Six Canadian municipalities have come together to form the first joint investment board in Ontario.
The new investment board, announced Wednesday, will take advantage of Ontario legislation passed in 2018 that allows municipalities to form a board to invest in any security that is “prudent.”
Prior to the passage of the rule, these municipalities could only invest in certain equities, bonds, and money market funds, all of which had to be offered by Canadian firms, according to Judy Dezell, co-president and co-chief executive of ONE Investment, the not-for-profit Ontario organization that formed the new board.
The founding members of the joint investment board are the city of Kenora, district municipality of Muskoka, and towns of Bracebridge, Huntsville, Innisfil, and Whitby, the announcement said.
These municipalities were already invested with One Investment, but now will expand their asset allocation strategy beyond the “legal list,” Dezell said by phone Wednesday. Under the pre-existing system, ONE Investment managed $2 billion in assets.
“They were Canadian-focused and very conservative,” Dezell said.
After the 2018 rule change was announced, ONE Investment began working to set up a joint investment board, materials from the Wednesday board meeting show. Dezell said that while the asset allocation strategy discussion is still underway, the joint investment board plans to start investing through the new strategy on July 2.
That new investment strategy will bring more diversification to the joint investment board’s portfolios, moving them away from a concentration in Canadian securities and into global equities and bonds, according to Dezell.
“The whole point of doing this was to better manage risk through diversification,” she said.
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According to Dezell, ONE Investment will manage long-term capital-focused funds on behalf of the joint board. These funds will be used for infrastructure projects, she said. In Ontario, the main source of funding for infrastructure projects is a property tax, unlike other areas where sales tax and income tax revenues can support those projects, according to Dezell.
“Municipalities have an infrastructure deficit,” she said. “They need to solve that.” According to Dezel, the board’s investments can help shore up the extra capital necessary to fund those projects.