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New Tecumseth Council receives staff report on investment strategy

October 2, 2025   ·   0 Comments

By Brian Lockhart

New Town Council has received a report from the Town treasury department to present the first annual performance update on the Town’s investment portfolio.

As of July 31, 2025, the Town’s investment portfolio continues to reflect strong adherence to its core principles – preservation of capital, liquidity, and financial stewardship.

The portfolio achieved a one-year return of 4.24 per cent, generating $211,755 in income.

The current strategy, anchored in laddered GICs and fixed income securities, has proven effective in a declining interest rate environment.

The current asset allocation has 4 per cent for cash and cash equivalents and 96 per cent for fixed income. The current yield on the fixed income allocation of the portfolio is 4.22 per cent, and the projected annual income is approximately $210,833.

Municipalities investing in Ontario have two options for investing. Section 418 of the Municipal Act, 2001 using Part I of O. Reg 438/97 details a series of permitted municipal investments, referred to as the “Prescribed List.” Alternatively, Section 418.1 of the Act under Part II of O. Reg 438/97 permits opportunities for broader equity opportunities under the structure “Prudent Investor Regime.” Part II is not widely used by municipalities in Ontario due to the extensive requirements.

In August 2023, the Town’s Investment Policy was approved by Council. The fundamental principles within the policy include:

• Legislative compliance

• Preservation of principal

• Maintenance of liquidity

• Competitive rate of return

When developing the policy, key considerations included minimizing investment risk and preservation of municipal capital through portfolio diversification and maturity timing. The policy requires investment maturities to synchronize with cash flow requirements. The use of legal or financial advice for proposed investments will be leveraged where appropriate.

Using a conservative approach, the Town’s investment policy has been developed to expand the opportunities for investment beyond basic bank account interest. Investment policies are frequently included among municipal financial policies.

In 2024, the Town invested $5 million, where one third of the portfolio matures each year, beginning in 2027, 2028, and 2029. The decision to reinvest in longer-dated notes when the portfolio was initially constructed in 2024 has benefited the portfolio by locking into higher-yielding investments. To take advantage of higher interest rates or yields, it is recommended to reinvest in maturing securities into longer term GICs/Bonds to lock into higher-yielding securities.

Based on the objectives of the Investment Policy Statement and the asset allocation, the Portfolio will continue to provide steady, consistent performance.

One-year rate of return on the Portfolio is 4.23 per cent, earning $211,755. Projected next twelve-month income of approximately $210,833.

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