Women of Wealth: An untapped market pg. 7
Black Creek Global Leaders Fund pg. 3 SUMMER EDITION 2016
Monthly Review FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS • WWW.CI.COM
FUND PROFILE
Signature High Income Fund: Equity-like returns, lower volatility market volatility over the intermediate term. In this environment, Signature High Income Fund’s yield-oriented portfolio should generate income that matches or exceeds equity returns, with relatively lower volatility, Signature believes. The search for high-quality income investments continues to accelerate as yields for risk-free investments such as developed market government bonds sink lower. In this environment, Signature High Income Fund is an excellent option for investors seeking a stable source of income. The fund has a track record of delivering stable, equity-like returns, annual distributions of 6% and volatility akin to the bond market over a nearly 20-year period.
• Available in tax-efficient solutions for non-registered investments. inception is 8.9%. Its total cumulative return since inception is 428%, versus 78.4% for the average five-year guaranteed investment certificate. These higher returns do, however, come with some volatility. Valuations for many of the higher-yielding asset classes in the portfolio dropped sharply in 2015 when it appeared that the U.S. Federal Reserve would begin raising interest rates, and as prices for oil and other commodities dropped sharply. High-yield bonds, for example, declined about 4.6% in 2015, the S&P/TSX Equity Income Index returned -14.6% and REITs dramatically underperformed the broader equity markets. During 2015, however, the fund was down just 1%. While valuations for many of the fund’s core asset classes have rebounded in 2016, they remain below peak values and the portfolio managers believe they still offer potential upside.
With elevated government debt levels, deflationary forces such as an aging population and limited monetary policy options, Signature’s outlook calls for continued low global economic growth and low inflation. These conditions should result in low interest rates and elevated capital
Consider adding a 30% Signature High Income Fund weighting to your clients’ balanced portfolios. In doing so, you can increase the portfolios’ efficiency by reducing volatility, and by adding steady, tax-efficient income that rivals the return of equities and the potential for growth.
60 months
Rolling return analysis *Inception to June 30, 2016
NAV + Payout
Total Return
Highest return
14.3%
20.0%
Average return
6.2%
9.7%
Lowest return
1.5%
0.8%
% positive periods
100.0%
100.0%
% negative periods
0.0%
0.0%
3646 periods
Signature High Income Fund Class A – Growth of $10,000 from *inception to June 30, 2016 $60,000 $50,000
$52,646
$40,000 $30,000
$30,861
$20,000 $17,151
$10,000
Price + Payout
Total Return
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
Dec-03
Dec-02
Dec-01
Dec-00
$0 Dec-99
Signature High Income Fund differs from other high income funds, many of which resemble traditional balanced funds that use a larger proportion of growth-oriented equities to reach their targeted distributions. When equities are rising, these competitors may outperform, but they also tend to exhibit greater volatility. Signature High Income Fund was designed to deliver a 6% annual distribution from income, and has succeeded in doing so every year since inception, thereby providing a more predictable, less volatile experience for clients.
• Low cost – the fund’s MER is in the bottom decile for funds in its Morningstar peer group.
Dec-98
Global government bond yields have continued their decline in 2016, underlining the difficulty faced by investors seeking stable income opportunities. 10-year bond yields in Canada and the U.S. reached record lows in early July after the U.K.’s vote to leave the European Union, while about US$12 trillion in government debt worldwide now offers negative yields. This has driven demand for stable assets that produce steady income, such as utilities, infrastructure securities (toll roads, bridges, airports), REITs, yieldproducing equities such as preferred shares and high-yield corporate bonds – all of which can be found in the Signature High Income portfolio.
• Equity-like returns with lower volatility.
Dec-97
Yield assets still in demand
• Not a balanced fund in disguise – income is generated from internal yield, not capital growth.
Dec-96
Signature High Income Fund is managed by Signature Global Asset Management, a portfolio management team with a wealth of experience investing in Canadian and global markets. Signature manages about $54 billion on behalf of CI Investments across a broad range of equity, income and balanced mandates. The Signature High Income portfolio is led by Chief Investment Officer Eric Bushell and Senior Vice-President Geof Marshall, who as the head of Signature’s high-yield bond team manages one of the largest high-yield portfolios in Canada.
Why Signature High Income Fund?
Cumulative Distribution
*Inception: Dec. 31, 1996 Source: CI Investments
Better than a GIC Signature High Income Fund’s diversified, flexible mandate has allowed it to deliver positive returns in all rolling five-year periods since inception (December 31, 1996). The fund’s average annual return since
Returns as of June 30, 2016
Class A Signature High Income Fund
6 month
1 year
3 year
5 year
10 year
15 year
1.2%
-2.2%
5.1%
5.8%
5.4%
8.6%
Since inception 8.9%
(Dec/96)
2 | Monthly Review | SUMMER 2016 | FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS | WWW.CI.COM
SPRING ROADSHOW
Cambridge mining difficult markets for value Many large caps look fairly valued 23x 22x
21.6
21x 20x
“This is one of the most difficult markets I have seen,” Brandon Snow, Cambridge Chief Investment Officer said during the recent CI Spring Roadshow. “With high valuations and an uncertain macro outlook, you can’t just buy the market. We are fortunate that our investment process and philosophy allow us to dig deep to uncover opportunities. Our deep understanding of how companies create value and our discipline to not overpay for that value creation allows us to navigate the market well.” Cambridge manages over $15 billion in assets across several Canadian-focused and global equity, income and balanced portfolios on behalf of CI Investments. The team follows a fundamental, bottomup investment process and its portfolios carry a high active share, meaning that the Cambridge funds are unique and less correlated to those of other managers and the market. Cambridge focuses on identifying companies with business models and management teams that can compound shareholder value over time, while being careful to not overpay for that value creation. Easy monetary policy has supported riskseeking behaviour and has helped to push equity valuations higher since 2011.
Portfolio evolution Brandon highlighted two holdings that show how the group’s portfolios have changed over the past five years in response to market conditions, and that illustrate the Cambridge focus on fundamental value: • Finning Canada has recently entered Cambridge’s top 10 holdings. The company sells, rents and provides customer support for Caterpillar equipment to several industries throughout Western Canada, including mining, forestry, construction, energy and agriculture. Given the negative sentiment for many of the sectors it supplies, the stock presents a more attractive valuation than it did five years ago. It has a new management team that is focused on generating free cash flow
+38%
18x 17x 16x
15.6
15x 14x
2013
2011
2009
2007
2005
2003
2001
Source: Credit Susse HOLT as of 3/31/2016 Universe: Largest 1000 US companies with 0 < Economic P/E < 50
13x
1999
“Momentum stocks have outperformed traditional value over the past few years, but history shows that when that happens, the market eventually recognizes intrinsic value and starts to reward that again,” Brandon said. “We are just starting to see that occur. In the meantime, caution is warranted, and volatility and confusion will continue to create opportunity for active investors like us.”
LT Median
19x
1997
In particular, several areas of the equity markets have experienced aggressive multiple expansions over the past five years. These have tended to be larger-cap companies with stable cash flow, such as those in the health care, consumer staples and utilities sectors. As a result, Cambridge is now finding better value opportunities in cyclical sectors such as financials, commodities and industrials.
1995
Divergent monetary policy by central banks around the world continues to drive market returns late in the economic cycle, resulting in equities trading at or above fair value, higher levels of volatility and asset classes becoming increasingly correlated. As it becomes more difficult to find investments that provide a margin of safety, a focus on fundamental value is becoming increasingly important, says Cambridge Global Asset Management.
Source: Bloomberg
The median large cap U.S. price/earning ratio is in the top decile of historical observations over the past 20 years. and good return on invested capital. It is a cyclical business that will improve when prices for commodities such as copper and oil rebound. “The management team is doing smart things with the company’s money,” Brandon said. “They have reset their compensation structure and are trying to do more with less capital. They are paying dividends and buying back stock with the free cash flow that is generated by their parts and service business. So we are getting an attractive yield while we wait for the end markets to improve.” • Alimentation Couche-Tard has been a long-standing Cambridge favourite stock, but recently dropped out of the group’s top 10 holdings. Although the business remains strong and is supported by a skilled management team, much of the company’s potential for value creation is already priced in to the stock, Brandon said.
its ability to create value through mergers and acquisitions is more limited than it was,” he said. “In addition, the stock now trades at a much higher multiple than when we first invested in the company. It’s still a great business, but does not offer the most attractive risk/reward opportunity in the marketplace. There are many cases where a great company just isn’t a great stock to own because of an extended valuation.”
Cambridge’s currency strategy Cambridge does not use currency trading to specifically add to fund performance. Rather, currency hedging is used as a risk management tool to protect the income streams that are paid in Canadian dollars and to control volatility, Brandon said. The highest currency hedges, therefore, can be found in the Cambridge income and asset allocation funds, while the group’s equity funds that are focused more on capital growth use lower hedges.
“Couche-Tard is now the second-largest convenience store operator in the world, so
LETTER TO ADVISORS
Supporting you in volatile times Dear Advisor, Global financial markets were thrown for a loop at the end of June when the British electorate voted in favour of the U.K. leaving the European Union. According to Standard & Poor’s, global equity markets dropped 4.7% on the day after the referendum and lost US$2.08 trillion in market value – the biggest one-day loss ever in dollar terms. Derek J. Green President, CI Investments
During challenging times like this, you can count on CI for support. Our portfolio managers provided commentary on the issue before the vote and on the day after. We then hosted a webcast on the following Monday so that you could hear directly from key managers about their views on the markets and their funds. A brief summary of their comments can be found on page 5. I am also pleased to report that, unlike many market participants, our portfolio managers were well prepared for the market fallout. Their defensive positioning ahead of the referendum helped to protect clients’ assets from the downturn, and put them in an excellent position to take advantage of the subsequent market rebound. Outstanding performers in these turbulent markets included the Harbour funds, Select Income Managed Corporate Class, Signature Global Income & Growth Fund, Signature Income & Growth Fund, as well as Signature High Income Fund and Signature Diversified Yield II Fund. We believe that this highlights the value of active management by experienced professionals, and the importance of actively managing risk for clients. Bond yields, meanwhile, have declined to unprecedented levels in the Brexit aftermath, and rate increases that were expected for later this year are now in question. As we outline in the article on page 1, Signature High Income Fund is a unique solution for income-seeking investors in this ultra-low-rate environment. With its diversified mix of asset classes, this actively managed fund has a long track record of providing a consistent 6% distribution, and with less volatility than equities. Thank you for your continued support. If you need further information or any assistance, please contact your CI Sales Team. Please accept my best wishes for an enjoyable summer.
Sincerely,
2015
Company earnings, however, have not kept pace with that increase, Brandon pointed out. The result is that many companies now look fairly valued to overvalued based on several metrics, including enterprise value, cash flow and earnings.
3 | Monthly Review | SUMMER 2016 | FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS | WWW.CI.COM
FUND PROFILE
Black Creek Global Leaders Fund By maintaining a focus on uncovering global businesses with leadership positions in their industries and long-term potential for growth, Black Creek Global Leaders Fund continues to create value for investors in uncertain market conditions. The fund is ranked first quartile in its category over the one, three, five and 10-year time periods, and it outperforming its global benchmark for the year-to-date as of June 30. “Nothing has really changed in terms of our investment process or philosophy,” said Bill Kanko, President and Portfolio Manager of Black Creek Investment Management and lead manager of the fund. “We continue to look for the best individual company ideas, anywhere we can find them. We take a long-term view, and work to understand the economics and characteristics of those businesses and their industries.” Black Creek manages about $5 billion on behalf of CI Investments across equity and balanced portfolios that include Black Creek International Equity Fund and Black Creek Global Balanced Fund. The funds are concentrated, each with about 25 to 35 equity holdings selected on the basis of a distinct idea about its future value. Although Black Creek does not allocate the funds specifically by geography or by sector, they are deliberately diversified to ensure they do not become too concentrated in any one particular area.
Vietnam and Thailand and is benefiting from growth in those countries. Other examples of companies in the fund with expanding emerging market presence include Christian Dior, the luxury goods company based in France, and industrial technology company Oerlikon of Switzerland. Black Creek does not typically use a currency hedging strategy within its equity funds, but it did establish one in the first quarter of this year when the Canadian dollar dropped below 70 cents U.S. That position was closed when the loonie later rebounded, Bill said. the past decade, but investment conditions have changed, most notably as a result of the financial crisis of 2009 and the fragile economic conditions that have persisted since then, Bill said. The period immediately following the crisis was the most active in the group’s history, as the funds rotated out of investments where the outlook had dimmed to businesses with greater growth potential – many of which were found in the U.S. market.
attractive opportunities in countries that offer greater potential for growth, including emerging market countries.
Over the past 18 months or so, however, the investments in Black Creek Global Leaders Fund have made another shift away from the U.S., reflecting higher valuations in the U.S. market and more
A good example of that trend is Japan-based Daikin, the world’s largest air conditioning manufacturer. The company has a strong global business, but is also rapidly gaining market share in emerging markets such as
“Of about 28 holdings in Black Creek Global Leaders, at least six of them are located in emerging markets,” Bill said. “But even among the more established developed-market companies in the portfolio, most of them have a significant presence in the developing world.”
Looking ahead, the implementation of negative interest rates by central banks in Europe and Japan is a significant change to the investment environment. They represent one of the biggest challenges for portfolio managers, as they could result in distorted market movements and greater volatility as they upend the traditional economics of banks, insurance companies and governments. “The intended goals of negative rates – boosting credit, lifting asset prices and forcing investors to take on more risk – are reasonable, but the risks are high and not all of the consequences are known,” Bill points out.
Black Creek Global Leaders Fund Managers: Bill Kanko, Matias Galarce, Heather Peirce
Black Creek’s investment process and philosophy have remained the same over
Returns as of June 30, 2016 Class A
YTD
1 year
3 year
5 year
10 year
Black Creek Global Leaders Fund
-3.9%
1.7%
14.5%
11.0%
7.0%
Since inception 5.7%
(Feb/05)
ONE KEY CHART
The economics of oil This chart helps to explain why oil companies continue to produce oil even when their income statement shows they lose money on each barrel. The answer lies in their cost structure.
Two characteristics of shale oil – short production lags and high decline rates – mean there is a far closer correspondence
Capital expenditures are sunk costs, usually incurred or committed to several years before oil production begins, whereas operational expenditures are largely variable costs. Oil companies therefore tend to produce as long as they can cover their operational expenditures, or can be reasonably expected to do so in the near future. How long they can hold out for prices to recover will depend on the strength of their balance sheet.
“Oil companies therefore
far more quickly. And production levels fall off far more quickly unless investment is maintained.
oil prices. Likewise, as prices recover, shale oil will increase, limiting any spike in oil prices. Shale oil acts as a form of shock absorber for the global oil market.
An important consequence is that shale oil is much more responsive to price changes. As prices fall, investment and drilling activity will decline and production will soon follow. But as prices recover, investment and production can be increased relatively quickly.
tend to produce as long as they can cover their operational expenditures.”
between investment and production when compared to conventional oil. Investment decisions impact production
The U.S. shale revolution has, in effect, introduced a kink in the (short-run) oil supply curve, which should act to dampen price volatility. As prices fall, the supply of shale oil will decline, mitigating the fall in
Average cost of production of a barrel of oil in the 20 largest oil-producing nations US$50
21.80 Operational Expenditure 17.30 Capital Expenditure
US$40
18.70 21.50
US$30
30.70
24.00
18.80
15.50 16.20
31.50
15.60
18.30
16.30 16.60
22.40
US$20
9.60 13.20
19.80 16.60 14.80
8.90 15.30
14.30
12.10
US$10
13.90 10.70
United Kingdom
Brazil
Canada
Source: UCube by Rystad Energy, 2015
United States
Norway
Angola Colombia Nigeria
China
6.60 5.60
7.20
US$0
6.90
11.50 7.20
Mexico Kazakhstan Libya Venezuela Algeria
4.50
8.40
Russia
3.70
5.70
5.70
5.10
5.40
4.80
Iran
UAE
Iraq
Saudi Arabia
Kuwait
4 | Monthly Review | SUMMER 2016 | FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS | WWW.CI.COM
ADVISOR SUPPORT
WealthView: A closer look at the Financial Planning modules Clien
tme Inves
Asset Allocation Analyst
Comprehensive
Every session begins with one click Every session begins with one simple click from the home page. Once a new client session is created, you can go ahead and get started by adding information about your client and any others members of the family to create a household session. For example, Jane and John Client, both 34 years old, have scheduled a meeting with their financial advisor to go over plans for their future retirement and the education saving needs for their six-yearold son. After entering some basic information about this household in the Client section of the Client Information module, the
Cash Flow
Integrated
A fully Web-based program, each module can be used on its own or with any of the other integrated modules. Let’s take a look at how WealthView can help advisors provide a full-view assessment of a client’s current situation and future objectives by exploring the tool’s Financial Planning modules a little closer.
A variety of training materials to support you
m
ion
nt
s
Net Worth
for
at
Last month, we introduced CI Investments WealthView™, a comprehensive and integrated suite of tools designed to help advisors bring their clients’ financial goals into view.
t In
Easy to use Education Savings Needs
Fina
Retirement Savings Needs
ncial Plannin
advisor is able to create a snapshot of Jane and John’s financial situation at this moment in time by using the Net Worth and Cash Flow calculators. Once that information has been added, the advisor can now delve deeper using the interactive Financial Planning modules. The Retirement and Education modules will allow the advisor to review this household’s current savings strategy and help them discover if they are on target to meeting their goals.
Visit AdvisorOnline to try WealthView today Your CI AdvisorOnline account provides you with convenient and secure access to the tool. You can log on to AdvisorOnline to access WealthView at any time. Not registered for AdvisorOnline? If you don’t have an account, sign up now. It only takes a few minutes. To obtain your User ID and password, contact CI Client Services at 1-800-563-5181, answer a few questions and you are ready to log on.
•S tep 1 Client – enter basic contact information that will be used to personalize the client report. •S tep 2 Net Worth – list investments, assets and liabilites, and include as many details as possible such asset type, contributions, withdrawals and payments to display a snapshot of the current financial situation. • Step 3 Cash Flow – create a visual budget summary by itemizing income, investments and asset expenses.
•S tep 1 Assumptions – enter details such as inflation rate, retirement age and future retirement income needs.
Financial Planning module – Retirement
•S tep 2 Current Investments – select the accounts that are applicable for retirement savings to include in the projection, along with before and after retirement expected rates of return. Any information entered in Client Information module will automatically display here to save you time. •S tep 3 Results – this page displays the results of the client’s current retirement savings stragtegy. Use the Alternate Scenario sliders to make changes on the spot and view the results dynamically, demonstrating how to better meet the client’s intended retirement goals.
•S tep 1 Worksheet – enter details such as child’s expected post-secondary education tuition, and room and board expenses, as well as other general family information and assumptions for inflation.
Financial Planning modules – Education
•S tep 2 Current Investments – select the accounts that are applicable for education savings to include in the projection, along with expected rates of return. Information entered in Client Information module will also automatically display here. •S tep 3 Results – this page displays the results of the client’s current education savings strategy. The Alternate Scenario section also allows you to display how adjustments made to the current strategy can benefit your client’s target goal.
• Step 1 Personalize – edit the cover page details (optional)
Reports module
WealthView training video series is now available
g
Steps to creating a simple retirement and education report
Client Information module
From the Home page of WealthView, click on the Library tab to find a variety of helpful training and reference resources including information on the basic steps to navigating the tool, FAQs and the business rules and assertions that are used in the retirement and education planning modules.
•S tep 2 Select Pages – to create a quick report that outlines the client’s retirement and education savings strategy, check off the pages you’d like to include one by one. Or click the box beside the heading “Financial Planning” to include all pages associated with both modules. •S tep 3 Create PDF – click on the button at the bottom of the page to create the report, and save it to your device or desktop. The tool does not store PDFs files.
For a quick overview, check out the WealthView training video series that includes five demos highlighting the capabilities of this tool:
Part One – Home Page This six-minute video will help you become familiar with the home page, tool settings and other options available to you.
Part Two – Client Information Module This 10-minute video shows you how to navigate the Client Information Module highlighting how to input client information, as well as the Net Worth and Cash Flow sections.
Part Three – Financial Planning Modules This 10-minute video features the Financial Planning section helping you become familiar with the Retirement and Education modules.
Part Four – Asset Allocation Analyst Module This 11-minute video takes you through the Asset Allocation Analyst module where you will see how you can review a client’s current asset mix, determine the Investor Profile, build a proposed portfolio of CI funds and review and compare current and proposed portfolios.
Part Five – Reports The four-minute demo shows you how to run reports from a simple few pages to a comprehensive financial plan.
5 | Monthly Review | SUMMER 2016 | FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS | WWW.CI.COM
MANAGER COMMENTARY
Investing after Brexit Several CI portfolio managers took part in a webcast in late June to discuss the implications of the vote by the British electorate to exit the European Union. Here is a brief look at some of the key points made during the call. A full summary can be found on CI’s website at www.ci.com/marketoutlook.
Eric Bushell, Chief Investment Officer • The Brexit vote could unleash a chain reaction of Euro-skepticism. A major risk is the potential acceleration of a breakup of the EU. • Markets are functioning, there is liquidity in credit and equities, and bonds have had a massive rally. The U.K. is adjusting, with the pound falling sharply, and the Bank of England prepared to intervene. Further rate hikes by the U.S. Federal Reserve are off the table and it’s also likely the European Central Bank will extend its quantitative easing. • Continuing low rates and negative interest rate policies in Europe threaten bank profitability. However, the capital position of the U.K. banking system looks sound despite reduced profitability. The Italian banking system represents a risk. • We expect the European economy to have 0.5 – 1% growth going into 2017, with a weaker euro, which may hurt China. • The Signature funds remain defensively positioned with a focus on developed markets and consumer services and a reduced emphasis on cyclical sectors. Our balanced funds have approximately 8% cash and about 7% in gold, which went up in response to the vote. We expect to reduce the gold weight in favour of equities when the opportunity arises. Signature Global Income & Growth Fund had a higher level of cash at 17%, and gold at 10%.
Brandon Snow, Chief Investment Officer, and Greg Dean, Portfolio Manager • The market dislocation immediately following the referendum created some buying opportunities at reasonable valuations, and we put some of our cash to work. • Despite the shock, people don’t know what the real impact of the vote will be. We continue to look for good value in businesses with solid long-term growth prospects. So far these have included stocks such as those of low-cost retailers and technology companies. • Investors have been overpaying for stocks that offer high dividend payouts. Our cash exposure is mainly in lieu of holding utilities and REITs. • Brexit has not significantly changed our view on China and other Asian markets, where we believe that flight of capital will continue to have a negative effect on valuations. • There continues to be a lack of liquidity in capital markets. Other than the post-Brexit strengthening of the U.S. dollar, market fundamentals have not significantly changed. We have not seen credit markets stop functioning or other drastic reactions. There is a need to remain disciplined in this environment.
Roger Mortimer, Senior Portfolio Manager • The British vote to leave the European Union is the first step into a much more complicated situation. Now is the time for continued caution.
Richard Jenkins, Managing Director and Portfolio Manager
• The five main areas we are monitoring are:
• Before the vote our global equity and balanced funds were about one-third exposed to Europe, as measured by revenues and profits, of which about 7% was in the U.K.
• Currencies – The Brexit decision has been negative for sterling and other currencies and positive for the U.S. dollar. Currency volatility tends to cause corporate paralysis as companies face difficulties in making decisions.
• The post Brexit sell-off seems overdone. London remains the world’s financial headquarters, and investors there are wondering about their future. Investors hate uncertainty, and they likely have over-discounted the impact of the crisis.
• Interest rates – We are in a sustained low interest rate environment. The U.S. Federal Reserve likely will not raise interest rates for the rest of year.
• Will the Brexit crisis lead fewer people to take cruises, will they make less use of information technology, will they go to the grocery store less often, will they use less gravel to build roads, less natural gas to heat their homes? These questions are related to companies we own in our portfolios, some of which have recently suffered significant drops. The answer to most of those questions is no, and so we are increasing our weightings.
• Growth – The decision to leave is a nationalistic action and is a step away from free trade. It will make companies hesitant to invest in the U.K. • Politics – Brexit and political figures like U.S. presidential candidate Donald Trump would not be popular unless there was a significant undercurrent of discontent. • Financial services sector – Banks have been impacted by a flatter yield curve, market volatility and lower equity valuations.
• The crisis has created some attractive opportunities for companies on our watch list. Some stocks in Japan have fallen dramatically, even though they have no exposure to the U.K.
• We are conservatively positioned with underweight positions in equities, financial services, the U.K. and Europe, with hedges on the sterling and euro.
CI.COM NEWS Updated Monthly Fund Profiles We are pleased to announce a number of enhancements to our monthly fund profiles and to the Advanced Fund Search price and performance tool on CI.com. Monthly fund profiles:
Price & Performance tool:
•C lass F – PDF profiles for Class F funds are available in addition to Class A. All other fund class results in the tool continue to link to the Class A PDF by default.
•C urrency filter – a new function to filter search results by Canadian or U.S. currency.
•P ortfolio Allocations – to provide more in-depth information and to be consistent with CI’s other fund-related documents, the geographic table now lists fund allocations by country instead of continent.
•H ighlighting the “Add to Favourite” option – a heading (“Add Favourite”) has been added beside the Fund Name label in the top row of the webpage, clearly showing how you can add funds to your “Favourite List” by clicking on the “+” icon to left of the fund name.
You can access the Price & Performance tool by clicking on the link on the top right-hand corner of the CI.com home page.
6 | Monthly Review | SUMMER 2016 | FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS | WWW.CI.COM
ADVISOR SUPPORT
Regulatory reform: what’s new? New regulatory requirements for dealers and advisors are in effect this summer. Here are the important dates and details:
Point of sale requirements As of May 30, 2016, advisors are required to provide their clients with the most recently filed Fund Facts document for each mutual fund being considered prior to accepting an instruction for purchase. This requirement is last stage of the Ontario Securities Commission’s Point of Sale initiative (“POS 3”), designed to offer investors the opportunity to evaluate a mutual fund’s suitability in light of their own investment needs and objectives. To comply with this pre-sale disclosure, advisors must be able to show evidence that pre-sale delivery occurred, and that a reasonable timeframe was provided to allow a client to review the information and make an informed decision on the transaction(s) requested.
“In all cases, evidence of Fund Facts delivery,
method used and date delivered, must be documented. Please note that a link to a website is not considered a valid method of delivery for a Fund Facts document to a client.
Immediate mutual fund purchases
including method used and date delivered, must be documented.”
In limited situations where it is not considered reasonably practical to deliver the Fund Facts documents before the acceptance of purchase and the purchaser specifically instructs the advisor to complete the transaction immediately, an exemption from pre-sale delivery can be relied upon provided that:
Fund Facts documents can be delivered: • In person during a client meeting; or • By e-mail, where a client has given verbal or written direction to do so; or • Via Canada Post mail, or other courier option. Your dealer may also offer a delivery method and delivery log. In all cases, evidence of Fund Facts delivery, including
• The advisor informs the purchaser of their obligation to deliver the Fund Facts and makes all reasonable efforts to do so; • The purchaser consents to post-delivery; and • The advisor verbally reviews the purpose of the Fund Facts and provides a summary of the pertinent information including (but not limited to) risk level, primary investments, suitability level,
all costs associated with buying, owning and selling, and the rights of withdrawal and rescission. Reasons for relying on this exemption must be documented along with the post-sale delivery method utilized.
Where to find Fund Facts
Relationship Model – Phase 2, or CRM2. Dealers will have one year from July 15, 2016 to begin providing their clients with: • an annual report on charges and other compensation that shows, in dollars, what the dealer or advisor was paid for the products and services it provided; and
CI provides access to Fund Facts for all of its funds at www.ci.com – simply click on the “Fund Facts” button on the right side of the page. Fund Facts are also filed with SEDAR at www.sedar.com.
• an annual investment performance report that covers
In addition to new pre-sale delivery obligations of POS3, compliance with CRM2 obligations of pre-sale disclosure (effective July 2014) are also still required. This includes a discussion of the features of the fund being considered for purchase and the disclosure of all charges associated with the purchase and holding of the fund.
• the change in value of the account; and
Final phase of CRM2
• deposits into, and withdrawals from, the client’s account;
• the percentage returns for the previous year; and the previous three, five and 10 years. Many investors will begin receiving these reports early in 2017, as their dealer firms will provide the information on a calendaryear basis.
The summer of 2016 also marks the final phase of amendments to National Instrument 31-103, known as the Client
Invest in a sophisticated, high-quality managed solution. Benefits include:
• Strategic asset allocation
• Expert portfolio management
• Comprehensive research from State Street Global Advisors
• Tax-efficient investing
• Customization options
• *New* lower minimum purchase amount
For more information about Portfolio Select Series, please contact your CI Sales Team or visit www.ci.com/portfolioselect.
7 | Monthly Review | SUMMER 2016 | FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS | WWW.CI.COM
PROFESSIONAL DEVELOPMENT
Women of Wealth: An untapped market By: Doug Towill, Senior Vice-President, Professional Development
In the January edition of CI Monthly Review, we outlined key strategies to help you attract affluent Canadians. In this article, we want to dig down further and look at a largely untapped market: women of wealth. Historically, high net worth women have been overlooked by our industry and we think it’s time to put this coveted group front and centre.
• Act as a consultant, not a salesperson. Taking a partnership approach will create a relationship grounded in mutual respect.
Key facts: • Canadian women today control $1.1 trillion in wealth (“The investment sector’s new – and crucial – frontier,” Jacqueline Nelson, The Globe & Mail, August 9, 2014)
3. A relationship built on trust. Affluent women want an advisor they can trust to guide them through some of the biggest decisions of their lives and their future. That means working with a professional who tells it like it is, whether talking about market volatility or investment fees. Top advisors not only understand that men and women approach wealth differently, they also recognize that each female client is different.
• Focus on peace of mind. We’ve created a simple tool to help female investors prioritize different “buckets” of money, and measure their comfort level. See our What Matters to You tool below (available on www.ci.com/pd). Women are building and inheriting wealth at a rapid rate and there is no better time to harness their economic power to benefit your business. Take the time to get to know the entire life picture of affluent female prospects and partner with them on their financial journey. HNW women want a sincere and authentic relationship with an advisor who is committed to their financial
• Nearly 70% of assets in Canada will be in female hands by 2020 (“Men are from Mars, women make better investors,” Mary Gooderham, The Globe & Mail, October 16, 2015)
Today’s Affluent Women
• Women spend 15% more time in retirement than men, yet save 40% less (“Expected years in retirement.” Society at a
Greatest concern about the future: Running out of money in old age
Glance 2014: OECD Social Indicators)
Source: Even Affluent Fear Becoming Bag Ladies
• 40% of women in North America earn more than their partners
Biggest worry: The financial situation of their children & grandchildren
(U.S. Bureau of Labour Statistics, 2013)
Source: Spectrum High Income Women Report
Whether you’re a male or female advisor and you are looking to grow your business, here’s why it’s time to focus on HNW women:
Developing relationships with both spouses is critical to create loyalty.
• They’re great clients: Affluent women are more likely than their male counterparts to count on you as their primary source of financial advice. Once a strong relationship is established, they are extremely loyal and follow the advice provided. (Oppenheimer Funds, Women and Investing Survey, 2006)
• Don’t view the couple as one entity. They may have very different perspectives and objectives. Never presume the male client is the primary financial decisionmaker, nor underestimate the influence of the female point of view.
• They’re good investors: When writing her book, Warren Buffett Invests like a Girl, author LouAnn Loften studied the habits of female investors and noticed that like Buffett, women are more likely to take a longer-term outlook, do more research, trade less and remain steady under pressure. • They refer a lot: When they are happy with their advisor, they talk about it. On average, women refer 26 clients over their lifetime, whereas men refer 11. (“How to Attract Women Clients,” JoAnne Sommers, Investment Executive, July 7, 2014)
So what do women look for from a financial advisor? What HNW Women Want 1. To play a main part. The majority of high net worth women (82%) actively seek advice and want a collaborative, inclusive approach to financial planning. (“Women are not a ‘Niche’ Market,” BNY Mellon and Pershing) In the past, some advisors would inadvertently spend the majority of their time with their primary client – usually the male – and have minimal contact with the secondary client – usually the female. This has proven to be risky. In fact, research shows 80% of Canadian widows fire their financial advisor within one year of their husband’s death. (“The Confidence Gap: Why aren’t there more women investors?” Tim Querengesser, February 10, 2014)
Key Value: Peace of mind is the most important measure of a successful life Source: Wells Fargo Affluent Women Study 2014
Top tips:
• Invite both clients to every review meeting and take care to ensure the conversation is collaborative and balanced – make eye contact with both clients, acknowledge their individual points of view and create a plan that suits both their joint and respective needs. • Find out what your top female clients enjoy on a social level and arrange an event or workshop. Perhaps skip the baseball game and invite them to an art gallery instead. For event planning tips, download our Client Appreciation Event Planning Guide at www.ci.com/pd. 2. R-E-S-P-E-C-T. Women of wealth are a powerhouse of ambition, knowledge and experience. In Canada, 60% of affluent women have created their own fortunes, whether as business owners or influential executives (Pollara/BMO, 2013). Yet research shows women have often felt patronized by our industry (“Women Want More,” The Boston Consulting Group, October 2009). Wealthy women want to increase their investment knowledge and build their confidence. As one HNW woman put it, “I don’t need my advisor to tell me how smart he is. I need him to give me confidence in my own abilities.”
Top tips: • Don’t sugar-coat it. Affluent women want transparency in all matters. Address challenges, trade-offs and concerns directly and with candour. Stay in touch, even if you don’t always have good news. • Make it personal. While many male clients put fund performance front and centre, in general, affluent women will focus on longer-term, non-monetary goals such as contentment in retirement. Although technical information is important, for many HNW women the fund is simply the vehicle to achieve their goal. Use language that connects the investment product back to their stated objectives.
AREA OF YOUR LIFE Retirement Education for kids Emergency fund Family commitments (i.e. eldercare)
• Educate to empower. Respect her position rather than assuming what’s best for her. Ask questions about her level of investment knowledge and find out what she wants to learn more about.
CI’s Professional Development Team is passionate about helping advisors see the world through a more female-friendly lens. As part of our selection of materials, we are proud to offer tools and resources created exclusively for women investors to help you uncover what matters most to them and create long-lasting relationships. For more information visit www.ci.com/pd.
What matters to You
Top tips: • Listen more, talk less. Women value an advisor who really listens to what matters to them (see the infographic Today’s Affluent Women for more on this).
well-being. Your efforts will definitely payoff: affluent women are extremely loyal and profitable clients.
Charity Fun money Other:
PRIORITY RANKING (1-7)
CONFIDENCE & COMFORT RATING (out of 10)
8 | Monthly Review | SUMMER 2016 | FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS | WWW.CI.COM CLASS A Mutual Fund Trust Corporate Class ISC DSC LL ISC DSC $C $US $C $US $C $US $C $US $C $US
CI Fund Codes Mandate Fixed Income Signature Global Bond Signature Canadian Bond Signature Corporate Bond Diversified Income Cambridge High Income CI Income Select Income Managed Corporate Class Signature Dividend Signature Diversified Yield II Signature High Income Canadian Balanced Signature Income & Growth Cambridge Asset Allocation Corporate Class Harbour Growth & Income Signature Canadian Balanced Portfolio Series Portfolio Series Income Portfolio Series Conservative Portfolio Series Conservative Balanced Portfolio Series Balanced Portfolio Series Balanced Growth Portfolio Series Growth Portfolio Series Maximum Growth Canadian Equity Cambridge Canadian Equity Corporate Class Cambridge Canadian Growth Companies** CI Canadian Dividend Cambridge Canadian Dividend CI Canadian Investment Harbour Harbour Voyageur Corporate Class Signature Select Canadian Synergy Canadian Corporate Class U.S. Equity Cambridge American Equity CI American Managers Corporate Class CI American Value Cambridge U.S. Dividend Global Equity Black Creek Global Leaders Black Creek International Equity Cambridge Global Equity Corporate Class CI Global Value Harbour Global Equity Corporate Class Signature Global Dividend Signature Select Global Global Balanced Black Creek Global Balanced Harbour Global Growth & Income Corporate Class Signature Global Income & Growth
Class A Performance as at June 30, 2016 Fixed Income Signature Global Bond Signature Canadian Bond Signature Corporate Bond Diversified Income Cambridge High Income Select Income Managed Corporate Class Signature Diversified Yield* Signature Dividend Signature Diversified Yield II Signature High Income Canadian Balanced Signature Income & Growth Cambridge Asset Allocation Corporate Class Harbour Growth & Income Signature Canadian Balanced Portfolio Series Portfolio Series Income Portfolio Series Conservative Portfolio Series Conservative Balanced Portfolio Series Balanced Portfolio Series Balanced Growth Portfolio Series Growth Portfolio Series Maximum Growth Canadian Equity Cambridge Canadian Equity Corporate Class Cambridge Canadian Growth Companies** CI Canadian Dividend Cambridge Canadian Dividend CI Canadian Investment Harbour Harbour Voyageur Corporate Class Signature Select Canadian Synergy Canadian Corporate Class U.S. Equity Cambridge American Equity CI American Managers® Corporate Class CI American Value Cambridge U.S. Dividend Global Equity Black Creek Global Leaders Black Creek International Equity Cambridge Global Equity Corporate Class CI International Value Harbour Global Equity Corporate Class Signature Select Global Global Balanced Black Creek Global Balanced Harbour Global Growth & Income Corporate Class Signature Global Income & Growth
Portfolio Manager Signature Global Asset Management Signature Global Asset Management Signature Global Asset Management
624 837 9010
110
Cambridge Global Asset Management CI Investment Consulting CI Investment Consulting Signature Global Asset Management Signature Global Asset Management Signature Global Asset Management
6803 2339
6813 3339
6823 1339
610 11111 686
810 11161 786
1810 11461 1786
574
623 847 9060
540
824
1623 1847 1150
Signature Global Asset Management Cambridge Global Asset Management Harbour Advisors Signature Global Asset Management
6116
6166
1166
691 685
891 785
1891 1785
CI Investment Consulting CI Investment Consulting CI Investment Consulting CI Investment Consulting CI Investment Consulting CI Investment Consulting CI Investment Consulting
7740 7770 2600 7710 2601 2602 2603
7745 7775 3600 7715 3601 3602 3603
1745 1775 1600 1715 1601 1602 1603
Cambridge Global Asset Management Cambridge Global Asset Management Tetrem Capital Management Cambridge Global Asset Management Tetrem Capital Management Harbour Advisors Harbour Advisors Signature Global Asset Management Picton Mahoney Asset Management Cambridge Global Asset Management CI Investment Consulting Epoch Investment Partners Cambridge Global Asset Management
2700 2701 2702 2703
3700 3701 3702 3703
11108 11114 11112 7420 690
11158 11164 11162 7425 890
11458 11464 11462 1425 1890
677
777
1777
212
312
812
612
1812
1540
1612
Black Creek Investment Management Harbour Advisors Signature Global Asset Management
11115 21115 11165 21165 11465 21465
680
180
880
580
1880
1580
578 588
579 589
878 888
879 889
1778 1688
1788 1689
3402
1111
2302 2303 2308
2502 2503 2508
3302 3303 3308
3502 3503 3508
1302 1303 1308
1512 1503 1508
2290 2305
2505
3290 3305
3505
1420 1305
1505
2304
2504
3304
3504
1304
1504
2309 2322 2310
2509 2517 2513
3309 3322 3310
3509 3517 3513
1309 1522 1310
1514 1217 1518
2321
2516
3321
3516
1521
1216
2307 290 2576 150 6103
2507 390 2586 164 2510
3307 790 3576 151 6153
3507 490 3586 017 3510
1307 1790 1576 1151 1153
1507 1490 1586 1117 1515
294 209 510
394 309 512
794 709 511
194 409 513
1794 1709 1511
1194 1409 1513
2574 2575 2323 206 2300 2578 2388
2584 2585 2518 306 2500 2588 2389
3574 3575 3323 706 3300 3578 3388
3584 3585 3518 406 3500 3588 3389
1574 1575 1523 1706 1300 1578 1388
1584 1585 1218 1406 1500 1588 1389
2573 2306 2312
2583 2506 2515
3573 3306 3312
3583 3506 3515
1573 1306 1312
1583 1506 1520
1708 1702 1704
11106 21106 11156 21156 11456 21456 11118 21118 11168 21168 11468 21468
3111
$US
1707
Black Creek Investment Management Black Creek Investment Management Cambridge Global Asset Management Altrinsic Global Advisors Harbour Advisors Signature Global Asset Management Signature Global Asset Management
2402
LL
1824
7500 7505 1510 11113 21113 11163 21163 11463 21463
2111
$C
1402
YTD
1 Month
3 Month
6 Month
1YR
3YR
5YR
10YR
Since Inception
2.6 3.4 3.0
2.1 1.6 0.6
2.7 2.3 3.4
2.6 3.4 3.0
13.0 3.9 0.0
8.0 4.3 4.0
6.0 4.0 4.6
5.6 4.2 4.9
4.3 (AUG. 92) 5.5 (JAN. 93) 4.5 (DEC. 01)
1.0 2.4 -0.3 2.2 -0.1 1.2
-0.2 0.8 -0.2 -0.6 -0.3 0.2
1.5 2.5 3.0 3.1 2.8 3.7
1.0 2.4 -0.3 2.2 -0.1 1.2
1.1 1.9 -3.3 -0.7 -3.0 -2.2
6.9 4.1 4.2 7.1 4.8 5.1
6.4 4.3 4.9 6.5 6.0 5.8
6.5 N/A N/A 5.0 N/A 5.4
9.4 4.0 5.6 6.6 5.7 8.9
(JUL. 04) (SEP. 10) (NOV. 09) (OCT. 96) (FEB. 11) (DEC. 96)
-0.6 1.5 6.4 -1.1
0.2 0.3 2.3 0.1
2.7 2.0 5.3 1.9
-0.6 1.5 6.4 -1.1
-5.0 1.6 4.0 -3.9
5.4 7.5 6.5 5.8
4.9 6.2 3.9 4.4
4.7 N/A 3.4 4.9
6.4 5.6 5.3 7.1
(NOV. 00) (DEC. 07) (JUN. 97) (JUN. 97)
1.6 -0.2 -0.5 -1.1 -1.7 -2.3 -3.1
0.5 0.0 -0.2 -0.5 -0.9 -1.2 -1.7
2.3 2.0 2.0 1.9 1.6 1.3 1.2
1.6 -0.2 -0.5 -1.1 -1.7 -2.3 -3.1
3.1 0.1 -0.5 -1.4 -2.3 -3.1 -4.1
6.2 6.3 6.8 7.0 7.4 7.8 8.6
5.9 5.5 6.1 6.2 6.5 6.9 7.3
5.3 4.4 4.4 4.3 4.2 4.1 3.9
5.3 5.1 4.8 6.8 4.5 4.2 3.8
(DEC. 97) (DEC. 97) (DEC. 01) (NOV. 88) (DEC. 01) (DEC. 01) (DEC. 01)
4.1 4.2 6.2 6.9 1.1 -2.4 -3.2 0.2 -3.8
0.0 -0.4 -0.1 -0.3 -2.0 -2.1 -2.8 -1.1 -2.1
4.3 5.9 2.8 2.7 1.7 -0.9 -1.3 2.6 0.9
4.1 4.2 6.2 6.9 1.1 -2.4 -3.2 0.2 -3.8
2.1 -3.0 2.3 7.5 -3.5 -8.4 -5.1 -4.3 -6.9
9.4 9.9 6.5 14.2 6.2 2.0 5.5 7.3 6.9
11.0 18.2 5.8 7.8 3.8 1.4 N/A 5.0 4.7
N/A N/A 5.2 6.5 3.6 2.8 N/A 4.8 3.6
7.6 17.3 5.7 8.0 8.3 6.2 7.1 8.9 8.0
(DEC. 07) (FEB. 11) (FEB. 05) (FEB. 05) (NOV. 32) (JUN. 97) (AUG. 11) (MAY 98) (DEC. 97)
-3.4 -2.3 -7.1 -1.4
-1.3 -1.1 -2.3 -1.7
1.7 0.9 -0.5 0.8
-3.4 -2.3 -7.1 -1.4
1.5 -1.1 -1.2 5.1
13.6 13.6 14.0 14.8
11.5 13.2 13.2 14.6
4.0 5.9 6.6 6.6
7.0 4.4 8.6 7.0
(MAY 89) (JUL. 00) (MAY 57) (JUN. 06)
-3.9 -13.7 -3.5 -5.6 -6.1 -8.0
-4.8 -8.4 -1.9 -2.4 -1.7 -2.4
-3.9 -7.1 2.3 1.9 -0.1 1.2
-3.9 -13.7 -3.5 -5.6 -6.1 -8.0
1.7 -10.0 -7.2 -4.4 -9.1 -5.5
14.5 9.9 9.1 8.8 6.0 8.6
11.0 8.6 8.7 6.4 6.3 8.5
7.0 N/A N/A 2.2 3.1 N/A
5.7 10.6 6.0 2.2 3.0 8.8
(FEB. 05) (SEP. 08) (DEC. 07) (JUN. 96) (DEC. 01) (JUL. 10)
-4.5 1.5 -5.7
-4.1 1.7 -0.3
-2.0 5.5 1.5
-4.5 1.5 -5.7
-3.8 5.6 -3.0
9.5 11.2 7.5
8.8 8.8 7.7
N/A 4.8 N/A
5.2 (FEB. 07) 4.9 (DEC. 02) 3.7 (FEB. 07)
* Closed. ** Soft capped.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. ®CI Investments, the CI Investments design, Signature Global Asset Management, Harbour Advisors, Harbour Funds and Cambridge are registered trademarks of CI Investments Inc. Portfolio Series and the Portfolio Select Series design are trademarks of CI Investments Inc. Cambridge Global Asset Management is a business name of CI Investments Inc. used in connection with its subsidiary, CI Global Investments Inc. Certain portfolio managers of Cambridge Global Asset Management are registered with CI Investments Inc. This report may contain forward-looking statements about the fund, its future performance, strategies or prospects, and possible future fund action. These statements reflect the portfolio managers’ current beliefs and are based on information currently available FSC FPO to them. Forward-looking statements are not guarantees of future performance. We caution you not to place undue reliance on these statements as number of factors could cause actual events or results to differ materially from those expressed in any forward-looking statement, including economic, political and market changes and other developments. Published July 2016. 1606-1110_E
