T13 - Encasa: Maximize Returns On Your Capital Reserves

Transcription

1 T13 - Encasa: Maximize Returns On Your Capital Reserves

2 The Social Housing Investment Program - Working for You BCNPHA Fall Conference Dawn Bowles, Investment Liaison, Encasa Financial Inc. November 24, 2015

3 BC Housing Investment Policy 1) Allowable Investments BC Housing s replacement reserve investment policy states that replacement reserve funds in developments governed by operating agreements must be funded annually and held in an investment account in your organization s name. Investing reserve funds and accrued interest is limited to securities that are authorized under your constitution and bylaws, and that are authorized under the Societies Act and the Trustee Act. 2) Maximizing Returns on Investments Over time, the costs of replaceable items are likely to increase. Consequently, replacement reserves must earn annual interest that is at least the increase in the Consumer Price Index (CPI) to remain adequate in future years. For example, if the CPI increase averages 2.5 per cent over a five-year period, your invested reserves should be adequate if the average annual interest earned in this period is at least 2.5 per cent. Invest_funds

4 Encasa + Social Housing Investment Program Investment Fund Manager investment of pooled capital reserves of non-profit and co-operative housing providers Will expand to include related enterprises, non-profits and other social enterprise. Three investment funds for right mix of sector risk/liquidity Social Housing Canadian Short-term Bond Fund Social Housing Canadian Bond Fund Social Housing Canadian Equity Fund Provide assistance to help unitholders take an active role in maximizing their investments Social enterprise owned by four non-profit organizations:

5 Encasa s Service Providers INVESTMENT FUND MANAGER Establishes and manages Funds Sets investment policy Manages compliance of Funds and Corporation Communicates with unitholders and stakeholders PRINCIPAL DISTRIBUTOR TRUSTEE AND CUSTODIAN Advises unitholders Manages accounts PORTFOLIO ADVISER & FUND ACCOUNTING Implements Encasa s investment policy Selects securities Reports to Encasa s Board Holder of mutual fund securities on behalf of fund/unit-holders

6 Regulatory Oversight Ontario Securities Commission (OSC) Administers and enforces securities law in the province of Ontario. Mandate is to: provide protection to investors from unfair, improper and fraudulent practices, and foster fair and efficient capital markets and confidence in capital markets. Encasa Board of Directors Representing the housing sector Independent Review Committee Oversees all decisions involving an actual or perceived conflict of interest Auditors Firm and investment funds

7 Program Statistics as of September 30, housing providers already participating Total Assets Under Management $493.8 million Program has added tens of millions of dollars to value of capital reserves over the last 12 years

8 Risk/Return Trade Off

9 Risk (Volatility) Range of Investment Options Trade-offs Between Risk and Returns SH Canadian Equity >7yrs 5-7yrs SH Canadian Bond 1-5yrs SH Canadian Short-Term Bond Years to Capital Expenditure

10 Our approach to investment decision-making Assist providers with investing their Capital Reserves PH&N IS Investment Funds Advisors provide investment advice in the context of when you require funds for capital planning purposes. Work with Boards to ensure investment mix supports capital reserve fund forecast: Encourage integration of capital and investment planning When will you need to spend your money? Capital Planning BCA/Asset Planner/Capital Reserve Fund Forecast Complete a BCA every 5 years and update it annually. When do we need to rebalance our investments? What are the planned expenses over the next 2, 5 and greater than 7 years? Does the Board s investment mix match their investment needs 9

11 Investment Tools Encasa provides two tools to assist with asset allocation Asset Mix Calculator The Asset Mix Calculator is for providers who want to invest capital reserves and who have confidence in their building condition assessments. Model Investment Portfolio Selector The Model Investment Portfolio Selector is for providers who want to invest capital reserves but do not have a building condition assessment, or are not comfortable with the one that they have. It is also for providers who need to decide how to invest money other than capital reserves. 10

12 Socially Responsible Investing (SRI) The Social Housing Investment Funds invest in companies that conduct themselves in a socially responsible manner and have socially responsible business practices. Sustainalytics Integrates environmental, social and governance factors into their investment processes (ESG). Avoid alcohol tobacco pornography military weapons gaming Favour environment workers rights strong governance 11

13 Social Housing Canadian Short-Term Bond Fund Portfolio is invested primarily in both government and corporate securities (shorter duration) Government bonds 20% to 100% Corporate bonds 0% to 60% Portfolio may also invest in mortgages and money market instruments Invests only in high quality investments Minimum quality of investment of BBB The average term-to-maturity of the fund is always less than 5 years Ideal for investments 1 to 5 years

14 Social Housing Canadian Bond Fund Portfolio is invested primarily in both government and corporate securities (longer duration) Government bonds 20% to 100% Corporate bonds 0% to 60% Portfolio may also invest in mortgages and money market instruments Invests only in high quality investments Minimum quality of investment of BBB The average term-to-maturity of the fund is always between 5 and 12 years Ideal for investments of more than 5 years

15 Social Housing Canadian Equity Fund Invest primarily in equity of Canadian corporations - Global component target 30% Portfolio broadly diversified across most sectors of the Canadian and Global stock markets Invests in large and stable corporations Large weight in financials Names are well recognized companies to the public Ideal for investments of more than 7 years

16 Rates of Return Rates of Return for Series A as of September 30, year % 3 years 3 % 5 years 3 % 10 years 3 Social Housing Canadian Short-Term Bond Fund-Series A Social Housing Canadian Bond Fund-Series A Social Housing Canadian Equity Fund-Series A % 1. Rates of return assume reinvestment of all distributions, after deduction of fees. 2. Annualized returns. The management fee for Series B is higher than for Series A, which could affect performance. Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or Fund Facts document before investing. The performance data provided assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charge or income taxes payable by any unitholder that would have reduced turns. Mutual funds are not guaranteed. Their values change frequently and past performance may not be repeated.

17 3-year GIC vs. Social Housing Canadian Short-Term Bond Fund $135,370 $120,504 Year GIC return (%) CSTBF return (%) Rates of return shown are for Series A units of the Social Housing Canadian Short-Term Bond Fund (Fund). The Fund offers different series, which are subject to different fees and expenses. The Management Fee for Series B is higher than for Series A, which could affect performance. GICs are investments that guarantee the deposit principal, while earning a pre-determined rate of return for the investment term. 16

18 Model Portfolios 10 Yr Annualized Returns Summary (SERIES A) If you invested $100,000 on March 31, 2005 Portfolio 1 3.1% $139,523 Portfolio 2 6.8% $154,390 Portfolio 3 8.3% $162,870 Portfolio 4 9.1% $168,386 Portfolio % $174,585

19 3-year GIC vs. Social Housing Canadian Bond Fund $147,221 $120,504 Year GIC return (%) CBF return (%) Rates of return shown are for Series A units of the Social Housing Canadian Bond Fund (Fund). The Fund offers different series, which are subject to different fees and expenses. The Management Fee for Series B is higher than for Series A, which could affect performance. GICs are investments that guarantee the deposit principal, while earning a pre-determined rate of return for the investment term. 18

20 The Fine Print Fully liquid Funds in account 48 hrs. No Load/Fee Investment Sign up Professional investment advice Multiple accounts Cash in Transfers Etc. Ranked among lowest MER for Canadian Retail Mutual Funds (June 30,2015)

21 Summary of Roles and Responsibilities: Who does what? Housing Provider PH&N IS Encasa Capital planning Allocation of investments to SHIF Annual review of allocations relative to capital plan (suggested) Review of investment reports from SHIF Investment advice based on capital plan Response to investment questions Accounting and reporting on investments Overall management of the investment program Customer support Coordination of presentations 20

22 Opening an account Once decision is taken: PH&N will open account Once open: Requires Board motion (Can provide sample) Requires signature of account documents Authorized signatures Federal ID procedures Must be kept up to date Investment advice Instant account access (phone/internet) Fund updates, quarterly statements, market commentaries & relevant program updates/reminders

23 Benefits of Investing with the Social Housing Investment Program Increased value of Capital Reserves Competitive returns at reasonable risk Proven track record of added value Low management fee compared to similar funds Access to a professionally managed program Guaranteed regulatory compliance Oversight of portfolio management by an independent consultant Diversified investment options at appropriate risk levels Access to investment advice Exemplary investor support and service Quick and easy investment and redemption process Quarterly performance reporting Advice and support Web-based reporting and information tools

24 Benefits of Investing with the Social Housing Investment Program A sector-based investment solution The Social Housing Investment Program unites the expertise of individuals who know housing with those who understand the investment world Competitive returns, sophistication, customization, SRI + low fees - not usually accessible to accounts <$5Million Leverage scale build in Ontario and open opportunity to BC and beyond Motivated by value and service to housing providers A for-profit social enterprise now owned by 4 Canadian Non-profit housing organizations (2 BC) = revenue back into the sector You will not find this unique combination anywhere else

25 Legal Disclosure This information has been provided by Phillips, Hager & North Investment Funds Ltd. (PH&NIF) and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. PH&NIF takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when printed. Due to the possibility of human and mechanical error as well as other factors, including but not limited to technical or other inaccuracies or typographical errors or omissions, PH&NIF is not responsible for any errors or omissions contained herein. PH&NIF reserves the right at any time and without notice to change, amend or cease publication of the information. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Simplified Prospectus or Fund Facts documents before investing. The performance data provided assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Past performance may not be repeated. Encasa Financial Inc. is the fund manager for all Social Housing Investment Funds. RBC Global Asset Management Inc. (RBC GAM) is the portfolio adviser for all Social Housing Investment Funds. PH&NIF, which uses the business name PH&N Investment Services, is the principal distributor of the units of the funds. The management fees and operating expenses associated with the Social Housing Investment Funds are paid by the respective fund. RBC GAM and PH&NIF are indirect, wholly-owned subsidiaries of Royal Bank of Canada. / Trademark(s) of Royal Bank of Canada. Used under licence. RBC Global Asset Management Inc. 2014

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27 Contacts encasa.ca

28 Fiduciary Responsibility Prudent Person Rule A standard that requires that a fiduciary entrusted with funds for investment may invest such funds only in Securities that any reasonable individual interested in receiving a good return of income while preserving his or her capital would purchase. Historically known as the prudent or reasonable man rule, this standard does not mandate an individual to possess exceptional or uncanny investment skill. It requires only that a fiduciary exercise discretion and average intelligence in making investments that would be generally acceptable as sound. Source: West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

29 Series A Management Fees and Ranking as of June 30, 2015 CSTBF CBF CEF MER (Series A) 0.79% 0.90% 1.17% Percentile ** 26% 28% 13% Average MER of comparable Canadian funds 1.13% 1.23% 1.96% * The Management Fee is for Series A units of the Social Housing Investment Funds as described in the prospectus. ** The independent source of this data is Morningstar. MER percentiles are based on Morningstar s standard classification of comparable retail funds by specific categories. 28

30 Rates of Return Rates of Return for Series B as of September 30, months 2 % 6 months 2 % 9 months 2 % Since Inception (Nov 24, 2014) Social Housing Canadian Short-Term Bond Fund-Series B Social Housing Canadian Bond Fund-Series B Social Housing Canadian Equity Fund-Series B Rates of Return for Series A as of September 30, months 2 % 1 year % 3 years 3 % 5 years 3 % 10 years 3 Social Housing Canadian Short-Term Bond Fund-Series A Social Housing Canadian Bond Fund-Series A Social Housing Canadian Equity Fund-Series A % 1. Rates of return assume reinvestment of all distributions, after deduction of fees. 2. Three-month and 6-month rate of return is a simple return on investment (not annualized). 3. Annualized returns. The management fee for Series B is higher than for Series A, which could affect performance. Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or Fund Facts document before investing. The performance data provided assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charge or income taxes payable by any unitholder that would have reduced turns. Mutual funds are not guaranteed. Their values change frequently and past performance may not be repeated.

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