The mandate of the Trust is to invest the Trust assets on behalf of its beneficiary organizations. In doing so, the Trustees will be guided by three main principles.
- They are to invest as a prudent person would.
- They are to invest to attempt to generate sufficient annual net income to allow its beneficiary organizations to meet their responsibilities to the Inuit of Nunavut.
- They are to attempt to ensure that the value of the net capital of the Trust remains at the real dollar level of 1990.
Simply put, the Trust is attempting to provide its beneficiary organizations with as much income as the Trust can reasonably afford to give each year while still protecting the Trust assets from the effects of inflation. The balancing of the need to generate income against the need to protect the assets from inflation is never an easy task but is one that is critical for the Trust to achieve its mandate. Both objectives have to be met, one cannot be sacrificed for the sake of achieving the other. The requirement to grow the value of Trust assets by at least the rate of inflation puts limitations on how much can be paid out of the Trust.
The Trustees, through extensive research and financial modelling, have determined that the maximum payout rate the Trust can afford to distribute annually, while still achieving the Trust’s mandate, is 4%. The Trust’s investment strategy has been designed around this payout rate as well as expectations of inflation. In order to achieve a smooth pattern of payouts, the base used for the 4% calculation each year is the average of the Trust’s assets for the twenty quarters ending as at September 30th of the prior year.