Minister of Finance Investment Management Framework for Up-front Funding to Independent Organizations

Updated September 2026

Introduction

This Framework, initially adopted in March 2009, replaced the Department of Finance Investment Policy Principles (dated March 2002), which had been previously used by the Government of Canada (GoC) when providing up-front funding to independent organizations.

Objective of the Framework

• To ensure that funds held in those independent organizations are prudently invested in diversified portfolios in order to earn adequate rates of return while minimizing the risk of loss of the capital.
• To ensure the investment management policies and practices of these funds are in line with the best practices followed by similar Canadian institutional investors.

Scope

The Minister of Finance Investment Management Framework for Up-front Funding applies to all up-front funding (i.e., grants) provided to an independent organization.

Recognizing that those independent organizations may have different structures and disbursement requirements, this Framework contains two parts:

• Part I Describes the investment management framework applicable to up-front funding provided to an independent organization that is to be held over a very long period of time or in perpetuity (endowment fund) in which case the principal amount needs to be protected over the long-term; and
• Part II Describes the investment management framework applicable to up-front funding provided to an independent organization that is to be held and spent over a short or medium predetermined period of time, generally less than 15 years.

Part I: Investment Management Framework for Up-Front Funding to be Held in Perpetuity (Endowment Fund)

Scope

Part I of the Investment Management Framework for Up-front Funding applies to all up-front funding provided to an independent organization that is to be held over a relatively long period of time or in perpetuity where the principal amount needs to be protected over the long-term and the Recipient's operation and programs are mostly financed by the investment income generated from the principal amount.

Approval by the Department of Finance

Department of Finance's approval of the Statement of Investment Policy (SIP) or any material amendments thereafter is required when the GoC's up-front funding contribution is equal or greater than $100 million. The approved SIP does not need to form part of the funding agreement between the GoC and the Recipient; however, the approval is required before the signing of the applicable funding agreement. Any subsequent material changes to the SIP shall be formally approved by the Board of the Recipient then submitted for the approval of the Department of Finance.

Standard Clauses

For greater clarification, in the context of this Framework, "Fund" means the grant plus any investment income and proceeds of the grant and "Recipient" means the entity receiving the up-front funding.

The following standard clauses shall be incorporated in the body of the funding agreement between the GoC and the independent organization receiving the up-front funding:

1. Prudent Investor Principle

The Recipient shall invest and manage the Fund according to investment policies, standards and procedures that a prudent investor would exercise in making investment decisions regarding property belonging to others.

2. Investment Committee

The Recipient shall establish a committee (the "Committee") that oversees all matters related to the investment management of the Fund. The Committee should be composed of at least three directors who are not officers or employees of the Recipient. Members of the Committee shall be financially literate and have broad knowledge or experience in investment matters.

3. Investment of the Fund

3.1 Without limiting the generality of article 1, the Recipient shall ensure that the principal amount of the Fund that has not been disbursed or committed be invested in accordance with the Prudent Investor Principle. Investment decisions shall be made with the principal objective being the preservation of the principal amount over the long-term.

For funding of less than $100 million:

3.2 Until the Board approves the Fund's Statement of Investment Policy and appoints an investment advisor for the Fund, the Committee shall ensure that the principal amount of the Fund be invested in low-risk, liquid short-term securities denominated in Canadian dollars.

For funding of $100 million or more:

3.3 Until the Fund's Statement of Investment Policy is approved by the Board and the Department of Finance and until the Board appoints an investment advisor for the Fund, the Committee shall ensure that the principal amount of the Fund be invested in low-risk, liquid short-term securities denominated in Canadian dollars.

4.Statement of Investment Policy

4.1 The Committee shall establish a written Statement of Investment Policy in respect to the Fund's portfolio of investments for approval of the Board. The Committee shall ensure that the Board is regularly made aware of any significant financial risks facing the Recipient, including the consequences of potential significant losses of investments of any part of or the entire Fund. The Statement of Investment Policy shall be reviewed no less frequently than annually. The Statement of Investment Policy shall include the following components:

1. long-term return objectives and expectations;
2. diversification policy of the Fund's investment portfolio, including various quantitative limits on investments;
3. asset allocation strategy including specific range for short-term fluctuation for each asset class and the long-term targeted asset mix;
4. permitted investment instruments and trading activities;
5. prohibited investment instruments and trading activities;
6. policy on the use of derivatives;
7. liquidity policy outlining how the Fund's liquidity needs will be addressed;
8. risk management policies outlining procedures to manage and mitigate various types of risks that the Recipient faces;
9. policy on the lending of cash or securities;
10. the retention or delegation of voting rights acquired through investments;
11. any investment policy related to environmental, social and governance factors; and 
12. performance measurement and monitoring procedures.

4.2 The Committee shall also establish and approve an investment strategy, describing the means used by the Recipient to best implement the Statement of Investment Policy. The investment strategy shall define the style of investment management, such as active versus passive managers, as well as specific investment instruments that would be used. The investment strategy shall be reviewed no less frequently than annually.

5. Investment Advisor and Portfolio Manager

The Committee shall recommend to the Board for their approval the appointment of one or more independent, external investment advisors to provide investment advice. The Committee may also recommend to the Board the appointment of one or more professional portfolio managers to invest the Fund consistent with the approved Statement of Investment Policy and the investment strategy.

6. Conflict of Interest Concerning Investment Management

The Board shall ensure that all investment advisors or portfolio managers who are involved in the investment management of the Fund disclose in writing, on a timely basis, the nature and extent of his/her interest, including any material interest in any entity that is a party of a transaction with the Recipient. The Board shall also ensure that the Recipient's conflict of interest policies and procedures cover, among others, voting, prohibited transactions, continuing disclosure and avoidance standards.

7. Borrowing

7.1 Except as provided in section 7.2, the Fund shall not borrow money, issue any debt obligation, or give any guarantees to secure a debt or other obligation of another entity.

7.2 The Recipient shall be permitted to maintain an operating line of credit to ensure that it has the appropriate cash flow for its ongoing operations, provided that the line of credit is maintained with a Canadian financial institution that is a member of Payments Canada according to standard terms and conditions, and provided further that the operating line of credit outstanding at any time does not exceed 1% of the book value of the Fund's assets.

8. Quantitative Limits on Investment Holdings of the Fund

8.1 Investments in the securities of any one issuer, or two or more affiliated entities shall be limited to no more than 10% of the assets of the Fund's investment portfolio.

8.2 Section 8.1 does not apply in respect to:

1. investments in securities issued by the Government of Canada or the government of a province or the government of the United States, or securities that carry the full faith and credit of either; and
2. any index, segregated, mutual or pooled fund.

8.3 The Fund's investments in the equities of any one issuer shall be limited to no more than 10% of the outstanding stock (or of any single class thereof) of the issuer.

8.4 Investments in alternative assets (including hedge funds, fund of hedge funds, venture capital, private equity, real estate, infrastructure, and other non-traditional asset classes) shall be limited to no more than 25% of the assets of the Fund's investment portfolio.

8.5 Fund shall maintain a minimum of 2% of the investment portfolio in cash or cash equivalent instruments to meet the Fund's liquidity needs.

9. Restrictions on Investments and Trading Activities

9.1 The Recipient undertakes not to engage or invest the Fund's assets in the following:

1. Fixed-income instruments rated below BBB- by Standard & Poors or Fitch Ratings, Baa3 by Moody's or BBB-by DBRS;
2. Derivatives or any instruments that have derivative holdings other than for risk mitigating purposes;
3. Non-marketable securities;
4. Crypto-Assets, except stablecoins as defined by the Stablecoin Act;
5. Commodities; and
6. Repurchase agreements against securities which are not permitted to be held in the Fund's investment portfolio.

9.2 Where external credit ratings are applied, investments or counterparties shall have a credit rating from at least two of the four following rating agencies: Moody's Investors Service, Inc, Standard & Poor's Global Ratings , Fitch Ratings Ltd and DBRS Morningstar Ltd. When there are two or more ratings for an entity, the lower of the highest two ratings should be used to assess eligibility, in accordance with Basel II rules. When there is an assumption of government support in the rating, stand-alone ratings should be used where available; otherwise the official rating should be used.

9.3 Section 9.1 does apply when the Fund's assets are invested in any index, segregated, mutual, or pooled fund, that does not hold the majority of its investments in these restricted assets.

10. Disclosure

The Recipient shall publish, on their website, their Statement of Investment Policy and shall publish, no later than 90 days after the end of their financial year, a summary of their investment portfolio.

Part II: Investment Management Framework for Up-Front Funding with Predetermined Durations

Scope

Part II of the Investment Management Framework for Up-front Funding applies to all up-front funding to be held and disbursed over a short or medium predetermined period of time, typically less than 15 years.

Approval by the Department of Finance

The Fund's Statement of Investment Policy does not require approval by the Department of Finance.

Standard Clauses

For greater clarification, in the context of this Framework, "Fund" means the grant plus any investment income and proceeds of the grant and "Recipient" means the entity receiving the up-front funding.

The following standard clauses shall be incorporated in the funding agreement between the GoC and the independent organization receiving the up-front funding:

1. Prudent Investor Principle

The Recipient shall invest and manage the Fund according to investment policies, standards and procedures that a prudent investor would exercise in making investment decisions regarding property belonging to others.

2. Investment Committee

The Recipient shall establish a committee (the "Committee") that oversees all matters related to the investment management of the Fund. The Committee should be composed of at least three directors who are not officers or employees of the Recipient. Members of the Committee shall be financially literate and have broad knowledge or experience in investment matters.

3. Investment of the Fund

3.1 Without limiting the generality of article 1, the Recipient shall ensure that the principal amount of the Fund that has not been disbursed or committed be invested in accordance with the Prudent Investor Principle. Investment decisions shall be made with the principal objective being the preservation of the capital to meet future disbursements requirements.

3.2 Until the Board approves the Statement of Investment Policy and appoints an investment advisor for the Fund, the Committee shall ensure that the principal amount of the Fund be invested in low-risk, liquid short-term securities denominated in Canadian dollars.

4. Statement of Investment Policy

4.1 The Committee shall establish a written Statement of Investment Policy in respect to the Fund's portfolio of investments for approval of the Board. The Committee shall ensure that the Board is regularly made aware of any significant financial risks facing the Recipient, including the consequences of potential significant losses of investments of any or all of the Fund. The Statement of Investment Policy shall be reviewed no less frequently than annually. The Statement of Investment Policy shall include the following components:

1. Long-term return objectives and expectations;
2. diversification policy of the Fund's investment portfolio, including various quantitative limits on investments;
3. asset allocation strategy including specific range for short-term fluctuation for each asset class and the long-term targeted asset mix;
4. permitted investment instruments and trading activities;
5. prohibited investment instruments and trading activities;
6. liquidity policy outlining how the Fund's liquidity needs will be addressed;
7. risk management policies outlining procedures to manage and mitigate various types of risks that the Recipient faces;
8. policy on the lending of cash or securities;
9. performance measurement and monitoring procedures;

4.2 The Committee shall also establish and approve an investment strategy, describing the means used by the Recipient to best implement the Statement of Investment Policy. The investment strategy shall define the style of investment management, such as active versus passive managers, as well as specific investment instruments that would be used. The investment strategy shall be reviewed no less frequently than annually.

5. Investment Advisor and Portfolio Manager

The Committee shall recommend to the Board for their approval the appointment of one or more independent, external investment advisors to provide investment advice. The Committee may also recommend to the Board the appointment of one or more professional portfolio managers to invest the Fund consistent with the approved Statement of Investment Policy and the investment strategy.

6. Conflict of Interest Concerning Investment Management

The Board shall ensure that all investment advisors or portfolio managers who are involved in the investment management of the Fund disclose in writing, on a timely basis, the nature and extend of his/her interest, including any material interest in any entity that is a party of a transaction with the Recipient.

The Board shall also ensure that the Recipient's conflict of interest policies and procedures cover, among others, voting, prohibited transactions, continuing disclosure and avoidance standards.

7. Borrowing

The Recipient shall not encumber the Fund in any way, including, but not limited to, encumbrances in any way connected to (i) borrowing money; (ii) issuing any debt obligations or securities; (iii) guaranteeing any debt or other obligation of a person, mortgage or other entity; or (iv) pledging all or any portion of the Fund byway of security for payment to any creditor.

8. Quantitative Limits on Investment Holdings of the Fund

8.1 Investments in the securities of any one issuer, ort wo or more affiliated entities shall be limited to no more than 10% of the assets of the Fund's investment portfolio.

8.2 Section 8.1 does not apply in respect to:

1. investments in securities issued by the Government of Canada or the government of a province, or securities that carry the full faith and credit of either; and
2. any index, segregated, mutual or pooled fund.

8.3 Investments in the securities with a credit rating of "A"(including all sub-classifications of this rating category) by at least one of the recognized credit rating agencies shall be limited to no more than 20% of the assets of the Fund's investment portfolio.

8.4 Investments in the securities with a credit rating of "AA" (including all sub-classifications of this rating category) by at least one of the recognized credit rating agencies shall be limited to no more than 70% of the assets of the Fund's investment portfolio.

8.5 Investment in securities that are not issued by, or carry the full faith and credit of either the Government of Canada or the government of a province, shall be limited to no more than 80% of the assets of the Fund's investment portfolio.

9. Investment Holdings in Foreign Currencies

The Fund shall not invest in securities that are not denominated in Canadian dollars.

10. Maturities of the Securities

The maturities and terms of investments shall match the profile of the Fund's forecasted disbursements. In cases where the timing of disbursements is unknown, investments shall be held in securities with term to maturity of one year or less.

11. Permitted Investments

11.1 The Recipient may invest the Fund's assets in the following:

1. Bank certificate of deposit;
2. Banker's acceptance;
3. Treasury bills, commercial paper and other short-term securities, bonds and notes issued by the federal government, provincial governments, municipal governments and corporations;
4. Asset-backed securities;
5. Mortgage-backed securities;

11.2 The Recipient undertakes not to engage or invest the Fund's assets in the following:

1. Equities or shares issued by any corporation;
2. Hedge funds or funds of hedge funds;
3. Fixed-income instruments rated below A- by Standard & Poors or Fitch Ratings, A3 by Moody's or A- by DBRS;
4. Derivatives or any instruments that have derivative holdings or features;
5. Non-marketable securities;
6. Commodities;
7. Crypto assets except stablecoins as defined by the Stablecoin Act;
8. Repurchase agreements against securities which are not permitted to be held in the portfolio; and
9. Margin transactions or any form of leveraging.

11.3 Where external credit ratings are applied, investments or counterparties shall have a credit rating from at least two of the four following rating agencies: Moody's Investors Service, Inc, Standard & Poor's Global Ratings , Fitch Ratings Ltd and DBRS Morningstar Ltd. When there are two or more ratings for an entity, the lower of the highest two ratings should be used to assess eligibility, in accordance with Basel II rules. When there is an assumption of government support in the rating, stand-alone ratings should be used where available; otherwise the official rating should be used.