Principles of the Investment Policy
The Long Term Growth Fund (LTGF) must be managed according to the Prudent Investor Rule.
Concentrated holdings of special importance to the Trust or holdings that serve a different purpose will be deemed to be excluded from the Prudent Investor Rule.
Our guiding principles around this are as follows:
Modern Portfolio Theory should be applied in the asset allocation of the LTGF guided by the purpose of the Fund and expected income requirements. It should be noted that because the Fund is intended for the longer term and will require inflation protection it should be constructed with a higher equity allocation than a pure balanced strategy. Over the long term, the ownership of businesses has proven to be the best solution to outpacing inflation. The long-term goal of this Fund is to provide income and economic opportunity in a diversified portfolio, primarily for the future generations of the Saddle Lake Cree Nation (SCLN).
This Fund must disperse a minimum of 10% and a maximum of 20% of the net income and gains on an annual basis. Given the intended long-term nature of this Fund it is necessary to attempt to grow the value on a real basis with the measurable goal of inflation + 3% This becomes especially important when the Nation’s population growth is taken into consideration.
It is our belief that active money management adds value to a portfolio but only if the chosen managers take less risk than the broader market for the return given, or are expected to provide a greater return vs. the broad market for the amount of risk taken. If a suitable active manager is not available, a passive investment in that asset class may be deployed.
It is believed with the low interest rate environment today that care should be taken not to have the duration of the bond portfolio be longer then the mid term bond index in aggregate. The hope is that an environment will present itself in the future to increase the duration of the bond mix.
Such opportunities may be an inverted yield curve or other indications of a change in the direction of the economy.
In the case of fixed income investments it is viewed to be prudent to buy bonds of “A” quality or better (as rated by the majority of the major credit agencies) at the time of purchase. Bonds of “BBB” status may be held in the portfolio but no lower grades will be acceptable for individual bond holdings. Pooled Bond Funds and ETFs will be exempt from this guideline as they can be well diversified. Pooled funds dedicated to the High Yield category should not individually make up more than 20% of the portfolio.