Lazaridis Gift Statement of Investment Policies and Procedures

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This online version is for convenience; the official version of this Statement of Investment Policies and Procedures is housed in the University Secretariat. In case of discrepancy between the online version and the official version held by the Secretariat, the official version shall prevail.

Approving Authority: Board of Governors

Date of Most Recent Review/Revision: November 14, 2024

Office of Accountability: VP: Finance and Administration

Administrative Responsibility: Office of Finance and Administration

Section I: Introduction

1.1 This document constitutes the Statement of Investment Policies and Procedures (the "Policy") applicable to the assets (the "Fund") held with respect to the Wilfrid Laurier Lazaridis Gift (the "Gift"), which was established by Wilfrid Laurier University (the "University") to provide some of the funding for the establishment and development of the Lazaridis Institute for the Management of Technology Enterprises.

1.2 The purpose of this Policy is to formulate those investment principles, guidelines and monitoring procedures which are appropriate to the needs and objectives of the Fund.

1.3 Any investment manager or other party providing services in connection with the investment of the Fund shall accept and adhere to this Policy unless an exception is made by the University’s Board of Governors.

Section II: Administration

2.1 The University through its Board of Governors (the "Board") is the administrator of the Gift. The Board has established a governance structure and delegated to the Finance, Investments & Property Committee (the "Committee") certain aspects of the Fund's operations.

2.2 In fulfilling its responsibilities, the Committee may delegate to an appropriate sub-committee that fulfils the responsibilities of the Board, or otherwise utilize employees of the University where appropriate. The Committee shall retain responsibility and utilize suitable personnel for such activities and monitor the activities undertaken by the selected personnel. Any reference in the Policy to Committee shall be interpreted as referencing the appropriate delegate.

2.3 The custodian of the Fund (the “Custodian”) shall be a trust company duly registered in Canada or an insurance company authorized to underwrite life insurance in Canada. All investments and assets of the Fund shall be held by the Custodian and invested:

a. in a name that clearly indicates that the investment is held in trust for the Gift and, where the investment is capable of being registered, registered in that name, or

b. in the name of the Custodian, or a nominee thereof, in accordance with an agreement with the Custodian that clearly indicates that the investment is held for the Gift, or

c. in the name of CDS Clearing and Depository Services Inc., or a nominee thereof, in accordance with an agreement with the Custodian that clearly indicates that the investment is held for the Gift.

2.4 Neither the Board, the Committee nor any employee of the University shall select securities on behalf of the Fund except for the selection of Pooled Funds and the issuers of guaranteed investment certificates. The Board shall retain one or more independent professional investment managers (the “Manager(s)”) to invest the Fund.

2.5 In the case of an investment in a Pooled Fund, the Fund's offering memorandum guidelines will apply. The Manager must provide notification to the Committee regarding any revisions to the fund’s policies.

2.6 The Committee shall maintain a description of the manager structure and keep a current copy of each Manager’s investment mandate (the “Mandate Statement”), where on exists.

2.7 The Committee may rely on independent experts for certain aspects of the Fund's operations where expert knowledge is required or desired or where a potential or actual conflict of interest exists.

Section III: Fund Overview

3.1 The fund is designed to provide a stable source of capital to help meet the funding requirements of the Lazaridis Institute for the Management of Technology Enterprises, while minimizing risk (volatility). The fund will be liquidated to $0 over a short-term horizon.

Section IV: Permitted Categories of Investment

4.1 From time to time, and subject to this Policy, the Gift may invest in any or all of the following asset categories and subcategories of investments either directly or through Pooled Funds which hold only these investments. For purposes of this Policy, "governments" includes supranational, Canadian federal, provincial or municipal governments, and securities guaranteed by these governments.

a. Canadian Equity: common stocks, real estate investment trusts (REIT), exchange traded funds (ETFs), income trusts, convertible debentures, share purchase warrants, share purchase rights, instalment receipts, depository receipts or shares, private placements, or preferred shares of Canadian public and private companies.

b. Foreign Equity: common stocks, ETFs, REITs, convertible debentures, preferred shares, share purchase warrants, share purchase rights, instalment receipts, depository receipts or shares, private placements or American depositary receipts of publicly traded non-Canadian companies.

c. Fixed Income:

• • Bonds, debentures, mortgages, notes, mortgage-backed or other asset-backed securities, private placements or other debt instruments of governments or Canadian corporations (public and private), subject to Section 6.4.
  • Guaranteed investment contracts or equivalent financial instruments of Canadian insurance companies, trust companies, banks or other eligible issuers.
  • Annuities, deposit administration contracts or other similar instruments regulated by the Insurance Companies Act (Canada) or comparable provincial law, as amended from time to time.
  • Term deposits or similar instruments of Canadian trust companies and banks.

d. Cash or Cash Equivalents:

• • Deposits with banks or trust companies.
  • Money market securities issued by governments or Canadian corporations (public and private) with term to maturity of one year or less.

e. Alternative Strategy Funds:

• • Alternative strategy funds may be used provided they are designed to meet the objectives of the fund. These funds may invest using derivatives and may use short selling strategies notwithstanding the following section. Alternative strategies include but are not limited to:
    • Real Assets - such as Real Estate Funds and Infrastructure Funds;
    • Absolute Return Strategies – such as certain Hedge Funds; and
    • Private Equity – such as Private Equity Funds, and Venture Funds.

4.2 Derivatives: The following derivatives are permitted:

a. Futures and options may be used only when they are regularly traded upon recognized public exchanges or other organized public trading facilities where market prices are readily available.

b. Forward currency contracts and swap agreements may be entered into only with financial institutions that satisfy the credit standards of the Policy with respect to cash equivalents and debt investments.

c. Instalment receipts may not be purchased unless cash or highly liquid, high quality short-term securities equal to the unpaid purchase price are also held.

4.3 Derivative instruments may be used only to:

a. Create an asset mix position within the ranges and among the asset classes set out in this Policy.

b. Adjust the duration of the fixed income portfolio within the ranges set out in this Policy.

c. Replicate the investment performance of interest rates or a recognized capital market index.

d. Increase the Fund’s current revenue by selling covered calls.

e. Manage the currency exposure of a portfolio of foreign property.

f. Reduce risk as part of a hedging strategy but in any case may not be used to leverage the Fund.

4.4 Derivative instruments may not be used to create exposures to securities which would not otherwise be permitted under this Policy or which would be outside the limits under this Policy had the exposure been obtained in the cash markets.

4.5 Any Manager investing in derivative investments must attempt to determine the market value of that Manager’s exposures on a daily basis.

Section V: Fund Objectives and Asset Allocation Policy

5.1 The fund is designed to achieve stable returns and to provide additional years of funding (versus not investing) while minimizing volatility.

5.2 The time horizon of the fund is not perpetual in nature. At inception of the investment, it is expected to be exhausted in full in the near term.

5.3 The Committee decided upon the policy allocation and ranges for the Fund as set out in the table below. Over complete market cycles the allocation is expected to approximate the "normal" allocation percentages.

* may be held in an investment, fund or a deposit account with the custodian or Laurier’s bank

5.4 The policy asset allocation reflects a mix of investments in bonds, which are sensitive to interest rates, and equities, which are expected to provide higher growth returns over the long term.

5.5 Cash and cash equivalents may also be held from time to time on a short-term, temporary basis or as defensive reserves within the portfolios for each asset class at the discretion of each Manager within the constraints prescribed by its mandate.

5.6 If the asset mix deviates outside the above ranges, at the end of any quarter, the Committee may take corrective action to bring the asset mix back within the range as soon as practicable. The Committee may delegate this responsibility to a Manager.

5.7 Assets will be invested using active management strategies. It is expected that active management will add to the total fund return, before manager fees. The Committee recognizes that the risk of active management can also reduce returns.

5.8 The Fund’s investment policy has a goal of achieving a long-term 3.0% average annual return, after manager fees.

5.9 The risks inherent in the investment strategy over a market cycle (a five to ten year period) are three fold. There is a risk that the market returns will not be in line with expectations. To the degree that an active management style is employed, there is a risk that the added return expected of active management over passive management will not be realized, or will be negative. There is also the risk of annual volatility in returns which means that in any one year the actual return may be very different from the expected return (such return may also be negative).

5.10 The Committee recognizes that the Gift’s financial position will also be affected adversely or favourably by numerous non-investment factors.

Section VI: Portfolio Diversification and Constraints

6.1 The Committee shall ensure that the diversification requirements in each Manager’s Mandate, in combination with the amount of assets allocated to each Manager, are consistent with the limits outlined in this Section based on the market value of the Fund.

6.2 Further constraints are documented:

a. No more than 10% of the market value of the assets shall be invested in any one entity or group at the time of purchase except for securities issued or guaranteed by the Government of Canada, the government of a province, or securities issues by the Government of the United Stated of America.

b. The Fund shall not acquire securities of a corporation to which are attached more than 30% of the voting rights.

6.3 In respect of the equity portfolios of the Fund:

a. North American holdings shall be diversified by stock, capitalization and industry, having regard to the relative sizes of industry sectors in the applicable stock market indices.

b. Non-North American holdings shall be diversified by stock, region, industry and country, having regard to the relative sizes of economic activity and stock market capitalization.

6.4 In respect of the fixed income portfolio of the Fund:

a. Public Market debt rated below “BBB (low)” or equivalent at the time of purchase is permitted.

b. Not more than 20% shall be held in the debt issues rated below BBB (Low) or equivalent.

6.5 All cash equivalents, including those held within the portfolios for each asset class at the discretion of the Manager, shall have a minimum credit rating of "R-1 (low)" or equivalent if commercial paper with a term to maturity of 365 days or less, and not issued by a government. If a security’s credit rating falls below "R-1 (low)" after time of purchase, the Manager shall take all reasonable steps to liquidate the investment in an orderly fashion with due regard to price and liquidity constraints.

6.6 For purposes of sections 6.4 and 6.5, credit ratings for issues will be taken as the lowest published rating by the Dominion Bond Rating Service (DBRS) Standard and Poors (S&P) or Moody’s Investor Services.

Except for the Alternative Strategy Mandates, the Managers shall not purchase securities on margin or engage in short sales.

6.7 Each Manager, which includes any subadvisor appointed by the Manager, shall be responsible for achieving best execution for transactions on behalf of the Fund. The Manager may use soft dollars¹, but only to pay expenses related to research services or other investment making decision services to the Fund (or where applicable, the Pooled Funds managed by the Manager), and only if the Manager believes that such services can be obtained in a manner and to an extent consistent with the Manager’s obligation to obtain best execution. The Manager must confirm their use of soft dollars in accordance with this policy to the Committee no less frequently than annually.

6.8 The Plan’s active investment managers may consider all qualitative and quantitative factors affecting financial performance of existing and potential investments, including environmental, social and governance (ESG) factors. An investment manager’s ability and desire to incorporate ESG factors into their investment selection process may be used as part of the decision criteria when evaluating investment opportunities.

Section VII: Loans and Borrowing

7.1 No part of the Fund shall be loaned to any party, other than through the purchase of debt instruments permitted under Section 4.1 and which otherwise meet the requirements of this Policy.

7.2 Money shall not be borrowed on behalf of the Fund and the assets shall not be pledged or otherwise encumbered in respect thereof, except:

a. For the payment of refunds, benefits or administration costs of the Gift to the extent that such borrowing is limited to the amount of the current service contribution in any fiscal year of the Gift and that the term of the borrowing does not exceed 90 days.

b. For and to the extent of temporary overdrafts that occur in the course of normal day-to-day portfolio management.

c. Inside the alternative strategy fund.

7.3 The lending of securities through the Custodian (or, where the Fund is invested in Pooled Funds, through the Pooled Funds’ custodian) is permitted, subject to applicable legislation and the approval of the Board. Revenue earned from securities lending shall be shared between the Custodian and the Fund in a manner consistent with current industry standards.

Section VIII: Voting Rights

8.1 The responsibility of exercising and directing voting rights acquired through investments shall normally be delegated to the Manager, who shall at all times act prudently and in the best interests of the Gift's beneficiaries. The Manager shall provide a copy of their voting rights policy to the Committee.

8.2 The Manager shall maintain a record of how Fund voting rights have been exercised.

8.3 In case of doubt as to the best interests of the Gift's beneficiaries, the Manager shall request instructions from the Committee and act in accordance with such instructions.

8.4 The Manager shall be required to advise the Committee and provide details in advance of the vote when the Manager has acquired on behalf of themselves and their clients 10% or more of that class of securities.

8.5 The Committee reserves the right to direct, or override, the voting decisions of a Manager, if in its view such action is in the best interests of the Gift's beneficiaries.

8.6 It is recognized, however, that the above constraints and policy on voting rights may not be enforceable to the extent that part of the Fund is invested in Pooled Funds.

8.7 Any voting rights related to Pooled Fund units and interests in partnerships or limited partnerships shall be the responsibility of the Committee, who shall vote in the best interests of the Gift's beneficiaries. This is not related to Pooled Fund security proxy voting rights, which will typically be delegated to the Investment Manager.

Section IX: Valuation of Investments

9.1 Investment in publicly traded securities shall be valued by the Custodian for the Fund no less frequently than monthly at their market value.

9.2 Investment in Pooled Funds comprising publicly traded securities shall be valued according to the unit values calculated at least monthly by the custodian of the Pooled Funds. The Custodian shall be responsible for requesting and recording the unit values on a monthly basis.

9.3 If a market valuation of an investment is not readily available, then a fair value shall be determined by or at the discretion of the Committee. For each such investment, an estimate of fair value shall be supplied by the Manager to the Custodian no less frequently than quarterly. Such fair value may be determined by reference to the most recent independent expert appraisal or by other means such as risk-adjusted discounted cash flows or comparison with similar assets which are publicly traded. In all cases the methodology should be applied consistently over time.

Section X: Related Parties and Conflicts of Interest

10.1 Definition of Related Party: For the purposes of this Policy the definition of Related Party is:

a. The University.

b. A member of the Board or Committee (or sub-committee).

c. An officer, director or employee of the University.

d. A person responsible for investing the assets of the Gift, or any officer, director or employee thereof. 

e. Association or union representing employees of the University, or an officer or employee thereof.

f. A beneficiary of the Gift.

g. The spouse or a child of any person referred to in any of paragraphs b. to f.

h. An affiliate of the University.

i. A corporation that is directly or indirectly controlled by a person referred to in any of paragraphs a. to h.

j. An entity in which a person referred to in paragraph a., b. or c. or the spouse or a child of such a person, has a substantial investment, or an entity that holds a substantial investment in the University.

10.2 Related Party Transactions

a. The assets of the Fund shall not be lent to, or invested in any securities of, the University or an affiliate of the University unless the investment is through an investment fund or a segregated fund that other investors may invest in.

b. The University may enter into a transaction with a related party

i. for the operation or administration of the Gift if

i. it is under terms and conditions that are not less favourable to the Plan than market terms and conditions; and

ii. it does not involve the making of loans to, or investments in, the related party.

ii. of nominal value or immaterial to the Plan. The market value of the Fund shall be used as the criteria to determine whether a transaction is nominal or immaterial. Transactions amounting to less than 0.5% of the aggregate market value of the Fund are considered to be nominal and immaterial. Two or more transactions with the same related party shall be considered as a single transaction.

10.3 Conflicts of Interest

a. If a member of the Board or Committee, or any agent or advisor thereof, or any person employed in the investment or administration of the Fund has or acquires any material interest, direct or indirect, in any matter in which the Fund is concerned or may benefit materially from knowledge of, participation in, or by virtue of an investment decision or holding of the Fund, the person involved shall as soon as practicable disclose this conflict of interest to the Chair of the Committee. The Chair shall then immediately advise all members of the Committee, which shall then decide upon a course of action. Any such person will thereafter abstain from any decision making with respect to the area of conflict, unless otherwise determined by unanimous decision of the remaining members of the Committee.

b. Every disclosure of interest under this Section shall be recorded in the minutes of the relevant Committee meeting.

c. The failure of a person to comply with the procedures, described in this Section, shall not of itself invalidate any decision, contract or other matter.

d. The Committee shall satisfy itself that an appropriate policy regarding conflicts of interest exists and is followed by any Manager appointed by the Board. As a minimum, the Code of Ethics and Standards of Professional Conduct adopted by the CFA Institute shall be expected to apply to such Manager.

Section XI: Monitoring Investment Performance

11.1 The Committee shall review the following Fund information each quarter:

a. The asset market values.

b. The current asset mix of the Fund.

c. Statistics on the investment performance of the Fund and each Manager relative to the objectives of the Policy and of their Mandates.

d. Statistics on the investment performance of the Fund and each Manager relative to the peers of the Investment Manager as defined in the Mandate Statement.

e. Portfolio characteristics.

f. The fees and expenses incurred in managing the Fund.

g. The managers will certify each quarter that they are compliant with their mandate.

h. That the fund as whole is within the boundaries of the SIP&P’s asset allocation policy.

11.2 The Manager shall provide detailed reporting on the investment performance of the Fund each quarter. The performance shall be shown in relation to the goals, relevant indices, and appropriate peer group. The Committee shall review within each quarter the Manager and discuss investment performance, investment strategies, expected future performance and any changes in the Manager’s organization, investment processes and professional staff.

11.3 The Manager shall provide detailed reporting on the investment outlook and outline how the portfolio is structured to take advantage of that outlook.

11.4 In order to achieve the long-term return objective of the Fund, the Committee is targeting to achieve over the long term a return, net of all brokerage expenses but before all other fees, that exceeds the return on a composite index made of passive investments in appropriate market indices (where available), according to the normal allocation defined in section 5.3. The market indices to be used in this evaluation are (assuming quarterly rebalancing): S&P/TSX Capped Composite Index, MSCI World Index, FTSE TMX Canada Universe Bond Index and a custom Alternative Strategy benchmark. As the fund is moving closer to its terminal state, the target benchmark will be transitioned as the Committee is able to liquidate certain asset classes over time. 

11.5 The primary focus of performance assessment will normally be on a since inception basis, performance over other time periods and the Manager’s performance for other comparable accounts prior to appointment to the Fund may also be considered. The Manager will not necessarily be faulted for under performing the agreed standard however, the Committee may conclude that significant short-term under performance renders it unlikely that the performance standard can reasonably be achieved at an appropriate risk level over the remainder of a market cycle.

Section XII: Policy Review

12.1 This Policy shall be reviewed at least annually in order to determine whether any modifications are necessary or desirable. Such review shall consider whether there has been:

a. A fundamental change in the design of the Gift.

b. Significant revisions to the expected long-term trade-off between risk and reward on key asset classes.

c. The expense expectation of the Gift.

d. A significant shift in the financial risk tolerance of the University.

e. Shortcomings of the Policy that emerge in its practical operation.

f. Significant recommendations by a Manager.

g. Changes to applicable legislation.

12.2 A copy of this Policy and any amendments to it shall be delivered to each Manager for the Gift.

Notes

¹ Soft dollars are defined as payment for brokerage services, such as research, through commissions rather than through direct payments.