

The portfolio will be rebalanced within the target asset allocation ranges if any asset class weight falls outside the indicated minimum or maximum percentages of total market value. Tactical positions that are more than 10 percentage points from the policy target must be approved by the Investment Committee even if those positions are within the allowable ranges stated in this Investment Policy.


ASSET CLASSES – ALLOWABLE INVESTMENTS AND RESTRICTIONS

Cash/Cash Equivalents
Direct investment of cash reserves in short-term paper shall be confined to obligations of Federal or Provincial governments, chartered banks, major trust companies, or top quality (“R1”) corporate credits. Money market funds denominated in Canadian or U.S. dollars are also acceptable.

Equities
Permissible investments may include the following strategies:

• Canadian equity
• U.S. equity
• Other developed and emerging market equity
• Private equity
• Venture capital
• Distressed debt

No more than 10% of the market value of the equity portfolio shall be invested within any one company at any time.
No more than 30% of the total market value of the equity portfolio shall be invested within any generally recognized industry group at any time.
Borrowing to purchase is not permitted.

Hedged Strategies
Alternative investments will be invested only through funds of funds to achieve diversification and reduce risk. Short-selling, leverage, and derivative positions may be used by the underlying hedge funds in this asset class. Strategies within this asset class may include directional strategies like long/short equity, global macro, or trend following strategies. Relative value strategies may include event driven, merger arbitrage, credit, or other relative value strategies.

Fixed Income
Credit ratings of individual securities in passively managed accounts will be in accordance with the construction of major Canadian fixed income indexes. Actively managed fixed income portfolios will consist of high quality corporate bonds, debentures, and other debt securities which shall have an average rating of “A” or better or the equivalent thereof according to a recognized bond rating service.

Real Assets
Real asset investment strategies may include both liquid and illiquid strategies. Liquid strategies may include commodities, real return bonds, or other liquid investments correlated with real assets. Illiquid strategies may include private real estate or natural resource investments.

Use of derivatives
Derivatives may be used for hedging and risk management including the hedging of foreign currency exposure. Some underlying managers, especially in the Hedged Strategies asset class, may use derivatives to implement their investment strategy.

U.S. Currency Exposure
Given the significant component of investment denominated in U.S. dollars and the Foundation’s responsibility to make distributions in Canadian dollars, 50 to 100% of the portfolio’s U.S. investments must be hedged against the Canadian dollar.

PERFORMANCE AND EVALUATION

1. Benchmark Performance
   Annualized rates of return over a moving three-year period will be compared to appropriate benchmarks within the specific asset classes as follows:
   
    
   

   	Equities	25% S&P TSX + 75% MSCI ACWI
   	Hedged Strategies	HFRI Fund of Funds Composite and 50% MSCI ACWI/50% TBill+400bps
   	Fixed Income	DEX Universe Bond Index
   	Real Assets	CPI + 500 bps

   
   
   Performance will be compared to benchmarks on a quarterly basis.
   
   In addition, on an annual basis, the committee will compare performance with the “Commonfund Benchmarks Study for Foundations” focusing on institutions of a similar size to the JCF.
   
   The Fund’s annualized rate of return over a moving three-year period must surpass the Canadian rate of inflation + 500 basis points over this period.
   
   
2. Absolute Performance
   The Fund’s annualized rate of return over a moving three-year period must surpass the Canadian rate of inflation + 500 basis points over this period.
   
   
3. Investment Expenses
   The committee must examine the reasonableness of investment expenses on an annual basis.
   
   
4. Socially Responsible Investments
   There is no socially responsible investment strategy set out by the committee.
   

GENERAL

If at any time an investment or group of investments within the Pooled Fund does not conform to the Asset Mix guidelines as outlined above, the Investment Committee shall exercise its best judgment as to the action required to correct the situation. If it appears that the situation will be corrected within a reasonably short period, the Investment Committee may elect not to rectify the temporary non-conforming investments.