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NUNAVUT
Like most people and companies with investments, the Nunavut Trust had a tough year, but chief executive officer Andrew Campbell expects the trust will bounce back by 2015.

"In most markets, returns were negative in 2011, so we're trying to weather the storm," Campbell said.

Full details of the trust's 2011 performance won't be released until the fall.

The trust, which is tasked with preserving the federal government's Nunavut land claim compensation funds, is committed to paying out the traditional trust standard of four per cent per year, or about $40 million per year, to Nunavut Tunngavik Inc (NTI).

"With interest rates at two per cent and markets producing almost zero on the equity side of things, it's virtually impossible to make four per cent right now. But that will change. I don't think very much is going to happen until 2015. I think 2012 is going to be flat like 2011."

The lack of market growth has diminished the trust's capital.

As of October, the fund had $1.09 billion, $55 million less than at the end of 2010.

The stated goal of maintaining a capital of $1.17 billion isn't a big worry for Campbell, who has seen large fluctuations of $10-$20 million per day.

"When the markets peaked several years ago at 14,000, our market value was about $1.255 billion," he said, noting he couldn't say how the positive movement in the markets during the last few days of December affected the trust.

"Currently the markets are at about 12,000, so that puts us well over $1.14 billion. At year end, if we were at 11,200, we'd probably be at about $1.09 billion."

That doesn't mean the trust is sitting still. Fund managers are restructuring the portfolio, moving more money into inflation-protected income generators such as real estate and infrastructure. One example is a hydroelectric dam that generates power that is sold at regulated rates that raise with inflation.

"Like every other investor, we want projects that generate these types of cash flow, so it's very competitive out there," he said.

"There's a lot of demand for these projects right now."

Priority one is generating the money beneficiaries need.

NTI has dipped into the trust's capital over the years to a total of $160 million, and has been working to repay its debt. NTI added to the loan in 2010, but 2011 figures were not available.

"They've made good steps toward repaying portions of that debt. They still owe us about $85 million, so if that was paid back, we would be over our target.

"Because markets are volatile, one thing we agreed upon a long time ago was that if we made more money than they budgeted to spend, they would pay us back part of the loan. If markets do well going ahead, that $85 million could easily go to zero.

"If we don't make as much as they budgeted, we would lend them more money.

"The trick is making sure that balance doesn't continue to grow. We expect it will go up and down over time because they need a steady flow of cash to pay their bills, and we know the markets are going to go up and down."

While the Nunavut Trust does not directly invest in Nunavut, it does invest in Atuqtuarvik, which invests in Nunavut businesses.

The trust also owns shares in the North West Company and has bonds with the Nunavut Power Corporation.

Regardless of the investment choice, the priority is preserving the real buying power of the capital.

"We've been ahead of the target in other years, and now we're behind," he said. "On the other hand, markets around the world have been heavily suffering. We've weathered the storm well."

Campbell is currently preparing Fern Elliott, the trust's chief financial officer, to take over as chief executive officer when he retires, likely when he turns 66 in March 2013.

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