To achieve its mandate, the Trust seeks to maximize long-term investment returns using prudent levels of risk


Given that the Trust has no cash inflows from sources outside of its investment activities, investment returns are required to preserve or enhance the real value of the Trust assets and to provide reasonable funds to appropriately support beneficiary organizations. Professional management and portfolio diversification are used to smooth fluctuations in portfolio valuation and return volatility and to provide a reasonable consistency of investment returns.

The Trust’s portfolio is designed to generate a total annualized rate of return, net of transaction, investment management and operational costs, that is greater than a payout rate established by the Trustees plus the rate of inflation as measured by the Canadian Consumer Price Index over a rolling 4-year period. By achieving this return objective, the Trust can generate a stable and slowly increasing amount of distributions to its beneficiary organizations.

Asset Allocation

The strategic asset allocation is intended to incorporate a mix of asset classes which will produce the highest, risk-adjusted expected investment return within a prudent risk framework taking into consideration the Trust’s constraints. Each asset class is not viewed in isolation but by its role in the overall portfolio and its behaviour in comparison to other asset classes. As a result of its long time horizon the Trust has a preference for equity investments and alternative, illiquid investments in less efficient markets which should produce higher, long-term risk-adjusted returns. The Trust’s asset allocation strategy combines low-risk, stable, income producing Canadian publicly traded bonds with higher yielding global bonds, higher-risk but potentially higher return global publicly traded equities and stable, income generating, and diversifying alternative investments.

Happy Inuit Grandmother
Contribution to Investment Strategy
ASSET CLASS Risk Reduction Fixed Income Yield Enhancement Growth Diversification Through Real Assets
Canadian Investment Grade Fixed Income 5%
Emerging Market Debt 5%
Global Multi-Strategy Debt 5%
Private Debt 10%
Canadian Public Equity 5%
US Passive Large Cap Equity 5%
US Active SMID Cap Equity 7.5%
Global Active Equity 15%
Emerging Market Active Equity 10%
Private Equity 5%
Infrastructure 12.5%
Real Estate 7.5%
Farmland/Timberland 7.5%

Portfolio Allocation by Contribution to Investment Strategy

Contribution to Investment Strategy_23
Sled Dogs in Sun
People of Qikiqtarjuaq

Portfolio Allocation by Asset Class

Allocation by Asset Class_2023

To minimize certain risks in the investment portfolio, the Trust diversifies its portfolio by investing in a variety of asset classes focused on different geographic regions with differing characteristics. External investment managers with significant expertise and varying investing styes are utilized to further minimize risk and achieve target returns within their assigned asset classes. Exposure to any single strategy, asset type and investment manager is restricted to predetermined ranges.

Trust staff regularly monitor the financial stability, staff turnover, consistency and appropriateness of style/risk profiles and track record of all its external investment managers. External investment mandates are expected to produce absolute performance results, after investment management fees, over a five-year period which meet or exceed the Trust’s long-term asset class return targets.

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Progress vs Mandate

The Trust’s mandate requires both the maintenance of a balance of assets sufficient to cover the effects of inflation since 1993 and the creation of annual cash income inflows which go out of the Trust by way of distribution to its beneficiary organizations. As part of their governance practices, Trustees annually review the assessment of the Trust’s progress in these two areas and always consider their mandate when considering any amendments to their investment strategy.

The Trust’s staff regularly monitors the progress of the Trust’s asset growth and compares the actual asset value with the assets that should be on hand based on calculations derived from its mandate (“mandated assets”) as laid out in its Trust Deed. Mandated asset balances are based on growing the value of the Net Settlement Payments by actual annual inflation rates.

When all of the income available for distribution as determined by Canadian tax rules is paid out every year, a Trust Deed requirement, then the only way the Trust assets can grow with inflation is by investing in assets which increase in value over time and are eventually sold for a profit. These growth assets are intended to experience value appreciation over a period of time rather than to generate annual cash income. It is the realized cash income that the Trust distributes, that is approximated by the 4% payout amount, and that provides for the majority of the Trust’s beneficiary organizations’ operating budgets. Maintaining a stable, secure, slowly increasing distribution is extremely important to the Trustees.

When investment markets result in annual distributions falling short of the current 4% payout amount, assuming the beneficiary organizations draw the full amount of the 4%, the difference is advanced to beneficiary organizations as a capital loan. This ensures that beneficiary organizations have stability around the amount of funding they will receive each year. The existence of a capital loan balance makes it more challenging for the Trust to meet its mandated asset amount as those assets are not inside the Trust earning the Trust return. It is excess distributions that form the only meaningful way that capital loans can be repaid and the ability to generate distributions in excess of the 4% amount in the future depends heavily on future investment markets and world economic conditions, neither of which can be guaranteed to produce the Trust’s required returns.

In the early years of the Trust’s life, there were not enough assets inside the Trust to support the growing operating needs of its beneficiary organizations and this led to the accumulation of meaningful capital loans outstanding. Since 2012 the Trust has enjoyed strong investment markets and implemented a new investment strategy that stabilized returns and generated the necessary yearly cash to cover its cash outflows. These factors allowed the Trust to periodically generate distributions in excess of the 4% amount over the years since 2012 and thereby trigger repayments of those capital loans. All these original capital loans had been repaid by the end of 2018 through a combination of our main beneficiary organization taking less than the 4% payout amount and the Trust generating excess distributions.

Having those assets back inside the Trust has removed a historical roadblock to the ability of the Trust to achieve its mandate. Going forward it is key that the Trust’s investment strategy minimizes the need for capital loans outstanding for extended periods of time. Since 2013 the Trust has accumulated sufficient assets to cover its mandate with a reasonable additional reserve to offset any future investment market challenges and has generated sufficient annual income to cover and slowly increase its 4% payout amount. By having sufficient assets inside the Trust, a well-researched investment strategy and strong governance practices, the Trustees can continue to achieve the mandate which helps fund the missions of its beneficiary organizations.