Global Fixed Income Pool

Transcription

1 This semiannual management report of fund performance contains financial highlights but does not contain the complete semiannual or annual financial statements of the investment fund. You can get a copy of the semiannual or annual financial statements at your request, and at no cost, by calling , by writing to us at United Financial, 2 Queen Street East, Twentieth Floor, Toronto, ON, M5C 3G7 or by visiting our website at or SEDAR at Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. RESULTS OF OPERATIONS The Fund s net assets increased by 56.7 million to million from December 31, 2016 to June 30, The Fund had net sales of 54.8 million for the period. The portfolio s performance increased assets by 1.9 million. The Fund s sixmonth return for Class A units was 0.6%, Class E units was 0.5%, Class OF units was 0.1%, Class I units was 0.6% and Class W units was 0.5%, compared to the return of the benchmark of 0.5% for the same period. The benchmark is the J.P. Morgan Global Government Bond Total Return Index. At the end of 2016, an investor poll conducted by J.P. Morgan showed that nearly 50% of those surveyed expected the benchmark U.S. year yield to be 2.5% or higher by the end of the second quarter of 2017, while other brokerdealers forecasted 3% or higher. The reality has been very different with the U.S. year yield trading in a narrow range and finishing the first half of 2017 at 2.30%. A proximate influence is the loss of investor confidence that reflation is in store as expectations surrounding the U.S. policy agenda have tempered, commodity prices have slipped and reported inflation readings to date have failed to pick up. A distinct lessening of tail risks from the political and banking spheres in Europe has provided little reassurance to investors. The broadly supportive stream of economic activity data and weak coincident inflation readings over the first half of the year is garnering a mixed reception from two different audiences. Amid investor circles, it continues to be regarded with skepticism, given the current cycle experience of the followthrough from firming economic activity to higher inflation being tepid. Among policymakers at major inflation targeting central banks however, the expectation persists that inflation will shift higher and move back toward their respective targets from currently subdued levels. The latter perception has led to some of these same central banks actively considering the reduction of their highly accommodative monetary policy stances, with the Bank of Canada, the European Central Bank, and the Bank of England all jumping on this bandwagon of late. This collective desire to follow the U.S. Federal Reserve s (Fed) lead in gradually moving toward higher policy interest rates and smaller balance sheets supported the push higher in nominal yields from their yeartodate lows. Over the second quarter, nominal year interest rates dropped by 0.12% in the U.S. and rose 0.02% in Japan, while in Canada, Germany and the U.K., these rates have risen by 0.13%. Throughout the first half of 2017, the Fund performed in line with its benchmark. The total return was primarily driven by duration and curve positioning, as well as the net compression of government and corporate credit spreads. On a relative to benchmark basis, yield curve positioning contributed the most to the alpha of the Fund, specifically 0.76%. This has occurred as U.S. interest rates fell across the board and the term structure (curve) flattened noticeably into June, while the European and Japanese yield curves steepened. On the other hand, currency positioning (an overweight in Canadian and U.S. dollar denominated bonds at the expense of Japanese yen and eurodenominated bonds) detracted noticeably from the Fund s alpha, specifically 1.09%. Exposure to corporate credit, U.S. agency mortgages and U.S. dollar emerging market sovereign bonds contributed a combined 0.55% to alpha. These positives were outweighed by the negative impact of our underweight in European peripheral government positions as spreads tightened following the French election as well as exposure to U.S. inflationlinked bonds as inflation expectations fell. The portfolio remains underweight total duration relative to the benchmark, primarily concentrated in the long end of the European and Japanese yield curves. In terms of currency exposures, the strategy remains underweight in yen and eurodenominated bonds in favour of an overweight in higher incomegenerating Canadian and U.S. dollar denominated bonds. During the second quarter, we selectively reduced positions in shorterdated (fiveyear and under) U.S. Treasury bonds, migrating this exposure to 30year maturities. At the same time, we have added U.S. dollardenominated emerging market sovereign spread exposure and maintained U.S. agency mortgages as implied interest rate volatility has fallen. In addition, we have reduced our exposure to U.S. inflationlinked bonds and inflation break evens have fallen. RECENT DEVELOPMENTS The most recent wave of central banks wanting to claim victory and walk back from highly accommodative monetary policy settings is concerning. Beyond that, inflation has only tentatively followed suit from improved economic activity indicators. The reality is that financial conditions remain loose in turn benefitting the economy in part due to easy monetary policy. For policymakers, the rationale for starting the gradual withdrawal of monetary stimulus now is that the risk of a faster policy tightening that could derail the economy later is reduced. After years of such stimulus and the debt loads that have accumulated however, there is a risk that economic sensitivities to changes in financial conditions are greater than appreciated by policymakers. It is only by beginning the process of policy tightening that both central bankers and financial markets will find out the truth, raising the risks of policy missteps along the way. The approach is either the right one: where higher inflation emerges, and term premiums in fixed income have room to normalize; or the wrong one: where tightening proves unwarranted CIG 9604

2 in the face of inflation remaining stubbornly below target, and policymakers eventually needing to retrace their steps on policy normalization. Managing through the evolution of policy towards the ultimate outcome is a focus of our strategy for investing in today s challenging market environment. The Canadian situation is an illustrative case in point for the current dilemma of many monetary policymakers. Although economic growth is broadening and the negative impact from lower oil prices has run its course, reported inflation and inflation expectations have not demonstrated commensurate improvements. For now, the Bank of Canada seems content that its response to the oil price collapse and resulting terms of trade shock has worked, paving the way for the withdrawal of this economic insurance via policy rate hikes. However, should inflation remain below target and as tepid as both businesses and investors expect, the Bank will likely find that the limits of the path to higher policy rates are closer than envisioned. Effective January 3, 2017, James Werry became a member of the Independent Review Committee of the Fund. Effective March 13, 2017, units initially issued as Class F units were renamed as Class OF units. RELATED PARTY TRANSACTIONS Manager, Trustee and Portfolio Advisor CI Investments Inc. is the Manager, Trustee and Portfolio Advisor of the Fund. CI Investments Inc. is a subsidiary of CI Financial Corp. The Manager, in consideration of management fees, provided management services required in the daytoday operations of the Fund. The Manager bears all of the operating expenses of the Fund (other than taxes, borrowing costs and new governmental fees) in return for a fixed administration fee. Management fee and fixed administration fee rates as at June 30, 2017, for each of the classes are shown below: Annual management fee rate (%) Annual fixed administration fee rate (%) Class A Class E Class E Class E Class E Class F Class F Class F Class F Class I Paid directly by investor Class OF Annual management fee rate (%) Annual fixed administration fee rate (%) Class W Paid directly by investor 0.18 The Manager received 2.1 million in management fees and 0.3 million in fixed administration fees for the period. Management Fees Approximately 21% of total management fees were used to pay for sales and trailing commissions and other services required. The remaining 79% of management fees were used to pay for investment management and other general administration. Interfund trading Interfund trading occurs when a Fund purchases or sells a security of any issuer from or to another Fund managed by the Manager. These transactions are executed through market intermediaries and under prevailing market terms and conditions. The Independent Review Committee reviews such transactions during scheduled meetings. During the period ended June 30, 2017 the Fund executed interfund trades. Principal Distributor The Manager has the exclusive right to arrange for the distribution of units of the Fund. Pursuant to a series of agreements, the right to distribute such units has been granted, on a collective basis, to the following dealers, each of which is an affiliate of the Manager. Assante Capital Management Ltd. Assante Financial Management Ltd. Independent Review Committee The Fund received standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee ( IRC ) with respect to the following Related Party Transactions: a) trades in securities of CI Financial Corp.; b) purchases or sales of securities of an issuer from or to another investment fund managed by the Manager (referred to as InterFund Trades ); c) purchases or sales of other investment funds managed by the Manager or their affiliates; and d) mergers of funds with another fund that is subject to National Instrument 812 ( Fund Mergers ). The applicable standing instructions require that Related Party Transactions be conducted in accordance with the Manager s policies and procedures. The Manager is required to advise the IRC of any material breach of a condition of the standing instructions. The standing instructions require, among other things, that the investment decisions in respect to Related Party Transactions (a) are made by the Manager free from any influence by any entities related to the Manager and without taking into account any consideration to any

3 affiliate of the Manager; (b) represent the business judgment of the Manager uninfluenced by considerations other than the best interests of the Fund; and (c) are made in compliance with the Manager s policies and procedures. Transactions made by the Manager under the standing instructions are subsequently reviewed by the IRC on a quarterly basis to monitor compliance. The Fund relied on the IRC s standing instructions regarding Related Party Transactions during this reporting period.

4 FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past six periods, as applicable. Net Assets per Unit () (1) (2) (8) * Class A Commencement of operations December 28, 2006 Six Months Ended r Ended r Ended r Ended r Ended r Ended 31, , , , , 2012^ (0.16) (0.34) (0.32) (0.29) (0.29) (0.28) () (0.04) (1.41) (0.16) 0.13 (0.06) (0.32) (0.) ,365 3,734 5,076 6,387 7,514 11, Class E Commencement of operations September 19, 2008 Six Months Ended r Ended r Ended r Ended r Ended r Ended 31, , , , , 2012^ (0.15) (0.32) (0.29) (0.27) (0.27) (0.25) (0.02) (0.02) (1.54) (0.16) (0.45) (0.09) , , , , ,920 72,733 13,517 16,715 13,826 12,721 9,914 6, *Footnotes for the tables are found at the end of the Financial Highlights section. ^Historical figures are based on Canadian GAAP, for more details refer to footnote 7.

5 FINANCIAL HIGHLIGHTS (cont d) Net Assets per Unit () (1) (2) (8) * Class E (0.04) 0.05 (0.49) (0.44) ,094 4, Class E (0.03) 0.06 (0.56) (0.49) , *Footnotes for the tables are found at the end of the Financial Highlights section. 5

6 FINANCIAL HIGHLIGHTS (cont d) Net Assets per Unit () (1) (2) (8) * Class E (0.03) 0.06 (0.59) (0.52) , Class F 0.03 (0.02) 0.07 (0.82) (0.74) *Footnotes for the tables are found at the end of the Financial Highlights section. 6

7 FINANCIAL HIGHLIGHTS (cont d) Net Assets per Unit () (1) (2) (8) * Class F (0.02) 0.07 (0.89) (0.80) Class F (0.02) 0.05 (0.43) (0.36) *Footnotes for the tables are found at the end of the Financial Highlights section. 7

8 FINANCIAL HIGHLIGHTS (cont d) Net Assets per Unit () (1) (2) (8) * Class F (0.02) 0.05 (0.43) (0.36) Class I Commencement of operations September 26, 2008 Six Months Ended r Ended r Ended r Ended r Ended r Ended 31, , , , , 2012^ () () 0.04 (0.11) (1.85) (0.19) (0.15) , , , , , ,469 31,921 29,131 24,628 21,542 16,123 12, *Footnotes for the tables are found at the end of the Financial Highlights section. ^Historical figures are based on Canadian GAAP, for more details refer to footnote 7. 8

9 FINANCIAL HIGHLIGHTS (cont d) Net Assets per Unit () (1) (2) (8) * Class OF Commencement of operations July 15, 2008 Six Months Ended r Ended r Ended r Ended r Ended r Ended 31, , , , , 2012^ (0.) (0.21) (0.19) (0.17) (0.18) (0.16) () 0.03 (0.18) (1.68) (0.18) 0.05 (0.) (0.35) Class W Commencement of operations June 24, 1994 Six Months Ended r Ended r Ended r Ended r Ended r Ended 31, , , , , 2012^ (0.02) (0.03) (0.03) (0.03) (0.04) (0.02) () 0.04 (0.07) (1.54) (0.16) (0.09) ,6 1,200 98,6 88,808 80,374 80,026 6,812 6,852 6,576 6,945 6,868 6, *Footnotes for the tables are found at the end of the Financial Highlights section. ^Historical figures are based on Canadian GAAP, for more details refer to footnote 7. 9

10 FINANCIAL HIGHLIGHTS (cont d) (1) This information is derived from the Fund s semiannual and annual financial statements. (2) Net assets per unit and distributions per unit are based on the actual number of units outstanding for the relevant class at the relevant time. The increase (decrease) in net assets from operations per unit is based on the weighted average number of units outstanding for the relevant class over the fiscal period. (3) Distributions are automatically reinvested in additional units of the Fund. (4) Management expense ratio is calculated based on expenses charged to the Fund (excluding commissions and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net assets for the period. The Effective HST tax rate is calculated using the attribution percentage for each province based on unitholder residency and can be different from 13%. (5) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio advisor manages its portfolio investments. A portfolio turnover rate of 0% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the fiscal period. The higher a Fund s portfolio turnover rate in a period, the greater the trading costs payable by the Fund in the period, and the greater the chance of an investor receiving taxable capital gains in the period. There is not necessarily a relationship between a higher turnover rate and the performance of a Fund. Portfolio turnover rate is calculated by dividing the lesser of the cost of purchases and the proceeds of sales of portfolio securities for the period, and excluding cash and shortterm investments maturing in less than one year, and before assets acquired from a merger, if applicable, by the average of the monthly fair value of investments during the period. (6) The trading expense ratio represents total commissions and other portfolio transaction costs disclosed in the statements of comprehensive income expressed as an annualized percentage of daily average net assets of the Fund during the period. (7) For financial years beginning on or after January 1, 2013 the financial highlights are derived from the financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS allows net assets to be calculated based on the last traded market price for financial assets and financial liabilities where the last traded price falls within the day s bidask spread. There are no differences between the net assets calculated for purpose of processing unitholders transactions and the net assets attributable to holders of redeemable units used for financial statement reporting purposes. For financial years before April 1, 2013, the financial highlights are derived from the financial statements prepared in accordance with Canadian GAAP. Under Canadian GAAP net assets for financial statement purposes were calculated based on bid/ask price while for purpose of processing unitholder transactions net assets were calculated based on the closing market price. (8) This information is provided for the period ended June 30, 2017 and the years ended December 31.

11 PAST PERFORMANCE This section describes how the Fund has performed in the past. Remember, past returns do not indicate how the Fund will perform in the future. The information shown assumes that distributions made by the Fund in the periods shown were reinvested in additional units of the relevant classes of the Fund. In addition, the information does not take into account sales, redemption, distribution or other optional charges that would have reduced returns or performance. rbyr Returns The following charts show the Fund s semiannual and annual performance for each of the periods shown and illustrate how the Fund s performance has changed from period to period. In percentage terms, the charts show how much an investment made on the first day of each financial period would have grown or decreased by the last day of each financial period, except where noted. Class A Class E Class I Class OF Jun Jun Jun Jun Class W Jun For the period from July 15, 2008 to December 31, For the period from September 19, 2008 to December 31, For the period from September 26, 2008 to December 31, 2008.

12 Summary of Investment Portfolio as at June 30, 2017 Portfolio Breakdown Percentage of Portfolio Breakdown (cont d) Percentage of Top 25 Holdings Percentage of Category Net Assets (%) Category Net Assets (%) Security Name Net Assets (%) Country allocation U.S.A Canada U.K Spain Japan Italy Turkey Mexico Argentina Indonesia Brazil Russia Colombia Cash & Equivalents Other Net Assets (Liabilities) South Africa Peru Belgium Philippines Jersey Island Panama Hungary Chile Sector allocation Foreign Government Bonds Provincial Bonds AssetBacked Securities ExchangeTraded Funds Corporate Bonds Cash & Equivalents Other Net Assets (Liabilities) Financials Canadian Government Bonds Government of Japan, Two r Bond 0.1% 03/15/ Province of Quebec 2.5% 09/01/ United States Treasury Note/Bond 2.25% 08/15/ Province of Ontario 2.4% 06/02/ ishares JPMorgan USD Emerging Markets Bond ETF United States Treasury Note/Bond 3% 02/15/ Province of Ontario 1.35% 03/08/ Province of Quebec 3.5% 12/01/ United States Treasury Inflation Indexed Bonds % 04/15/ Spain Government Bond 1.4% 01/31/ Italy Buoni Poliennali Del Tesoro 1.2% 04/01/ Spain Government Bond 0.4% 04/30/ Province of Ontario 2.85% 06/02/ Province of Quebec 3% 09/01/ United States Treasury Inflation Indexed Bonds % 07/15/ United States Treasury Note/Bond 0.75% 02/28/ Spain Government Bond 1.15% 07/30/ Province of Ontario 3.5% 06/02/ Province of Quebec 3.75% 09/01/ United States Treasury Note/Bond 1.625% 05/31/ United States Treasury Note/Bond 1.875% 02/28/ United States Treasury Note/Bond 1.25% 07/31/ United Kingdom, Treasury Gilt 1.25% 07/22/ United Kingdom, Treasury Gilt 2% 09/07/ United Kingdom, Treasury Gilt 3.5% 07/22/ Total Net Assets (in 000 s) 897,386 The summary of investment portfolio may change due to ongoing portfolio transactions of the Fund and updates will be available on a quarterly basis. A NOTE ON FORWARDLOOKING STATEMENTS This report may contain forwardlooking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective, and similar expressions are intended to identify forwardlooking statements. Forwardlooking statements are not guarantees of future performance. Forwardlooking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forwardlooking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forwardlooking statement made by the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchanges rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forwardlooking statements are subject to change without notice and are provided in good faith but without legal responsibility.