City of Toronto Investment Report for the Year 2025 (2026.IB15.4)
Previous reports are available upon request. Email CMDInquiry@toronto.ca
Amendments to Ontario Regulation 610/06 in 2015 allowed the City of Toronto to invest under the prudent investor standard. Under this standard, the City has greater flexibility in the types of investments that it can make. However, the City must, according to the new regulation, “exercise the care, skill, diligence and judgement that a prudent investor would exercise” in making investments. They City also established the Toronto Investment Board in which City Council delegated its authority to manage and oversee the City’s investment funds that are not immediate required by the City (i.e. the Long-Term Fund and Sinking Fund). Capital Markets administers and executes the ongoing directives and initiatives of the Toronto Investment Board.
The Toronto Investment Board is responsible for implementing the Council adopted Investment Policy. The Investment Policy considers the general economic conditions, the possible effect of inflation and deflation, the role each investment plays within the City’s overall portfolio. The Investment Policy also addresses the City’s objectives for return on investment, risk tolerance, liquidity needs for planned projects, and unanticipated contingencies. City Council is required to review its Investment Policy annually.
Although the Investment Policy prescribes limits on the asset mix among investment portfolios, the objectives for the City’s financial investments are to:
a) Ensure safety of principal – Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolios.
b) Maintain adequate liquidity – Investments shall be undertaken in a manner that takes into account the needs of periodic cash flows and reasonably anticipated budgetary requirements to fund the City’s cash needs
c) Diversify Investments – Investments should be sufficiently diversified as to:
i. Avoid concentration in a specific issuer or credit and;
ii. Avoid concentration in specific asset classes, markets, sectors and term to maturity in order reduce overall risk.
d) Attain Capital appreciation – Investments shall be made to earn realized or unrealized investment income, but not at the risk of significantly eroding the principal, with the objectives in priority order of:
i. meeting annual budgetary requirements for earnings
ii. maintaining portfolio term structure to support the City's long-term financial plan, and
iii. provide a return consistent with established benchmarks.
e) Based on the investment objectives above, the assets will be invested in a mix of fixed income, equity, and real asset investments in order to balance volatility and returns. The target Asset Mix was developed by considering the possible effect of inflation, the expected return and risk of each proposed asset class and the City’s need for liquidity, capital preservation and income.
The City has two main portfolios, each of which have specific investment objectives and constraints.
Two portfolios that are grouped under the General Fund are the Short-Term Fund and Long-Term Fund. The Long-Term Fund is positioned towards funding the City’s future reserve and reserve fund requirements and therefore takes a longer view of the market. The Short-Term Fund is primarily focused on ensuring adequate liquidity is maintained to meet the City’s short-term and mid-term cash flow requirements.
City revenues can be held in the Short-Term Fund until short-term liquidity needs are met. Excess liquidity can then be allocated to the Long-Term Fund. Likewise, Long-Term fund securities can be sold to meet short-term liquidity requirements when suitable and if necessary. Traditionally, the Long-Term Fund provides an opportunity to earn a higher investment return versus the Short-Term Fund.
The Sinking Fund holds assets accumulated to provide for the repayment of the City’s sinking fund debt as it matures. Contributions are made to the Sinking Fund in accordance with applicable legislative requirements. Current information on the value of Sinking Fund assets, outstanding sinking fund debt and related investment performance is provided in the City’s most recent Investment Report and Annual Financial Report.
Risk affects investment returns. Higher return often accompanies higher risk. Since safety of principal is an overarching investment objective, risk exposure on the City’s investment portfolios has been kept low.
One principal factor affecting the performance of the City’s investment portfolios is the general level of interest rates. Despite greater flexibility in investment choices resulting from the prudent investor standard, a majority of the City’s investments remain in fixed income securities.
Investment portfolio performance is influenced by capital market conditions, including changes in interest rates, credit spreads, equity markets, inflation and other economic factors.
Refer to the Council Approved Investment Policy for further information regarding the City’s investment asset mix guidelines and the City’s most recent Investment Report for the latest market commentary.
Asset Mix
Investment Policy Allowable Ranges
Short-Term Fund, Long Term Fund, and Sinking Fund
| Asset | Short-Term Fund | Long-Term Fund | Sinking
Fund |
| Fixed-Income | 0% - 100% | 50% - 100% | 50% - 100% |
| Equity | - | 0% - 30% | 0% - 30% |
| Real Assets | - | 0% - 15% | 0% - 15% |
| Cash | 0% - 100% | 0% - 5% | 0% - 5% |