Global financial markets batter the Nunavut Trust
Trust officials may reduce annual contributions to Inuit orgs
Delegates to Nunavut Tunngavik Inc.’s annual general meeting learned Oct. 24 that because of poorly performing global financial markets, it’s tough for the Nunavut Trust to earn money these days.
And that, in turn, may affect the trust’s ability to provide “a strong stable level of financial support to our beneficiary organizations as long as current conditions continue.”
That means NTI and other Inuit organizations will likely get less money — about 25 per cent less annually — which adds up to more than $1 million a year per regional Inuit organization or about $3 million a year for NTI.
That shortfall is something that Nunavut Trust managers suggested resource royalties could help compensate for.
Under the Nunavut land claims agreement, the Nunavut Trust received $1.17 billion in compensation money that the federal government paid the Inuit of Nunavut in annual installments.
Nunavut Trust has attempted to invest that money to make sure the net capital value of that amount remains at the real dollar level of 1990.
Each year, it has paid beneficiary organizations four per cent of its assets.
But the trust endured big problems in 2011, said the Nunavut Trust’s longstanding executive director Andy Campbell and Qikiqtani trustee Archie Arngnakak.
“Nunavut Trust, just like pension funds and endowments around the world, may not be able to continue to fund a four per cent level of return,” they said in their presentation to NTI delegates.
Investments on the Canadian stock market have fallen, Canadian bonds have lost value, the U.S. stock market is unpredictable and globally, world stock markets performed poorly.
The Nunavut Trust tried to boost its investments and avoid losses by changing its investment strategy, but it’s been difficult when global economies are in the midst of political and economic turmoil, Campbell said.
The size of the Nunavut Trust has decreased since its peak in 2006 and overall, the trust has lost value.
That being said, the trust has still plowed more than $642 million into beneficiary organizations since 2001, with $52.3 million handed out in 2011.
In 2011, the trust had to hand out more because, according to Revenue Canada regulations, it had racked up a tax gain over the past 21 years.
Although it was an artificial gain and the trust actually lost money, the Nunavut Trust had to contribute $42 million more than usual to Inuit organizations.
Since this was greater than the usual four per cent a year paid out, the additional money went to paying off some of the capital loans that NTI borrowed from the trust to maintain operations over the years.
“As long as the fund capital is not eroded,” the Nunavut Trust should return to “a more positive position,” Campbell said.
On the positive side, Campbell, who retires next March, said “we’re slowly working our way back up. It will probably continue to be slow.”