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Investment Objective The objective of this fund is to provide long-term investment returns through capital appreciation (growth), without compromising its regard for the preservation of capital. Fund Details • Fund Inception: December 1, 1996
†This fund is no longer offered by way of prospectus and is only available for accredited investors or members of an employer-sponsored pension or savings plan. Canadian Equities Highstreet Asset Management - Quantitative Core Manager Highstreet uses a multi-factor quantitative model which must meet their specific criteria for Growth, Value, Quality & Risk (GVQ+ R(tm)) when considering buy and sell decisions. Investors’ appetite for risk remained low during the first two months of 2009. While golds continued to offer support, this was offset by the decline in the other sectors, led by Financials and Energy, the S&P/TSX index declined by 15% to March 9th. In the latter part of the quarter, investor confidence was buoyed by further announcements of government co-ordination to address the economic downturn, marking a strong rebound in the markets. The rally was most pronounced in the Financial, Energy, and to a lesser extent, the Materials sectors. Overall, one out of three stocks advanced, as the S&P/TSX lost 2%. The portfolio performed in line with the index over the quarter. Stock selection in Financials favoured diversified banks over insurance companies, and this benefited the portfolio. Conversely, stock selection within the Energy and Materials sectors detracted from the portfolio’s performance, principally during the late-quarter rally that had stock prices recovering, as investor risk aversion subsided. The portfolio was better than the benchmark, as two out of every four stocks gained ground during the quarter. Top contributors to the portfolio over the quarter were not holding Manulife Financial for the majority of the quarter, and holding Petro-Canada. Not holding Suncor or Canadian Oil Sands during the quarter hurt the portfolio. The rebound late in the quarter took place despite declining corporate earnings, indicating a measured return of investor confidence in equity markets. While earnings are expected to continue to decline into the next quarter, this earnings season will be critical in determining whether government actions around the world are beginning to stabilize the economy. The direction of analyst estimates over the next several weeks will provide a better picture of where the markets are headed in the near future. Throughout the economic cycle, we adhere to our promises to provide a portfolio with superior growth, value, quality and risk. Lincluden Management - Value Manager Lincluden, using a “value-buyer” approach, favours companies that its analysis shows to be undervalued. Identifying trends that will enhance future value is important. Canadian Equity markets were extremely turbulent in the quarter, declining precipitously in the first two months of the year, led by further uncertainty surrounding global bank liquidity. The subsequent announcement of a plan by the U.S. Treasury to help banks deal with bad loans saw global markets recover, and the S&P/TSX Index recover most of its losses by the end of March. The TSX ended in moderately negative territory as 8 out of 10 sectors declined in the quarter. Relative performance of the portfolio versus the benchmark suffered, as the portfolio was underweight in gold and fertilizer stocks, which rebounded quite strongly in the quarter – following significant losses in the last half of 2008. Holdings in acquisition targets Petro Canada and Nova Chemicals appreciated quite strongly in the period, helping to cushion the impact of the underweight to gold and fertilizer. In this environment, our investment discipline continues to identify solid industry-leading companies at valuation levels that have not been available for many years. While extreme volatility continues to make short-term stock results unpredictable, we are of the view that today’s valuations will translate into exceptional results in the medium term. J. Zechner Associates - Top-Down Growth Manager Zechner’s expertise is the identification of economic and business trends and the weighting of industry sectors. Stocks selected must have good growth characteristics and be liquid. Stock markets finally gave investors some good news in March, as the S&P/TSX Composite index rallied almost 20% in the 14 days after the lows reached on March 9th, and generated a total return of 7.8% for the month – the first monthly gain for the stock market since August of last year. For the first quarter though, the index still fell by 2.0% – the third straight quarter of stock market losses. The leading sector in the index for the first quarter was the Basic Materials group, which showed a 7.7% gain on strength in base metals and gold stocks. Financials lagged with a quarterly decline of 7.4%. Although we had an underweight to gold, our investment strategy benefitted from strength in the oil sector, as well as strong performance from metals and fertilizers and a timely purchase of financial stocks, as they hit their lows in early March. We have used the strength in the market to upgrade the quality of the portfolio by moving to larger, more liquid stocks. In terms of stock exposures, we added to the Financial sector, where the strategy had previously been substantially underweight. Another focus in the portfolio continues to be on the resource stocks with overweight positions in the energy, base metal and agricultural stocks. Uranium continues to look like a great play in the commodities sector, as inventories are low, demand is increasing, and China has started to stockpile supplies for future expansion of nuclear energy. The growth sectors that currently look most attractive to us are in the wireless and high bandwidth sectors, including the telecom service providers and equipment and software vendors. U.S. Equities NWQ Investment Management - Value Manager NWQ invests in undervalued companies with perceived catalysts to improve profitability and unlock value. The first quarter of 2009 remained a difficult period for the financial markets. Stocks posted losses from January through March 9th, almost rivaling those incurred during 2008, whereupon a rally began with the DOW, S&P 500 and Russell 1000 indices appreciating as much as 20%. The impact of companies suggesting that “business hit a wall” became evident in fourth quarter earnings releases delivered in January and February. No doubt, first-quarter earnings releases will not be an enjoyable read either. Capacity utilization is dreadful, General Motors and Chrysler may be headed into bankruptcy soon, and commercial real estate will likely become the next significant problem for the financial sector. The U.S. government has assembled an alphabet soup of aid packages including PPIP, TARP, TALF, TLGF, and quantitative easing; all to either get credit flowing through the financial system, remove toxic assets from the banks’ balance sheets, or to improve capital positions in the sector. During the first quarter of 2009, the relative performance was significantly ahead of the Russell 1000 Value Index, and equivalent to the S&P 500. However, the fund posted negative absolute returns. The biggest detractors to performance were the fund’s underweighting in the utilities and health care sectors, two sectors that did relatively better than the index overall. The fund benefited from its exposure to the energy, producer durables, and mining sectors. International Equities Newton Capital Management - Global Thematic Core Newton’s approach recognizes that no economy, industrial sector or company should be seen in isolation when there is a global market for goods and services. Investors’ nerves remained frayed during the first quarter of 2009, with reports of persistent weakness in the global economy and evidence of deteriorating corporate earnings tending to overshadow attempts by hyperactive policymakers to ease economic and financial-market strains. Fresh unease was derived from the worsening outlook for the emerging economies of Eastern Europe, whose currencies depreciated rapidly. Governments, particularly in the U.S. and the UK, put in place a range of plans, including fiscal stimulus packages, asset purchase plans, and capital injections and guarantees for the banking sector. Central banks, meanwhile, cut interest rates sharply and, having all but exploited the scope of ‘conventional’ monetary policy, the Federal Reserve and the Bank of England implemented less orthodox measures to try to lower long-term interest rates. The principal area of strength of the portfolio was once more the financials sector in which strong stock selection and the underweighting of developed-world banks were beneficial. Elsewhere, holdings in the energy and materials sectors were positive contributors to relative performance, with strong stock selection in the energy sector being especially favourable. Holdings in the utilities sector also performed well. The principal area of weakness was the consumer discretionary sector (the retailing sub-sector in particular), in which disappointing stock selection and underweight exposure combined to ill effect. Stock selection in the consumer staples sector also proved unfavourable. All performance is presented in Canadian dollar terms, gross of investment management fees. Past performance is not indicative of future results. |
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