redefining active management yoonjai shin, cfa director, ci investment consulting
TRANSCRIPT
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Redefining Active Management
Yoonjai Shin, CFADirector, CI Investment Consulting
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• CI Investment Consulting team
• Redefining active management
• Market outlook
Agenda
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Yoonjai Shin, CFA
Director
Fund/manager analysisAsset allocationsCurrency strategy
Fund selectionProject management
Andrew AshworthAnalyst
Fund/manager analysisCash flow managementPerformance reporting
Lewis Harkes, CFA
Senior Analyst
Fund/manager analysisPerformance reporting
Alfred Lam, CFA
VP & Portfolio Manager
Investment strategy / Asset allocationsFund selection/ Currency strategy
Communications
Marchello HolditchSenior Analyst
Fund/manager analysis
CI Investment Consulting Team
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What do we manage?
$20 billion in assets under management
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Best Fund of Funds Award -2011
Best Fund of Funds Award -2012
Best Global Fixed Income Balanced Award -2012
Best Global Fixed Income Balanced Award -2013
Industry recognition
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• Bond return expectation is very low• Equity returns are more attractive but have high
volatility
Investors can either take more risks or demand from their portfolio manager to work harder
The new normal
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Redefining Active Management
Total return = Asset mix + Alpha + Market Beta + Currency – Tax – Fees
Optimize
Maximize Manage
Manage/
Reduce Minimize
Reduce
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Access to managers under one roof
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Expected Return %
Volatility
100i
40i6
0e
100e
PE expansion
.. . .
For illustration purposes only; there is no guarantee on results
. Gov’tBondsGIC
Solution for every investor
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Strong performance
2013* 20122011
PSS 40i60e 9.2 9.2 -2.9PS Balanced 8.3 8.1 -2.8Quotential Balanced Growth Portfolio 5.4 6.4 -4.5Fidelity Balanced Portfolio 5.0 8.1 -2.8Dynamic Edge Balanced Portfolio 5.0 6.0 -3.7AGF Elements Balanced Portfolio 4.6 6.8 -3.040% DEX, 60% TSX 1.9 5.2 -1.4
*May 31, 2013
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Why are we out-performing?
• Superior income allocation• Overweight US equity• Currency hedges did not cost us even though CAD has
depreciated in general• Strong performance from Cambridge and QV (PSS
only)
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Price-Earnings MultiplesBased on 12 Month Forward Operating Earnings
Bottom Up Earnings Based on CPMS (TSE) and IBES (S&P) Consensus
26 26
24 24
22 22
20 20
18 18
16 16
14 14
12 12
10 10
8 886 88 90 92 94 96 98 00 02 04 06 08 10 12 14
TSXS&P 500
Source: TD Securities
Overweight US
Outlook: US vs. Canada
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13Source: CIBC
-6%
-4%
-2%
0%
2%
4%
6%
07
:4
08
:3
09
:2
10
:1
10
:4
11
:3
12
:2
13
:1
13
:4
14
:3
US
Canada
Forecast
Real GDP Growth, Y/ Y % Chg
GDP growth forecast
2013 2014
US 2.0% 3.2%
Canada 1.6% 2.4%
Outlook: US vs. Canada
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-6%
-4%
-2%
0%
2%
4%
6%
2004 2008 2012
Fed Funds Rate
Equivalent stimulus impact (including QE)
Source: Rudebusch (FRBSF Economic Letter, 2010), Haver Analytics, Federal Reserve, CIBC
Outlook: continued monetary easing
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Government of Canada benchmark bond yields - 10 year
GRAPH PERIOD: 28 May 2012 - 28 May 2013
Source: Bank of Canada
Volatility in bond markets leading to tactical opportunities
Outlook: volatile bond markets
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USDCAD - PPP vs Actual
1.190
1.016
0.800
0.900
1.000
1.100
1.200
1.300
1.400
1.500
1.600
1.700
1986
1991
1996
2001
2006
2011
USDCAD - PPP
USDCAD - Actual
Canadian dollar is 17% overvalued based on Purchasing Power Parity
Source: Bloomberg
Outlook: Canadian dollar