Legacy Fund records $1.47-million loss in first half of year

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Volatile markets have rocked investment funds around the world since the COVID-19 pandemic was declared in March.

Norfolk County’s $70-million Legacy Fund has not been immune to these gyrations, posting a loss through the first six months of 2020 of $1.47 million – or 2.05 per cent of the fund’s entire value.

The news was contained in a report from the county’s treasury department.

In her report, deputy treasurer Amy Fanning compared the six-month performance of the Legacy Fund with the 10.3 per cent return it produced in 2019. The net gain there was $6.9 million.

“The 2019 and 2020 year-to-date returns depict how long-term investments fluctuate, and that the strategy to leave the principal intact is a long-term strategy,” Fanning says.

Fanning’s report highlights the performance of Norfolk’s investments through the first six months of this year in a number of different vehicles.

Norfolk engages in short-term investments based on the fact that – in a normal year – the county’s cash reserves spike quarterly with the passage of every property tax instalment deadline.

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Fanning says Norfolk’s expenditures in all areas average $2.9 million a week. Cash reserves beyond that are parked in short-term guaranteed investment certificates (GICs) and high-interest savings accounts.

In 2019, Norfolk’s average balance in short-term investments totalled $18.8 million. The return last year was 2.46 percent, which works out to $463,000.

Cash reserves over and above what Norfolk will need in a given year are devoted to reserve funds and medium-term investments. Under Ontario law, these investments must be conservative. That means no corporate bonds or stock market plays.

Because of these regulations, Norfolk and other municipalities favour government and financial institution bonds with credit ratings of AA- or better.

Norfolk’s average investment balance in medium-term vehicles last year totalled $4.1 million. The treasury report says Norfolk’s return in this area in 2019 came to $153,100, or 3.72 per cent.

The Legacy Fund represents the proceeds Norfolk County collected seven years ago when the municipality agreed to sell the Norfolk Power distribution utility to Hydro One. The net gain from that transaction was $66 million.

Norfolk’s policy for the Legacy Fund is to protect the principal while spending a portion of the annual returns on infrastructure and worthwhile community projects.

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