the greystone strategist€¦ · 3 real estate returns are the ipd all property index up to its...

THE POWER OF DISCIPLINED INVESTING®

The Greystone Strategist

Spring 2018

Greystone.ca

300 Park Centre • 1230 Blackfoot Drive

Regina • Saskatchewan • Canada • S4S 7G4

Telephone: (306) 779-6400

Toll-Free: 1-800-213-4286

Suite 1907 • 201 Portage Avenue

Winnipeg • Manitoba • Canada • R3B 3K6

Telephone: (204) 956-1399

Toll-Free: 1-877-872-7686

Suite 4510 • 77 King Street West

TD North Tower

Toronto • Ontario • Canada • M5K 1J3

Telephone: (416) 309-2190

Suite 1, 12/F

International Commerce Centre

1 Austin Road West, Kowloon

Hong Kong

The Greystone Strategist | Spring 2018 2

Spring Overview

Figure 1: Asset Class Total Returns

Benchmarks

S&P/TSX Infrastructure2 Custom Mortgage Benchmark4

MSCI World (Net)1 IPD All Property3 FTSE TMX Cda 91 Day T-bill

MSCI Emerging Markets (Net)1 FTSE TMX Cda Universe

FTSE TMX Cda LT Overall

1 MSCI, net of foreign dividend withholding taxes.2 Infrastructure returns are the Preqin Infrastructure Quarterly Index up to Q3 2017 and are Greystone Infrastructure Fund (Canada) LP returns thereafter.3 Real estate returns are the IPD All Property Index up to its most recent publication, Q4 2017 and are Greystone Real Estate Fund Inc. returns thereafter.4 Custom Mortgage Benchmark: FTSE TMX Cda Short Term Overall 60%, FTSE TMX Cda Mid Term Overall 40% + 0.5% per annum.

UPDATE

• As the 10-year anniversary of the global financial crisis and subsequent recovery approaches, we are frequently asked if it is time to turn defensive with multi-asset portfolios. Our conclusion is “not yet.” Consensus views that the next recession is at least one or two years away appear reasonable, given positive leading indicators and a penchant for central banks to default into accommodative postures at signs of uncertainty. We think there is also a chance that the cycle extends beyond consensus views to three years or more.

• The global economy is benefitting from sustained growth in the U.S. and China, as well as a turnaround in Europe. Notable is the recovery in Japan, which recently posted eight quarters of positive economic growth for the first time in 20 years. China’s consumer is successfully taking over from fixed-asset investment and the export sector as the engine of the economy. This is a structural shift that we believe will create new opportunities for investors who can access companies exposed to the burgeoning middleclass. While perhaps mistimed, the U.S. tax cut is providing a late cycle boost to an already robust economy. Forecasting agencies are responding and continue to revise upwards their GDP growth outlooks.

• The recent rise in volatility appears to us as a healthy correction and we do not believe it will derail synchronous global growth or the path of central bank normalization. We remain constructive on equities as earnings growth momentum remains strong and is supported by underlying fundamentals.

• Unemployment rates in the U.S., Germany, Japan and Canada are all near pre-crisis lows, indicating capacity constraints may be looming. Central banks are also removing monetary stimulus with the U.S. Federal Reserve taking the lead. We believe that global central banks will continue to follow. There is also the chance that deglobalization and trade wars increase consumer prices and interest rates in the long run.

• We are conscious of the fact that unintended disruptions often occur when the rate structure moves higher than expected. While the growth outlook is strong, we believe a continued focus on risk management is important as financial assets are exposed to shifting landscapes. The first quarter of 2018 was a reminder of financial asset volatility, with negative local currency returns across equity regions.


Spring Overview

Figure 2: Consensus GDP Estimates Increasing

1.6

1.7

1.8

1.9

2

2.1

2.2

2.3

Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18

2018 G8 GDP Estimates 2019 G8 GDP Estimates

Source: Bloomberg.

Figure 3: CBOE Market Volatility Index

0

10

20

30

40

50

60

70

80

90

Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18

VIX

Source: Bloomberg.

• In the upcoming quarters, we believe investors should begin the process of fortifying their portfolios and reducing unstable longer-term risks. Our risk management focus within equity portfolios is to ensure stock specific factors dominate active returns in order to minimize shifting macro risks. We believe that portfolios constructed with companies that demonstrate business momentum from a diverse set of drivers will have a better opportunity to weather bouts of market volatility, regime shifts in the equity market, and changes in the business cycle. From a regional allocation perspective, we are biased to an equal overweight in the U.S. and international markets with neutral positioning in Canadian equities.

• In multi-asset portfolios, the right sizing of risks equates to a trimmed equity overweight combined with cautious corporate bond, high yield and global credit exposures. We believe that equities are a better source of return as they provide an opportunity to participate in late cycle growth. Conversely, corporate bonds offer lower premiums and future return potential but are still exposed to market downturns, particularly as spreads are tight and corporate indebtedness rises. Recent years have witnessed a trend towards greater credit risk within fixed income programs in order to enhance yield or active returns.

• Reducing this credit risk can be accomplished, while still achieving yield enhancement, by rotating into high-quality secured debt found within private debt and mortgage markets. From an interest rate risk perspective, we are positioning fixed income portfolios with a defensive tilt to protect against rising interest rates.

• Our real estate and infrastructure views also reflect a bias for quality assets that are well suited for the later stages of an economic expansion. In our real asset portfolios, we have focused on investments with sustainable cash flows and high credit quality. For real estate, we have sought acquisitions where demand is supported by robust demographic trends and stable underlying fundamentals. We recommend vigilance for real estate strategies that employ high degrees of leverage, as this tends to increase equity market correlations at times when diversification is most needed. We believe that a global lens for infrastructure continues to provide flexibility to navigate sector and geographic positioning, particularly if global protectionist sentiment continues. While prices are high across asset classes, we believe the relative value of real assets is attractive compared to stocks and bonds.

Market volatility returned in Q1


Canadian Short-Term

Rates of Return Periods ended March 31, 2018 (Annualized Compound C$)

(%) Q1-2018 1 Year 3 Years 5 Years 10 Years

FTSE TMX Canada 91 Day T-Bill Index 0.3 0.8 0.6 0.7 0.9

Figure 4: Canadian Core CPI YOY

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Apr-12 Apr-15 Apr-18

%

Source: Statistics Canada. Bloomberg.

Figure 5: Canadian Dollars to U.S. Dollars

0.70

0.72

0.74

0.76

0.78

0.80

0.82

0.84

Apr-17 Jul-17 Oct-17 Jan-18

Source: Bloomberg.

Figure 6: Canadian 3 Month Banker’s Acceptance Yield vs.Canadian 3 Month Treasury Yield

0.0

0.5

1.0

1.5

2.0

Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17

%

Canadian 3 Month Banker's Yield Canadian 3 Month Tresury Yield

Source: Bloomberg.

UPDATE

• The Bank of Canada (“BoC”) increased the overnight rate by 25 basis points (bps) to start the quarter. The market’s implied probability for 2018 rate hikes fell to two for the year, following a cautious tone in the subsequent March interest rate announcement from the BoC. This contributed to a softer Canadian dollar against most global currencies.

• The U.S. Federal Reserve (“Fed”) had its first meeting under Chair Jerome Powell and delivered a muted announcement with few changes to future expectations. We are observing additional changes to voting members within both the Fed and European Central Bank (“ECB”) for 2018. Going forward, there is a potential for membership in both bodies to have a higher bias to interest rates.

• U.S. funding markets have seen a sharp spike in the differential between the London Interbank Offer Rate (“LIBOR”) and the Overnight Indexed Swap rate (“OIS”). The spread has historically been approximately 10 bps and moved close to 60 bps by quarter end.1 In the past, this spread has been used to measure the health in the banking system, resulting in significant market attention to the recent move. Technical issues explaining the shift include: an increase in the supply of U.S. Treasuries; recent money-market reform that has shifted demand for corporate paper; and side-effects of the U.S. tax bill on the borrowing costs for U.S. branches of foreign banks. While this may tighten financial conditions, we do not believe the wider spread reflects stress in the banking sector.

• Higher North American inflation levels contrasted against softer economic data prints. U.S. core inflation as measured by personal consumption expenditure (“PCE”) increased to 1.6%1 year over year. More surprising was an average of 2.0%1 for the BoC’s three preferred measures of core inflation. While we acknowledge the impact of transitory effects and minimum wage increases, we do believe markets have underappreciated the potential for inflation rates reaching and surpassing long-term central bank targets.

• Value continues to be derived by overweighting banker acceptances and floating-rate notes while underweighting treasury bills. Provincial Treasury-Bills have also recently demonstrated a better yield opportunity versus Government of Canada issuance.

1 Bloomberg, Wall Street Journal.

WATCH FOR... ■ Future interest rate bias of new members to the U.S. Fed and ECB

■ Direction of LIBOR-OIS spread to confirm financial system stability




FTSE TMX Canada Universe Bond Index 0.1 1.4 1.2 2.9 4.4

Canadian Bonds

Figure 7: Canadian 10-Year Bond Yield

0

1

2

3

2012 2013 2014 2015 2016 2017 2018

%

Source: Tullett Prebon Inofrmation, FactSet.

Figure 8: Canadian Corporate Option Adjusted Spread

0

100

200

300

400

500

600

Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17

Source: Bloomberg. Merill Lynch to June 30, 2017. Bloomberg Barclays thereafter.

WATCH FOR... ■ Outcome of Ontario provincial elections for future trajectory of budget balance

■ Core inflation measures to rise as base effects from 2017 fade away by mid-year

January 2012 - March 2018

UPDATE

• Seasonal factors have appeared to replay the trend from recent years with Q1 economic data releases missing expectations. Canadian bonds ended the quarter with a slightly positive return as yields fell in response to sluggish data. U.S. fixed income investors did not fare as well with the benchmark Bloomberg U.S. Aggregate Index falling 1.5% for the quarter. The yield differential between U.S. Treasury Bonds over Government of Canada (“GoC”) bonds has widened after closing in the latter half of 2017.

• Provincial bonds struggled amid higher market volatility and the premium over GoC bonds widened over the quarter. The Ontario Liberal Party announced greater spending and a return to deficits in their final budget before summer elections. We are watching the outcome of the election as a change in leadership to the Progressive Conservative Party could potentially reduce deficits, reducing the spread for Ontario issuance.

• Corporate bonds also witnessed wider spreads to start the year. Most notable were struggles in longer dated pipelines and in banks. Both subgroups were impacted by underperformance of bonds lower in the capital structure, namely hybrid pipelines and non-variable contingent capital (“NVCC”) for banks. We would recommend a neutral exposure with respect to NVCC but maintain conviction on pipelines.

• With central banks continuing down a path of tighter policy and balance sheet unwind, we believe that tactical trading of credit and interest rate risk will increase in importance as a source of value-add. This will potentially contrast active sources of return for many fixed income investors who have benefitted from a structural credit overweight. Private debt markets can help facilitate this shift as certain segments still benefit from attractive spreads relative to similar risk public debt.

• Our current bias in portfolios reflects an assessment of technical levels for interest rates and credit spreads more than an expected shift in trajectory for economic growth. With yields falling over the quarter and spreads still near post financial crisis lows, we maintain a defensive posture with respect to primary fixed income risks.




Greystone Mortgage Benchmark* 0.3 0.1 1.3 2.6 4.8

* FTSE TMX Cda Mid Term Overall 40% + FTSE TMX Cda Short Term Overall 60% + 50bps per annum.

Commercial Mortgages

Figure 9: Commercial Mortgage Origination Activity

2529

40

48 49 48 4850

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017

Bill

ion

s ($

)

Source: CMLS Financial. As at Dec 31, 2017.

Figure 10: Commercial Mortgage Lenders

0

25

50

75

100

2010 2011 2012 2013 2014 2015 2016 2017

%

Bank Credit Union Life Insurance Company

National Housing Act Public/Private Investment Managers Commercial Mortgage Backed Securities

Unsecured Debt First Mortgage Bond Other

Source: CMLS Financial. As at Dec 31, 2017.

UPDATE

• According to CMLS Financial, commercial mortgage origination activity reached a record level of $50 billion in 2017. This is a 4.6% increase from the prior year. Banks continue to represent the largest component of the commercial lending market at 28.8%, followed by National Housing Act insured mortgages at 16.0% and private/public investment managers at 14.5%. We anticipate lending activity to be strong for core assets in major markets throughout 2018, whereas we expect there will be less lending capital available for non-strategic assets (i.e. power centres in secondary markets).

• The high level of lending capital in the mortgage market and strong overall real estate fundamentals resulted in spreads compressing over the quarter by five basis points for five-year and 10-year term mortgages. However, the resulting increase in bond yields negated the spread compression, which led to a stable absolute yield.

• The commercial mortgage market outperformed the provincial and corporate bond markets for the quarter. This was a result of spreads increasing within the traditional fixed income space. We continue to advocate for the diversification benefits commercial mortgages have within a balanced portfolio.

• Lenders continue to remain disciplined in their underwriting process. Given the capitalization rate compression in some major markets, the underlying property’s cash flow generation (i.e. debt service coverage) and stability of the tenant roster are important considerations when determining the appropriate loan to value (“LTV”) ratio. As a result, we anticipate that some lenders in major markets, such as Vancouver, British Columbia, may underwrite to lower LTV ratios.

WATCH FOR... ■ Strong lending activity for core assets in major markets

■ Diversification benefits from commercial mortgages




MSCI EAFE (Net) Index 1.3 11.0 6.2 11.7 5.1

International Equity

Figure 11: MSCI EAFE Index (Canadian Dollars)

1,000

1,400

1,800

2,200

2,600

2012 2013 2014 2015 2016 2017

Source: MSCI. FactSet.

Figure 12: MSCI EAFE Earnings Outlook

10

11

12

13

14

130

140

150

160

170

180

2015 2016 2017

%C$

EPS 12 Month Fwd LHS EBIT Margin RHS

Source: MSCI, FactSet.

UPDATE

• After a period of benign volatility in international stock markets, volatility returned in early February and again in March due to concerns that central banks will increase interest rates and an increase in trade risk. International markets were down in local terms across all sectors, but the depreciation in the Canadian dollar versus the euro and yen benefitted Canadian investors’ returns. The strong economic backdrop likely played a role in preventing a more sizable market correction. Among the worst performing markets was the U.K. as many companies face profit warnings due to Brexit uncertainty that continues to hang over the region’s equities.

• Supporting the strong global growth posted in 2017 is the synchronization in global GDP across both developed and emerging economies. Growth is firmly supported by industrial production in areas such as the U.S., the eurozone and Japan. In fact, Japan’s exports climbed to an all-time high, and both the eurozone and Japan experienced strong growth this past year. In the case of the eurozone, 2.5% was the highest growth achieved in the region over the past decade.

• Chinese growth has continued to be stronger than expected and was at 6.8% year over year for the fourth quarter of 2017. The fact that China has maintained high growth despite a renewed push by regulators to manage loan growth has eased some concerns regarding the country’s ability to grow out of the accumulated debt.

• Despite the strong economic environment and the health of corporate earnings, we think that market volatility may continue this year as the market adjusts to the maturing business cycle and the looming trade disruption raises market uncertainty. Earnings growth has been strong for international markets and is expected to be 21% over the next 12 months. We think the current environment is reasonably good and will likely continue to support the outperformance of cyclical versus defensive sectors, barring any escalated trade disruption.

WATCH FOR... ■ Possible supply disruptions due to heightened U.S.-China trade risk

■ Details regarding ongoing Brexit negotiations to materialize

April 2012 - March 2018




S&P 500 Index 2.1 10.2 11.4 18.8 12.0

U.S. Equity

Figure 14: S&P 500 Earnings & P/E Valuation NTM (Next 12 months)

120

135

150

165

14

15

16

17

18

19

Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18

$

P/

E

S&P 500 PE - LHS S&P 500 EPS - RHS

Source: Factset.

Figure 13: S&P 500 Index (U.S. Dollars)

900

1,200

1,500

1,800

2,100

2,400

2,700

2012 2013 2014 2015 2016 2017

Source: S&P. Factset.

UPDATE

• After a strong performance from U.S. stocks in 2017, the start to this year has been a lot more challenging. Volatility has picked up from last year’s extremely low levels as concerns regarding higher interest rates and trade disruptions have grabbed the headlines. Less attention has been paid to the fact that economic conditions continue to be healthy and corporate earnings are expected to see an acceleration in growth this year.

• The new Chair of the Federal Reserve, Jerome Powell, held his first FOMC meeting and commented on the continued strengthening of the economy, which spooked equity markets as concerns grew about the number of rate hikes this year. While higher rates are certainly a headwind for stocks, they still remain at historically low levels and increasing in response to what is currently a very healthy economy.

• President Trump’s focus on trade moved from NAFTA to China after a slew of announced tariff proposals was met with China’s own proposals. It is premature to say at this stage whether this will lead to a full blown trade war, as even these proposals have to go through a negotiation process. While any tariffs would be a headwind for affected industries, the current proposals are not likely to derail healthy U.S. GDP growth this year.

• Internet-related stocks came under pressure with Facebook garnering the most attention as lapses in privacy led to a significant correction in its stock price. Despite the headlines, Information Technology was still the best performing sector in Q1.

• As mentioned, corporate earnings remain healthy – they are currently at all-time highs and are expected to move higher. The move lower in stock prices has been solely a function of lower valuation. S&P 500 valuation levels are now much closer to historical averages, yet earnings growth expectations are very much above average.

WATCH FOR... ■ Q1-2018 earnings announcements and the positive impact of lower corporate

tax rates

■ Whether market leadership will continue to be driven by Information Technology stocks


Despite volatility impacting valuation, earnings expectations moved higher.




S&P/TSX Composite Index -4.5 1.7 4.1 6.9 4.5

Canadian Equity

Figure 15: S&P/TSX Composite Index (Canadian Dollars)

10,000

12,000

14,000

16,000

18,000

2012 2013 2014 2015 2016 2017

Source: S&P, FactSet.

Figure 16: Combined Index Weight of Pipelines, Telecommunications, Utilities, REITs

0

5

10

15

20

S&P/TSX S&P 500 MSCI EAFE

%

Source: Factset, MSCI, S&P.

UPDATE

• Canadian equities pulled back alongside other global equity markets as volatility levels picked up. Energy and interest rate sensitive stocks were the main culprits; however, stocks in most sectors saw negative returns.

• Rising rates have been and will continue to be a focus going forward. While the TSX has good exposure to sectors that, in theory, should benefit from higher interest rates (i.e. Financials), it also has significant exposure to sectors that are hurt by them. Pipeline, telecommunication and utility stocks all underperformed the broader market during the quarter. Add in REITs, and the TSX has greater exposure to interest rate sensitive stocks than other major equity markets.

• NAFTA continues to be an overhang for stocks despite increased activity in negotiations between the three countries. Resolution could come as early as April or May, which is before the Mexican elections, and a positive resolution (continuation of NAFTA with some concessions for the U.S.) may be a boost for Canadian equities.

• Supply and demand dynamics for crude oil are much closer to equilibrium. In fact, prices moved up in Q1 with U.S. inventory levels now below their five-year average. Western Canadian Select, the Canadian heavy oil benchmark, continues to trade at a wide discount to West Texas Intermediate (U.S. light oil benchmark). However, oil producers are hopeful that delivery by rail can provide temporary relief for constrained pipeline capacity.

• Despite some of the headwinds facing Canadian stocks, the TSX is trading at reasonable valuation levels (below that of the S&P 500 in the U.S.) and growth is expected to push earnings to an all-time high by the end of the year. Markets are expected to remain volatile and, as such, an active approach should be favoured.

WATCH FOR... ■ Canadian stocks’ reaction to a resolution of NAFTA negotiations

■ Continued pressure on interest rate sensitive stocks


Interest Rate Sensitive: TSX has double the exposure compared to

other major indexes


Rates of Return Periods ended December 31, 2017 (Annualized Compound C$)


IPD All Property Index* 2.7 7.2 7.0 7.7 8.1

* Most recently reported period.

Real Estate

UPDATE

• The exit of Sears Canada (“Sears”) has caused the retail national average vacancy rate to rise by 1.8% to end the year at 6.2%.1 Given Sears represented approximately 2.5% of the Canadian retail inventory,2 the negative impact to vacancy rates is actually well within expectations. While secondary and tertiary markets may have longer lease-up periods for the Sears vacancy, we are seeing significant tenant demand within major markets for the Sears space at higher rental rates. Depending on the location, leasing strategies may include redemising the store footprint to accommodate multiple tenants, redeveloping the area into new uses such as food halls or entertainment, and intensifying the existing site by adding residential density.

• Excluding the impact of Sears, we are seeing strong leasing demand within the market as retailers continue to be attracted to the stable Canadian economy and the high disposable income of the Canadian consumer. 2017 Canadian retail sales grew 6.7% over the prior year, representing a 20-year high.3 The market is also benefitting from more international brands coming to Canada, as 50 new international retailers opened locations in Canada over the past year, which is an increase from 21 in 2016.3

• Large urban shopping centres nationwide are experiencing strong growth in annual sales per square foot, with the top 20 malls exceeding $850 sales per square foot.4 Canada’s leading malls remain highly productive because of their concentrated ownership among institutional investors who are committed to creating a more entertaining and unique shopping experience. This is achieved through ongoing and strategic capital investment, adjustments to tenant mix and due to Canada’s relatively lower retail density (i.e. square feet per capita). Overall, the retail outlook for 2018 is positive with store openings expected to exceed store closures. Store openings will likely be led by the food industry, while global retailers are expected to continue to expand into Canada over time.5

1 CBRE Limited.2 Scotiabank.3 Retail Insider.4 Retail Council of Canada.5 JLL.

WATCH FOR... ■ International retailers increasingly attracted to the Canadian market

■ Large urban shopping centres continuing to exhibit strong sales productivity

Figure 18: Forecasted Net Store Openings in 2018

-3500 -2500 -1500 -500 500 1500 2500 3500

Fashion/Apparel

Department Stores

Superstores/Wholesale Clubs

Consumer Durables

Cosmetics/Pharmacies

Supermarkets

Convenience Stores

Discount/Dollar Stores

Restaurants/Fast Food

Source: IHL Group, JLL.

Figure 17: Top Shopping Malls in Canada by Sales Per Square FootRank Mall Name City Province Sales Per Sq Ft

1 Yorkdale Shopping Centre Toronto Ontario $1,653

2 Oakridge Shopping Centre Vancouver British Columbia $1,579

3 CF Pacific Centre Vancouver British Columbia $1,531

4 CF Toronto Eaton Centre Toronto Ontario $1,528

5 Southgate Centre Edmonton Alberta $1,147

6 CF Chinook Centre Calgary Alberta $1,075

7 Square One Shopping Centre Mississauga Ontario $1,064

8 Metropolis at Metrotown Burnaby British Columbia $1,031

9 CF Rideau Centre Ottawa Ontario $987

10 CF Sherway Gardens Toronto Ontario $979

11 CF Fairview Mall Toronto Ontario $956

12 CF Richmond Centre Richmond British Columbia $937

Source: Retail Council of Canada.


Infrastructure

Rates of Return Periods ended March 31, 2018 (Annualized Compound US$)


Infrastructure Fund Benchmark (in US$) * 1.9 8.0 8.0 n/a n/a

* Current benchmark is 8% gross return rolling over four year period.

Figure 19: Global Unlisted Infrastructure Fundraising 2007 to Q4-17

0

5

10

15

20

25

30

35

40

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Nu

mb

er o

f Fu

nd

s

Fun

d V

alu

e (U

SD

bill

ion

)

Aggregate Fund Value Number of Closed Funds

Source: Fundraising Round-Up 4Q17: Another Strong Year, But 2018 May Falter, Infra-Deals, 2017.

Figure 20: Sector Activity by Value

23%

33%12%

6%

14%

12%21%

41%

13%

3%

11%

11%

North America

Europe

Latin America & Caribbean

Middle East & Africa

Asia

Australasia

2016

2017

Source: Inframation Deals FY17 Project Finance League Table and Trend Report, Infra-Deals, 2017.

UPDATE

• Fundraising for infrastructure has reached record levels in recent years. Unlisted infrastructure funds raised a total of US$53.6 billion in 2017, US$2.2 billion shy of the US$55.8 billion secured in 2016. With an unprecedented volume of capital available, competition for assets will continue to increase, compelling investment managers to move away from traditional infrastructure assets and seek assets with infrastructure-like characteristics.1

• Transactions in Europe represented approximately 41% of total deal value globally in 2017, an increase from 33% in 2016. Brownfield transactions accounted for 49% of transaction value in Europe, an increase of 9% from 2016.2 Much of the growth has been powered by debt funds, capital market bonds and a healthy supply of equity from institutional investors. In particular, the U.K. remains Europe’s most active Brownfield market with an increase of 101% in deal value, from €14.9 billion in 2016 to €30.0 billion in 2017.3 The U.S. and Canada were the second largest regions for Brownfield projects by deal value in 2017, with power representing the most active sector. North American loan and capital market financings for Brownfield projects increased 76% and 44% in value, respectively, reflecting investors’ confidence in the core infrastructure market.4

• Alberta continues to be the stronghold for Canada’s power generation market. The Renewable Electricity Program (“REP”) is intended to encourage the development of 5,000 MW of renewable electricity generation capacity connected to the Alberta grid between now and 2030. The Alberta Electric System Operator, responsible for implementing and administering the program, expects to procure up to 300 MW of renewable energy projects that must include a 15-20% equity ownership from indigenous groups through the second phase of REP, prioritizing indigenous group involvement.5

1 Fundraising Round-Up 4Q17: Another Strong Year, But 2018 May Falter, Infra-Deals, 2017.2 Inframation Deals FY17 Project Finance League Table and Trend Report, Infra-Deals, 2017.3 Infrastructure Investors Forum Europe, Infra-Deals, 2018.4 Infrastructure Investors Forum America, Infra-Deals, 2018.5 Details Emerge on Alberta’s Follow-on 700MW Renewable Tender, Infra-Deals, 2017.6 Outlook 2018: M&A and Refis to Drive Power and Energy Deals, Infra-Deals, 20177 Outlook 2018: European Brownfield Multiples to Reach New Highs, Infra-Deals, 2017.

WATCH FOR... ■ Continued high levels of M&A activity and refinancing in the U.S. and

Canadian power and energy sector as asset owners rebalance their portfolios and take advantage of the current borrower-friendly market. 6

■ Continued demand for European Brownfield infrastructure assets; with headwinds such as rising interest rates and political risk surrounding Brexit unlikely to deter investors. 7


Asset Class Rates of Return

Figure 21: Annual Compound C$ (Periods Ending March 31, 2018)

Total Returns (%) Annualized Rates of Return

Major Asset Class Indices & Greystone Pooled Funds* 1st Quarter YTD 1 Year 2 Years 3 Years 4 Years 5 Years

Balanced Funds

Greystone Balanced Fund 0.8 0.8 8.2 9.7 5.3 8.1 9.5

Balanced Benchmark1 -0.4 -0.4 4.9 8.1 4.9 6.9 8.1

Greystone Balanced Plus Fund 0.8 0.8 8.3 9.8 5.5 n/a n/a

Balanced Plus Fund Benchmark2 0.2 0.2 5.2 8.3 5.0 n/a n/a

Fixed Income Funds

Greystone Canadian Fixed Income Fund 0.1 0.1 1.7 2.0 1.5 3.4 2.9

FTSE TMX Canada Universe Bond 0.1 0.1 1.4 1.4 1.2 3.4 2.9

Greystone Long Bond Fund 0.0 0.0 5.4 3.8 2.4 6.3 5.0

FTSE TMX Canada Long Term Overall Bond 0.0 0.0 5.1 3.4 2.0 6.2 4.7

Greystone High Yield Bond Fund 0.4 0.4 2.5 7.7 4.3 4.3 5.0

High Yield Fund Benchmark3 -1.0 -1.0 3.3 12.0 5.8 4.6 5.3

Greystone Real Return Bond Fund 1.4 1.4 3.6 1.6 0.3 3.7 1.6

FTSE TMX Canada Real Return Bond 1.4 1.4 3.4 1.4 0.2 3.6 1.6

Greystone Bond Plus Fund 0.3 0.3 2.4 2.6 2.1 n/a n/a

FTSE TMX Canada Universe Bond 0.1 0.1 1.4 1.4 1.2 n/a n/a

Greystone Corporate Bond Fund 0.5 0.5 2.8 3.7 2.8 3.9 3.7

FTSE TMX Canada All Corporate Bond 0.3 0.3 1.8 2.9 2.2 3.7 3.4

Greystone Short Bond Fund 0.3 0.3 0.2 0.9 1.0 n/a n/a

FTSE TMX Canada Short Term Overall Bond 0.2 0.2 -0.4 0.4 0.7 n/a n/a

Greystone Short Bond Plus Fund 0.6 0.6 1.6 2.0 2.0 n/a n/a

FTSE TMX Canada Short Term Overall Bond 0.2 0.2 -0.4 0.4 0.7 n/a n/a

Greystone Money Market Fund 0.3 0.3 1.0 0.8 0.8 0.9 0.9

FTSE TMX Canada 91 Day T-Bill 0.3 0.3 0.8 0.6 0.6 0.7 0.7

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses.1 Current Balanced Fund Benchmark: FTSE TMX Cda 91 Day T-Bill 3%, FTSE TMX Cda Universe 37%, S&P/TSX Composite 24%, S&P 500 18%, MSCI EAFE (Net) 18%. Prior to April 1, 2014 benchmark was FTSE TMX Cda 91 Day T-Bill 3%, FTSE TMX Cda Universe 37%, S&P/TSX Composite 35%, S&P 500 12.5%, MSCI EAFE (Net) 12.5%. 2 Please refer to the Disclosures page for the benchmark details. 3 Current High Yield Fund Benchmark: 50% ML US HY Master II Trust Hedge to CAD + 50% ML CAD and USD HY Canadian Issuers Hedge to CAD.






Duration Funds

Greystone 3 Year Duration Fund** 0.2 0.2 -0.1 0.6 0.9 1.8 1.8

Greystone 8 Year Duration Fund** 0.0 0.0 0.8 1.4 1.5 4.2 3.5

Greystone 15 Year Duration Fund** 0.3 0.3 6.2 4.2 2.8 7.4 5.6

Greystone 20+ Year Duration Fund** -0.4 -0.4 10.2 5.4 2.7 10.2 6.6

Canadian Equity Funds

Greystone Canadian Equity Fund -2.5 -2.5 4.2 8.3 1.7 4.3 7.3

S&P/TSX Composite -4.5 -4.5 1.7 9.8 4.1 4.8 6.9

Greystone Canadian Equity Income & Growth Fund -5.7 -5.7 1.5 6.5 2.0 3.0 5.4

Canadian I&G Fund Benchmark4 (Primary) -4.8 -4.8 1.0 9.0 4.1 5.1 6.9

S&P/TSX Composite (Secondary) -4.5 -4.5 1.7 9.8 4.1 4.8 6.9

Greystone Canadian Equity Small Cap Fund -12.1 -12.1 -5.6 9.8 2.6 -0.1 5.7

S&P/TSX SmallCap -7.7 -7.7 -6.6 10.0 4.5 0.7 3.5

U.S. Equity Funds

Greystone U.S. Equity Fund 2.9 2.9 16.1 18.4 12.8 17.7 20.5

Greystone U.S. Income & Growth Fund 2.4 2.4 12.2 15.9 12.3 17.2 19.0

S&P 500 2.1 2.1 10.2 15.4 11.4 15.7 18.8

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses.** Name change effective January 1, 2018. 4 Current Canadian I&G Fund Benchmark: S&P/TSX Capped Composite 80%, Telecommunication Services 5%, Utilities 5%, Oil & Gas Storage & Transportation 5%, Equity Real Estate Investment Trusts 5%. Prior to April 1, 2014 the benchmark was S&P/TSX Capped Composite 70%, Financials 10%, Telecommunication Services 10%, Utilities 10%.






International Equity Funds5

Greystone International Equity Fund 3.9 3.9 18.1 18.2 9.2 12.7 15.1

MSCI EAFE (Net) 1.3 1.3 11.0 13.0 6.2 8.0 11.7

Greystone International Income & Growth Fund 3.4 3.4 18.7 15.5 9.0 10.0 13.5

International I&G Fund Benchmark6 (Primary) 1.3 1.3 11.0 13.0 5.2 6.5 11.0

MSCI EAFE (Net) (Secondary) 1.3 1.3 11.0 13.0 6.2 8.0 11.7

Greystone China Income & Growth 4.9 4.9 47.9 37.3 19.3 n/a n/a

CSI 300 (Net) 3.0 3.0 21.6 13.6 0.5 n/a n/a

Global Equity Funds5

Greystone Global Equity Fund 4.1 4.1 16.3 16.9 10.9 15.6 n/a

Greystone Global Income & Growth Fund 2.3 2.3 15.2 15.8 10.6 13.2 15.7

MSCI World (Net) 1.6 1.6 9.8 14.0 8.6 11.7 15.1

Real Estate and Mortgages

Greystone Real Estate Fund Inc. 2.1 2.1 12.0 10.0 8.7 7.9 8.4

Greystone Real Estate LP Fund 1.2 1.2 9.8 7.4 5.8 n/a n/a

Greystone Mortgage Fund 1.1 1.1 3.9 3.8 3.6 4.6 4.4

Mortgage Fund Benchmark7 0.3 0.3 0.1 1.0 1.3 2.7 2.6

Infrastructure

Greystone Infrastructure Fund (Canada) LP** -0.5 -0.5 15.9 24.1 30.2 n/a n/a

Infrastructure Fund Benchmark8 1.9 1.9 8.0 8.0 8.0 n/a n/a

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses. ** The Greystone Infrastructure Fund (Canada) LP and the Greystone Infrastructure Fund (Canada) LP II (the “Feeder Funds”) invests in units of a master fund, the Greystone Infrastructure Fund (Global) LP (the “Master Fund”). The Master Fund invests in the allowable infrastructure investments outlined in its Investment Policy. Master: The Master Fund is priced monthly in USD and includes any working capital within the Master Fund, as well as the current USD value of the most recent valuation of the underlying investments. Valuations of the investments held in the Master Fund are done semi-annually in the local currency of the investment. Interim valuations may be done as the result of special situations. At each monthly pricing period, the investment valuations are converted to USD at the rate in effect at the pricing date. Feeder: The Feeder Funds are priced monthly in U.S. dollars and reported to clients in Canadian dollars and include working capital held within the Feeder Funds as well as the updated monthly value of the units held in the Master Fund. The value of the Feeder Funds’ investment in the Master Fund is determined based on the updated monthly price of the Master Fund. 5 International Equity and Global Equity funds and MSCI EAFE and World indices performance is net of foreign dividend withholding taxes. 6 Current International I&G Fund Benchmark: MSCI EAFE (Net). From April 1, 2008 to June 30, 2015 the benchmark was MSCI EAFE High Dividend Yield (Net). 7 Current Mortgage Fund Benchmark: FTSE TMX Canada Short Term Overall 60%, FTSE TMX Canada Mid Term Overall 40% + 0.5% per annum. From October 1, 2007 to September 30, 2009 the benchmark was FTSE TMX Canada Conventional Mortgage. 8 Infrastructure Fund Benchmark is an absolute gross return of 8% USD over a rolling four year period for comparison purposes.






Target Date Funds

Greystone Retirement Plus Fund 1.6 1.6 7.2 7.7 4.9 n/a n/a

Retirement Plus Benchmark9 0.7 0.7 4.7 7.0 4.3 n/a n/a

Greystone 2020 Target Date Plus Fund 1.5 1.5 7.0 7.7 4.9 n/a n/a

2020 Target Date Plus Benchmark9 0.6 0.6 4.6 7.0 4.3 n/a n/a















* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses. 9 Target Date Plus Fund benchmarks are determined on a quarterly basis based on the strategic asset mix for the subsequent quarter. Details regarding changes to the Target Date Funds benchmark compositions is available upon request.


Glossary of TermsAbsorption Absorption: The rate at which available properties are sold in a specific real estate market in a given time period.

Bearish/Bullish Bearish: A sentiment that the performance of the market, a specific security, or an industry will fall moving forward.Bullish: A sentiment that the performance of the market, a specific security, or an industry will rise moving forward.

BoC The Bank of Canada: The Bank of Canada is the central bank of Canada. (Related terms - See central bank rate and monetary policy.)

BoE The Bank of England: The Bank of England is the central bank of the United Kingdom. (Related terms - See central bank rate and monetary policy.)

BoJ The Bank of Japan: The Bank of Japan is the central bank of Japan. (Related terms - See central bank rate and monetary policy.)

Bond market rally/sell-off Bond market rally: A period of sustained increases in the price of bonds, typically following a period of flat or declining prices.Bond market sell-off: A period of increased selling of bonds, which leads to decreases in the price of bonds and yields increasing.

Bond yield curve Yield curve: A line that plots the interest rates of bonds at a set point in time. The bonds have equal credit quality, but differing maturity dates.Steepening of the yield curve: An increase in the gap between the yields on short-term bonds and long-term bonds, which will make the curve appear steeper.Flattening of the yield curve: A decrease in the gap between the yields on short-term bonds and long-term bonds, which will make the curve appear flatter.Inverted yield curve: A situation in which a yield curve flattens to the point that short-term rates are higher than long-term rates. An inverted yield curve typically precedes a period of recession.

Bond yield Real yield: An investment return that has been adjusted to account for inflation.Nominal yield: Also referred to as the nominal rate, coupon yield, or coupon rate; it is the interest rate that a bond issuer is obligated to pay to the bond purchaser. This rate is fixed and applies to the life of the bond.Back-up in bond yields: A term for the movement in bond yields which makes bonds more expensive to issue. A back-up is characterized by an increase in bond yields and a decrease in price.

bps Basis points: One hundredth of one percent, used for describing small changes in figures such as interest rates.

Brownfield Brownfield: An infrastructure asset that is fully operational.

Cap rate Capitalization rate: A rate of return on a real estate investment property based on the expected income that the property will generate.

CBRE Limited CBRE Limited: A Fortune 500 and S&P 500 company headquartered in Los Angeles that is the world’s largest commercial real estate services firm. CBRE Limited offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.

Central bank rate – in U.S. Fed Funds rate, in Canada Overnight rate

Central bank rate: The rate of interest the central bank charges on the loans and advances to a commercial bank.Federal funds rate: The interest rate at which a depository institution lends funds maintained at the U.S. Federal Reserve to another depository institution overnight. The federal funds rate is generally only applicable to the most creditworthy institutions. Overnight rate: The interest rate at which a depository institution lends funds to another depository institution (short term) or the interest rate the central bank charges a financial institution to borrow money overnight. The overnight rate is the lowest available interest rate and, as such, it is only available to the most creditworthy institutions.

China’s City Tier System First Tier cities: Refers to China’s “Big Four” cities: Beijing, Shanghai, Shenzhen, and GuangzhouSecond Tier cities: Refers to capital cities of each province or coastal cities such as Tianjin, Chongqing, Chengdu, Wuhan, Xiamen; cities tend to be located primarily in Central ChinaThird Tier cities: Refers to mid-tier cities from more developed provinces and some cities within less developed provinces (mostly in central or western China); cities tend to lag behind first and second tier cities in terms of economic growth and development, although many of them are still considered to be very significant economically and historicallyFourth Tier cities: Refers to less developed cities from more developed provinces and more developed cities from less developed provinces; cities tend to represent the majority of China’s urban population and combined income


Class A Office Class A Office: The most prestigious commercial real estate buildings competing for premier office users with rents above average for the area.

CMHC Canadian Mortgage and Housing Corporation: A Crown corporation of the Government of Canada, through the 1944 National Housing Act.

CMLS Financial CMLS Financial: One of Canada’s largest independently owned mortgage companies, providing a wide range of commercial lending services, residential mortgages, and institutional services.

CMBS Commercial mortgage-back securities: A type of fixed-income security that is collateralized by commercial real estate loans.

Commercial mortgage Commercial mortgage: A mortgage loan that is secured by commercial property.

Commercial real estate Commercial real estate: Property that is used solely for business purposes, usually classified into the following categories: office, retail, industrial, multi-family, land and miscellaneous.

Consensus expectations Consensus expectations: A figure or prediction based on the combined estimates of the analysts covering a specific company, marketing or economic event. Common consensus expectations include earnings per share and gross domestic product.

Contagion Contagion: A situation where a shock in a particular economy or region spreads out and affects others. Contagion can cause economic crises or booms at a global level.

CRB Index Commodity Research Bureau Index: An index that measures the overall direction of commodity sectors. The CRB was designed to isolate and reveal the directional movement of prices in overall commodity trades.

Credit risk Credit risk: The risk that a borrower will default on any type of debt by failing to make required payments.

Credit spread Corporate credit spread: The difference in yield of investment grade corporate bond relative to a risk-free rate, usually measured in basis points (bps)High yield credit spread: The difference in yield of non-investment grade corporate bond relative to a risk-free rate, usually measured in basis points (bps) Option Adjusted Spread (OAS): The difference in yield of a corporate bond relative to a risk-free rate, which is adjusted to take into account an embedded option, usually measured in basis points (bps)

Cyclical/Defensive sectors Cyclical sectors: Sectors where performance will rise and fall with the stages of the business cycle. These sectors tend to perform well when the economy is in expansion, and poorly when the economy is in recession. Cyclical sectors include: Materials, Technology, and Industrials. Defensive sectors: Sectors that remain stable during various stages of the business cycle. These sectors tend to perform better than the market during recessions and worse than the market during expansions. Defensive sectors include: Telecom, Utilities, and Consumer Staples.

DJIA The Dow Jones Industrial Average: The DJIA is a price-weighted average of 30 significant stocks traded on the NYSE and the NASDAQ.

Dovish/Hawkish Dovish: A sentiment that generally favours low interest rates in order to encourage growth within an economy. Hawkish: A sentiment that generally favours relatively high interest rates in order to keep inflation in check. (Related term - See Monetary Policy.)

Duration Duration: Degree of sensitivity of the market value of a fixed income instrument (e.g. mortgage, bond) to changes in interest rates.

Earnings Analysts’ earnings estimates: An estimate for a company’s future quarterly or annual earnings. Used in company valuation.Earnings per share (EPS): The portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability.

ECB The European Central Bank: The central bank of the European Union. (Related terms - See central bank rate and monetary policy.)

EU The European Union: A group of European countries that participates in the world economy as one economic unit and operates under one official currency, the euro.

Emerging markets Emerging markets: A nation’s economy that is progressing towards becoming advanced, as shown by some liquidity in local debt and equity markets and the existence of some form of market exchange and regulatory body.

Expansion/Recession Expansion: A period when business activity surges and gross domestic product expands until it reaches its peak.Recession: A period of significant decline in activity across the economy, lasting longer than a few months.


Fed U.S. Federal Reserve: The central bank of the United States. (Related terms - See central bank rate and monetary policy.)

Flight to quality Flight to quality: The action of investors moving their capital away from riskier investments to the safest possible investment vehicles.

FOMC The Federal Open Market Committee: The branch of the Federal Reserve Board that determines the direction of monetary policy.

G8 The Group of Eight: The G8 refers to the group of eight highly industrialized nations that hold annual meetings to foster consensus of global issues. Members: France, Germany, Italy, U.K., Japan, U.S., Canada, and Russia.

GDP Real gross domestic product: A macroeconomic measure of the value of economic output adjusted for inflation/deflation.Nominal gross domestic product: A macroeconomic measure of the value of economic output at current market prices.

GoC bond yield Government of Canada bond yield: The amount of return an investor will realize on a Government of Canada bond.

Greenfield Greenfield: An infrastructure asset under development (prior to being operational).

GTA Greater Toronto Area: The city of Toronto and the four regional municipalities that surround it: Durham, Halton, Peel, and York.

Hard/Soft landing Hard landing: An economic state wherein the economy is slowing down sharply or is tipped into outright recession after a period of rapid growth.Soft landing: A term used to describe a rate of growth high enough to avoid recession, but slow enough to avoid high inflation.

Headwind/Tailwind Headwind: A condition or situation that will make growth more difficult.Tailwind: A condition or situation that will help move growth higher.

High beta stocks/low beta stocks

High beta stocks: A stock with a market beta of greater than one, meaning that the security will be more volatile than the market.Low beta stocks: A stock with a market beta of less than one meaning that the security will be less volatile that the market.

IMF International Monetary Fund: The IMF is an international organization created for the purpose of promoting global monetary and exchange stability, facilitating the growth of international trade, and assisting in the establishment of multilateral system of payments for current transactions.

Inflation/Deflation Inflation: A general increase in prices and fall in the purchasing value of money.Core inflation: A measure of inflation that excludes items that face volatile price movements, such as energy and food products.Headline inflation: The raw inflation figure as reported through the Consumer Price Index.CPI: The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services such as transportation, food, and medical care.Core PCE: Core Personal Consumption Expenditures is a measure in the change of price of consumer goods and series excluding food and energy prices.Deflation: The reduction of the general level of prices in an economy.

IPD All Property Index Investment Property Databank All Property Index: The most common benchmark for Canadian real estate funds.

Leasing activity Leasing activity: Refers to both the expiry of existing leases and the new leases signed at a property.

LIBOR London Interbank Offered Rate: A benchmark rate that some of the world’s leading banks charge each other for short-term loans.

Market correction/Market pullback

Market correction: A reverse movement, usually negative of at least 10% in a stock, bond, commodity, or index to adjust for an overvaluation.Market pullback: A falling back of a price from its peak. This price movement might be seen as a brief reversal of the prevailing upward trend.

Margin Pressure Margin Pressure: A term for the effect of certain internal or market forces on a company’s operating, gross or net margins.

Market valuation Market valuation: The process of determining the current worth of the overall market.Market price-to-earnings (P/E) ratio: A market valuation technique that divides the total value of all the market’s constituents by their combined earnings. The resulting ratio gives insight into whether the market may be over or under priced.Cheap market valuation: A statement about the pricing of financial assets within a market. Cheap would imply a market P/E ratio lower that it has historically been, meaning that investors are paying less for each dollar of earnings than in the past.Expensive market valuation: A statement about the pricing of financial assets within a market. Expensive would imply a market P/E ratio higher than it has historically been, meaning that investors are paying more for each dollar of earnings than in the past.


Monetary policy Monetary policy: Monetary policy is used by a central bank of a country to control the circulation and value of a nation’s currency.Quantitative easing: A monetary policy in which a central bank purchases government or other securities from the market in order to lower interest rates and increase the money supply.Quantitative tightening: Tight monetary policy is a course of action undertaken by a central bank to constrict spending in an economy that is seen to be growing too fast, or to curb inflation when it is rising too quickly.

MSCI EAFE Index The MSCI EAFE Index: A stock market index designed to measure the equity market performance of developed markets outside of the U.S. and Canada. The acronym stands for Europe, Australasia and Far East.

MSCI World Index The MSCI World Index: A stock market index of over 1,600 global stocks, it is commonly used as a benchmark for world or global stock funds.

Multiples Multiples: A term for a measure of some aspect of a company’s financial position, determined by dividing one metric by another metric.

New construction New construction: Construction of entirely new structures and/or significant extensions to existing structures whether or not the site was previously occupied.

OECD Organisation for Economic Cooperation and Development: OECD is a group of 30 democratic countries that support free market economies; they discuss and develop economic and social policy.

Oil price Brent Oil: A major trading classification of sweet light crude oil, which serves as a major benchmark price of oil worldwide.Western Canadian Select (WCS): One of North America’s largest heavy crude oil streams used as a benchmark for emerging heavy, high acidic crudes. West Texas Intermediate Oil (WTI): WTI, also known as Texas light sweet, is a grade of oil used as a benchmark in oil pricing.

OPEC Organization of the Petroleum Exporting Countries: OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, with the hopes of avoiding fluctuations that may affect both oil purchasing and producing economies.

P/E Ratio Price-to-earnings ratio: A valuation ratio of a company’s current share price compared to its per-share earnings. (Related term - See market valuation.)

PBOC The People’s Bank of China: The central bank of the People’s Republic of China. (Related terms - See central bank rate and monetary policy.)

Purpose-built rental properties

Purpose-built rental properties: Multi-unit residential properties constructed for the purpose of renting out the units in the rental housing market; these properties include apartment buildings.

REITS Real Estate Investment Trust: A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

Rental rate Rental rate: A periodic charge per unit for the use of a property; the period may be a month, quarter or year.

Risk-on/Risk-off Risk-on/Risk-off: An investment setting in which price behavior responds to, and is driven by, changes in investor risk tolerance. Risk-on/Risk-off refers to changes in investment activity in response to global economic patterns. A risk-on situation occurs during a period of low perceived financial risk, thus encouraging investors to take on risk. A risk-off situation occurs during periods of high perceived financial risk, thus encouraging investors to reduce risk.

S&P 500 Index The S&P 500 Index: The S&P 500 is an American stock market index made up of the 500 largest companies by market capitalization, listed on the NYSE and NASDAQ.

S&P/TSX Index The S&P/TSX Index: An index of the stock prices of the largest companies on the Toronto Stock Exchange.

Sovereign credit risk Sovereign credit risk: The credit rating of a country or sovereign entity. This rating provides insight into the level of risk associated with a particular country.

Stock market volatility Stock market volatility: The vigorous fluctuation of share prices within the stock market.

TMX FTSE 91-day Treasury Bills

TMX FTSE 91-day Treasury Bills: A benchmark used to track the performance of Government of Canada Treasury Bills.

TMX FTSE Canada Bond Universe

TMX FTSE Canada Bond Universe: A benchmark which is designed to track the performance of the Canadian bond market.

Top-line revenue growth Top-line Revenue Growth: A reference to the growth in the gross sales or revenues of a company.

Vacancy rates Vacancy rate: A numerical value calculated as the percentage of all available units in a rental property that are vacant or unoccupied at a particular time.

World Bank World Bank: The World Bank is a United Nations international financial institution that provides loans to developing countries for capital programs.


This report is provided for informational purposes only, is not meant as investment advice and should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any predictions or projections made will occur. Past performance is not indicative of future results.

Commentary contained in this report reflects the opinions of Greystone Managed Investments Inc. at the date of the report. It was developed from sources that Greystone believes to be reliable. Greystone does not guarantee the accuracy or completeness of such information. Greystone’s opinions and viewpoints may change over time. Likewise, holdings may change by the time you receive this report. The securities discussed do not represent all of the portfolio’s holdings and may represent only a small percentage of a strategy’s holdings.

Figures shown in this report are in Canadian dollars except as noted, and may be subject to rounding error. Returns are gross of investment management fees.

Greystone claims compliance with the Global Investment Performance Standards (GIPS®). A GIPS® compliant presentation is available upon request. Greystone has been independently verified for the period January 1, 2000 to December 31, 2016. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS® standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS® standards. Verification does not ensure the accuracy of any specific composite.

Indices & BenchmarksCurrent benchmark weights and indexes are noted on each asset class page. Benchmark returns reflect any index and weighting changes made since inception. Index returns include reinvestment of dividends, if applicable, but not the deduction of any fees or expenses, which would reduce returns.Indices used in Greystone reporting are copyrighted by and used with the permission of their respective providers: Standard & Poors, TMX Inc., Russell Investments, Merrill Lynch & Co. Inc., BMO Capital Markets, Investment Property Databank Limited; ©IPD 2015 and its licensors (IPD), and Morgan Stanley Capital International (MSCI). Index use will vary by Greystone client and not all indices or index providers may be cited in this report.

MSCI disclosure: neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing, or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

For clients with benchmarks that blend two or more indices (e.g. FTSE TMX Canada 91 Day T-Bill 3%, FTSE TMX Canada Universe Bond 37%, S&P/TSX Composite 35%, S&P 500 Composite 12.5%, MSCI EAFE (Net) 12.5%): Our reporting system rebalances your benchmark to its stated asset mix on a daily basis. Consequently, there may be discrepancies between benchmark returns presented in this report and those calculated with a monthly or quarterly rebalancing.

For clients who hold fixed income: FTSE TMX Global Debt Capital Markets Inc. is the source for credit ratings. If a particular security is not identified by FTSE TMX Global Debt Capital Markets Inc., an equivalent, recognized, independent rating agency is used. Greystone does not rate securities.

FTSE TMX Global Debt Capital Markets Inc(“FTDCM”), FTSE International Limited (“FTSE”), the London Stock Exchange Group companies (the “Exchange”) or TSX INC. (“TSX” and together with FTDCM, FTSE

and the Exchange, the “Licensor Parties”). The Licensor Parties make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE TMX Canada Universe Bond and sub-indices (“the Index”) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTDCM and all copyright in the Index values and constituent lists vests in FTDCM. The Licensor Parties shall not be liable (whether in negligence or otherwise) to any person for any error in the Index and the Licensor Parties shall not be under any obligation to advise any person of any error therein.

Current Balanced Plus Fund benchmark: FTSE TMX Canada Universe Bond 24%, Mortgage Fund benchmark 8%, S&P/TSX Composite 21.5%, S&P 500 10.7%, MSCI EAFE (Net) 10.7%, MSCI World (Net) 10.7%, IPD All Property 10%, Infrastructure benchmark 4.4%. History:

• Dec 13, 2016 – Jan 24, 2017: FTSE TMX Canada Universe Bond 24.6%, Mortgage Fund benchmark 8%, S&P/TSX Composite 22%, S&P 500 11%, MSCI EAFE (Net) 11%, MSCI World (Net) 11%, IPD All Property 10%, Infrastructure benchmark 2.4%.

• Apr 1, 2016 – Dec 12, 2016: FTSE TMX Canada Universe Bond 25.4%, Mortgage Fund benchmark 8%, S&P/TSX Composite 22.7%, S&P 500 11.3%, MSCI EAFE (Net) 11.3%, MSCI World (Net) 11.3%, IPD All Property 10%.

• Mar 1, 2016 – Mar 31, 2016: FTSE TMX Canada Universe Bond 26.1%, Mortgage Fund benchmark 8%, S&P/TSX Composite 23.3%, S&P 500 11.6%, MSCI EAFE (Net) 11.6%, MSCI World (Net) 11.6%, IPD All Property 7.8%.

• Feb 1, 2016 – Feb 29, 2016: FTSE TMX Canada Universe Bond 27%, Mortgage Fund benchmark 8%, S&P/TSX Composite 24%, S&P 500 12%, MSCI EAFE (Net) 12%, MSCI World (Net) 12%, IPD All Property 5%.

• Jan 5, 2016 – Jan 31, 2016: FTSE TMX Canada Universe Bond 27.9%, Mortgage Fund benchmark 8%, S&P/TSX Composite 24.7%, S&P 500 12.3%, MSCI EAFE (Net) 12.3%, MSCI World (Net) 12.3%, IPD All Property 2.5%.

• Apr 24, 2015 - Jan 4, 2016: FTSE TMX Canada Universe Bond 28.7%, Mortgage Fund benchmark 8%, S&P/TSX Composite 25.32%, S&P 500 12.66%, MSCI EAFE (Net) 12.66%, MSCI World (Net) 12.66%.

• Apr 1-23, 2015: FTSE TMX Canada Universe Bond 36.7%, S&P/TSX Composite 25.32%, S&P 500 12.66%, MSCI EAFE (Net) 12.66%, MSCI World (Net) 12.66%.

IPD returns are not immediately available at quarter-end; therefore, the prior quarter’s index return is used in this report.

The Infrastructure fund is priced semi-annually at the end of June and December in U.S. dollars. Interim valuations may be done as the result of special situations. Performance is calculated based on the last available price obtained from the semi-annual or interim valuation and daily FX movement. Net of investment management fees.

No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient without the prior written consent of Greystone.

Greystone is registered as a portfolio manager and exempt market dealer in all provinces and in the Northwest Territories and is registered as an investment fund manager in Saskatchewan, Ontario, Quebec and Newfoundland and Labrador. Greystone is also registered as an investment adviser with the Securities and Exchange Commission in the US.

© Greystone Managed Investments Inc. All rights reserved. Strategist and the Greystone Strategist are registered trademarks of Greystone Capital Management Inc. and licensed to Greystone Managed Investments Inc. ISSN 1201-4613.

Disclosures


Investment Management

Robert Vanderhooft, CFA1

Chief Executive Officer & Chief Investment Officer

FIXED INCOME PUBLIC EQUITIESQUANTITATIVE RESEARCH/RISK MANAGEMENT & PORTFOLIO RISK SOLUTIONS

CHAIR, ESG Committee & UNPRI INITIATIVES

Blaine Pho, CFA1

Chief Investment Officer, Fixed Income

Jeff Tiefenbach, CFA1

Chief Investment Officer, Public Equities(Lead, Global Equity & International Equity)

Jonathan Jacob, CFA, FSA, FCIA1

Senior Vice-President, Quantitative Research/Risk Management & Head of Portfolio Risk Solutions3

Scott Linner, CFAVice-President, Research

Chad Toews, CFA, CMTSenior Vice-President

Curtis Schimmelmann, CFAVice-President

Neil Schell, CFA, CPA, CMASenior Portfolio Manager

Michael Geng, CFA, MBA, CPA, CMAPortfolio Manager

Jennifer Melcher, CFAPortfolio Manager

Rankin Jaworski, CFAPortfolio Manager

Max Moore,CFATrader

Mark RumpelTrader

Client Portfolio Managers (Fixed Income)

Jafer Naqvi, CFA1

Vice-President, Fixed Income & Multi-Asset

David Tallman, CFAClient Portfolio Manager,Fixed Income & Multi-Asset

Alou Koumare, MFRMAnalyst,Fixed Income & Multi-Asset

Zahra Ahanchian, MEconAnalyst,Fixed Income & Multi-Asset

Portfolio Management

Himanshu Sharma, CFA, MBASenior Vice-President & Lead, Canadian Equity & Head of Fundamental Research

James Baldwin, CFA1

Senior Vice-President & Co-Lead, Canadian Equity

Grant Stahl, CFA1

Senior Vice-President & Lead, U.S. Equity

Alfred Li, CFA, MBA, FRMSenior Vice-President & Co-Lead, International Equity4

Blair Ledingham, CFASenior Director & Co-Lead, U.S. Equity

Fundamental Research

Himanshu Sharma, CFA, MBASenior Vice-President & Lead, Canadian Equity & Head of Fundamental Research

James Baldwin, CFA1

Senior Vice-President & Co-Lead, Canadian Equity

Travis Wetsch, CFAVice-President

Blair Ledingham, CFASenior Director & Co-Lead, U.S. Equity

Michael Brown, CFASenior Director

Heather Greenman, CFA2

Senior Director

Mark Scollan, CFASenior Director

Terence Chung, CFA, MBA Director4

Ivo Ciurlizza, CFASenior Analyst

Paula Brinton, CFA Senior Analyst

Solo Zhang, M.Sc., FRMSenior Analyst

Raymond ChanSenior Analyst/Trader

Product Specialist & Market Research

Lisa Moen, CFAVice-President, Market Research, Public Equities

Chirag Patel, CFAVice-President, Product Specialist

Graeme CaswellAnalyst, Market Research5

Public Equities Trading

Craig Martin, CFA1

Vice-President

Amanda Reich, CFASenior Director

Janeen Snell, CFADirector4

Presley GiblerEquity Trader

Jeff Evans, CFA, LLMVice-President, Quantitative Research/ Risk Management

Kelvin Nan, M.Eng, PhDSenior Analyst, Quantitative Research/ Risk Management

Chantal Laplante, CFA, M.Sc.Director,4 Portfolio Risk Solutions

Carlin Pohl, CFADirector,4 Portfolio Risk Solutions

1 Asset Strategy Team Member.2 On leave.

3 Quantitative Research/Risk Management reports to Jeff Tiefenbach and Portfolio Risk Solutions reports to Robert Vanderhooft.4 Promotion effective April 1, 2018.

5 Term to permanent hire effective April 2, 2018.


Alternative Investments

Robert Vanderhooft, CFA1

Chief Executive Officer & Chief Investment Officer

Ted Welter1

Managing Director & Chief Investment Officer, Alternative Investments

Jeff Tripp, CFA, MBASenior Vice-President, Real Estate Investments

Greg ZahorskiSenior Vice-President, Real Estate & Mortgage Investments

Luke Schmidt, CFA, M.Sc.Vice-President, Real Estate Investments

Peter-Paul Bloeman, MBAVice-President,Real Estate Asset Management

Jimmy Buzaglo, CFASenior Portfolio Manager, Real Estate Investments

Matt Sych, CFA, CPA, CMASenior Portfolio Manager, Real Estate Investments

Mark Cooksley, MBASenior Director, Real Estate Investments

Sandy Ardern, CPA, CASenior Director Finance, Real Estate Asset Management

David Struthers, MBASenior Director, Real Estate Asset Management

Garrett Meier, CFA, M.Sc.Portfolio Manager, Real Estate Investments

Michael Ostrander Analyst,4 Real Estate Investments

Tom Harder, CFASenior Vice-President, Mortgage Investments

Viktor Mosiy, CFASenior Portfolio Manager, Mortgage Investments

Myles Routly, CFA, MBASenior Analyst, Mortgage Investments

Tyler NguyenSenior Analyst,4 Mortgage Investments

Karolyn KarpinsSenior Manager, Mortgage Investments

Jeff Mouland, P.Eng., MBAExecutive Director / Head of Infrastructure, Infrastructure Investments

Matthew Press, MBAVice-President, Infrastructure Investments

Adam ThouretSenior Director, Infrastructure Investments

Natalie Sekiritsky, CFASenior Analyst, Infrastructure Investments

Tony GuoAnalyst, Infrastructure Investments

Connie Ashton, CFA, CPA, CGAChief Operating Officer, Alternative Investments

Brad Vance, LLB3

Senior Vice-President & Legal Counsel

Shane Lewis, CFA Senior Portfolio Manager, Alternative Investments

David Steffensen, CPA, CADirector of Finance, Alternative Investments

Blake Zimmer, CFASenior Analyst, Alternative Investments

Joëlle Guilbault, CFASenior Analyst,4 Alternative Investments

Val Marie Sikorski Senior Administrator, Alternative Investments

Andrew Croll, CFA, CAIAVice-President, Alternative Investments

Elina Betman, CFA2

Client Portfolio Manager, Alternative Investments

Alexandra Katz, CIMClient Portfolio Manager, Alternative Investments

Monish Arora, CFAClient Portfolio Manager, Alternative Investments

Hiranga Jayawardana, CFA, CAIA, MFinSenior Analyst, Alternative Investments

Emily Williams, MFinAnalyst, Alternative Investments

Nicole Templeton,Analyst, Alternative Investments

James PlazaResearch Analyst, Alternative Investments

1 Asset Strategy Team Member.2 On leave.

3 Indicates shared resource.4 Promotion effective April 1, 2018.


Marketing & Operations Management

Jeff Robertson, CFA President, Managing Director & Chief Operating Officer

Marketing

Nazmin GuptaChief Marketing Officer

Human Resources

Dianne Conlon Senior Vice-President

Shelly Antill Manager1

Legal & Compliance

Jacqueline Hatherly, LLBChief Compliance Officer & Senior Legal Counsel

Jared Hein, CPA, CAAssistant Vice-President,1 Compliance

Investment Operations

Jackie AlbanoSenior Vice-President

Tana CameronDirector1

Lisa NagyManager

Michelle KrenbrinkManager

Marnie PerepelukManager

Finance, Performance Analytics, Information Technology

Tom Mamic, CPA, CAManaging Director & Chief Financial Officer

Finance

Brendan Bailey, CPA, CASenior Manager,Fund Accounting

Kristen Schneider, CPA, CGAController,Corporate Accounting

Performance Analytics

Hung Truong, CIPMDirector

Information Technology

Steven Engel, MBA, CMCSenior Vice-President

James GoodchildVice-President & Chief Information Security Officer

Jonathan SalgadoAssistant Vice-President1

John TimmonsAssistant Vice-President1

Bruce ChernoffSenior Architect

Chard MerkSenior Manager1

Executive Office Initiatives

Frank Hart, FCMCVice Chair, Managing Director & Chief Risk Officer

Colin Lynch, MBASenior Vice-President, Strategy & Growth

Client Strategy & Innovation

Louis Martel, CFA, FSA, FCIA, ICD.D Managing Director & Chief Strategist

Executive Office

Peggy HoganDirector & Secretary to the Board

Institutional Relationships

Sean Collins, CFASenior Vice-President

Michael GillisSenior Vice-President

Frank GrecoVice-President

Jay Wiltshire, CFAVice-President

Loren Gee, CFA, MBAVice-President

Elizabeth Marr, CFAVice-President

Chris Chernecki, CFAVice-President

Simon Segall, MA, ASA Vice-President

David Blyth, CFAVice-President

Bruno Saintonge, CFADirector

Branding & Communications

Anne Bilczuk, CPA, CGASenior Vice-President

Lenn McDonaldDirector

Karl HamblinDirector

Lorrie WrightManager

Marketing Intelligence & Services Shari LavaVice-President

Chris MacLean Senior Manager

Denise Fray ThompsonManager

Nicole Lomax, CFAManager

1 Promotion effective April 1, 2018

THE POWER OF DISCIPLINED INVESTING®

Our investment management looks to the long term, and our process doesn’t vary across the years. Ultimately, we aren’t satisfied until we give our clients the finest in investment performance and service.

Robert L. Vanderhooft, CFAChief Executive Officer & Chief Investment OfficerGreystone Managed Investments Inc.

““

Headquartered in Regina, with additional offices in Winnipeg, Toronto and Hong Kong, Greystone Managed Investments Inc. is a Canadian-based institutional asset manager, providing investment management services to its broad client base since 1988.

Greystone.ca

(4/2018) Union

Logo

the greystone strategist€¦ · 3 real estate returns are the ipd all property index up to its...

Documents