The OAF Blog

New Approaches to the role of ‘Capital’ in the Arts

June 04, 2012

One of the principal responsibilities of our Board is managing the investment portfolio for the Ontario Arts Foundation. We are long term investors (our investment time horizon is 5 to 10 years) and this drives our investment strategy. The Foundation looks to earn investment returns that will:

      • Create a stable flow of income for arts organizations and will fund awards and scholarships
         
      •  Meet foundation operating expenses
         
      • Protect capital values against inflation
         

Making decisions on risk and asset mix strategy are critical to our achieving our investment objectives, particularly in today’s volatile political and economic climate.

 

Investment Policy Statement

Documenting investment strategy in a formal Investment Policy Statement gives our Board a framework for stating how investments will be allocated across asset classes (stocks, bonds). Investment policy creates the portfolio structure (how much is invested in equities – Cdn, US, Global ) and establishes a benchmark against which we monitor the investment performance delivered by our managers. It allows the board to know – has the portfolio achieved returns that meet or exceed our objectives.

Creating an investment portfolio starts with stating a goal or ‘required rate of return’ – returns we need in order to meet the objectives of the foundation – financial support for the arts. The Board establishes an asset mix that balances risk with the returns we expect to achieve. The asset mix is based on the level of risk the Board is comfortable with and drives the allocation of investments into equities, bonds and other assets. The foundation hires investment managers to manage the portfolio, invest in accordance with our investment policy and achieve results that we expect to add value. 

 

Risk Assessment

We ask ourselves the question - ‘To achieve a particular portfolio return, how much risk is the Foundation prepared to accept?’  What is the appropriate level of risk we must accept to attain returns that meet our purpose. Every Board faces the challenge of bridging the gap between ‘required return’ and returns based on long term economic investment trends. We have learned there are no easy answers – higher returns imply taking on additional risk, lower returns mean less risk of loss but a lower investment return.

Recently, we updated our investment strategy and Investment Policy Statement. To increase the potential for higher returns, we introduced new asset classes (small cap equity and absolute return strategies). We are using different types of active portfolio management, but doing so in a way that diversifies our portfolio while lowering risk and volatility. This is an ongoing process – the Board will meet regularly with our investment managers and measure investment performance. Our objective is always to achieve investment results that meet our core objectives – protect capital, generate regular income and meet operating costs, and do so in a disciplined way.

 

Warren Buffett says it in this way,

“To invest successfully over a lifetime does not require an extraordinarily high IQ, unusual business insights or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework”. 

 

Regular updates will be shared with arts organizations and private donors to keep you abreast of strategy, our manager’s views of the global economy and markets and investment results. 

 

 

 

 

2016

Summer Travels - 2016

September 01, 2016

Taxing Endowment ?

May 25, 2016

2015

Ontario's Culture Strategy

November 25, 2015

Arts and Aging

June 30, 2015

Getting Capital Right

April 02, 2015

Arts Advocacy - 2015

February 23, 2015

2014

Canadian Women in Philanthropy

November 05, 2014

Dialogue on Capitalization

October 08, 2014

2013

Tax Changes to Be Aware Of

August 26, 2013

2012


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