City of Toronto Investment Report for the Year 2020

In total, there are now four fixed income managers and four global equity managers engaged in managing the long-term investments under the Toronto Investment Board. The final two global equity investment managers were funded in 2020. Both fixed income and equity investment classes are fully funded in accordance with the target asset mix in the Investment Policy with 70 percent allocated to fixed income and 20 percent to global equities. As at December 31, 2020, approximately 90 percent of both the Sinking Fund and the Long Term Fund were managed by external fund managers with the remaining 10 percent to be allocated to Real Assets. The Toronto Investment Board continues to evaluate opportunities in the Real Asset category. Performance of the long-term investment portfolios in 2020 were in line with expectations on an earned income basis and did exceptionally well on a market value basis. It should be noted that performance of these funds are measured on a four year moving average basis in accordance with the Investment Policy. Subsequent to year-end, the Toronto Investment Board was reviewing options for ways to enhance return in this low-interest environment. More information on this review will be provided in the next semi-annual report to City Council. Short term cash balances, which are part of the Short Term Fund managed by staff, finished 2020 at above average levels. This was primarily due to the COVID pandemic and the uncertainty around several revenue sources. A sharp decline in short term interest rates due to changes by the Bank of Canada resulted in returns below expectations in 2020. We expect these short term interest rates to return to pre-COVID levels once the pandemic nears an end. All funds managed are compliant with the Council-approved Investment Policy. The Toronto Investment Board is in the process of hiring a third-party data provider in order to monitor and report on whether or not external investment firms hired by the City are compliant with the terms of the Investment Policy governing Environmental, Social, and Governance Factors. It is expected this information and data regarding climate change risk from these reviews be available for the next investment report due in December, and will continue to be reported to City Council on a semi-annual basis.