Q introduction. Forstong Global Asset Management Inc

Transcription

1 Q introduction Forstong Global Asset Management Inc

2 Forstrong s Approach Why Invest Globally How Macro Works 2018 Q2: Outlook 2

3 Why Invest Globally

4 GLOBAL PORTFOLIOS MAXIMIZE opportunity Canada represents just 3% of global equity market capitalization* Canada represents just 2% of the global investment grade debt market** *As represented by the MSCI All-Country World Index (Source: MSCI as at December 31, 2017 **As represented by the Citigroup World Broad Investment Grade Bond Index as at December 31, 2017 Sources: MSCI and Citigroup 4

5 GLOBAL PORTFOLIOS MAXIMIZE OPPORTUNITY Top 2 sectors represent over 50% of S&P/TSX Composite Index Top 4 sectors represent over 75% of S&P/TSX Composite Index TSX significantly underrepresented in healthcare, technology, consumer staples and consumer discretionary sectors Source: Bloomberg as at December 31,

6 CANADIANS ARE OVERINVESTED IN CANADA Source: Vanguard 6

7 INSTITUTIONAL INVESTORS ALREADY THERE Canada s largest pension fund is globally diversified for growth to fund future liabilities CPP asset allocation (March 2016) Foreign developed market equities 40.6% Canadian equities Emerging market 5.4% equities 6.3% Other debt 7.5% 19.4% Bonds and money market securities 7.6% 13.2% Infrastructure Real estate United States ($110.9 billion) Other Latin America Australia ($8.2 billion) 2.9% ($7.8 billion) 2.8% 39.7 % 19.1 % 6.5% Canada ($53.3 billion) Japan ($18.0 billion) 7.5% 9.1% 12.0% U.K. ($20.9 billion) Asia - excl. Japan ($20.9 billion) Europe - excl. U.K. ($33.4 billion) $44.5 billion $278.9 billion Global 18.3% Asset Mix Comparison as at March 31 Equities, 5.0% 95.0% Fixed Income Fixed Income Canada 19.1% 26.9% 52.3% Equities 81.7% 80.9% Real assets 20.8% Canada Global Source: Canada Pension Plan 7

8 CANADIANS NOT EXPLOITING GLOBAL Opportunities Equity Exposure of the Typical Canadian Investor Many Canadian investors are over-exposed to highly concentrated home markets. Fixed Income of the Typical Canadian Investor Canada U.S. Rest of World 24% 17% 8% 59% 87% Canada U.S. Rest of World Canada U.S. Rest of World Canada only represents 3% of the global equity market 46% 51% Canada only represents 2% of the global debt market 54% 44% Canada U.S. Rest of World Canadian equities dominated by concentrated number of companies (% of TSX) 58% Government Bonds & Money Market Other 38% 78% Top 25 companies Top 10 companies Canadian fixed income dominated by government bonds and money market. 22% Sources: Bloomberg (2017), World Bank (2016), OSC (2015), S&P Dow Jones Indices (2017), FTSE TMX (2017), MSCI (2017), Citigroup (2017) 8

9 GLOBAL ASSET CLASSES OFFER HIGHER POTENTIAL 9

10 How Macro Works

11 UNCOMMON EXPERTISE 150+ Years of Global Investing Experience Wilfred J. Hahn, MBA Global Strategic Advisor and Chief Compliance Officer Mark Arthur, CFA Chief Executive Officer and Director Tyler Mordy, CFA President and Chief Investment Officer Ken Hawkins, MBA Research Manager David Kletz, CFA Vice President, Portfolio Manager Karen Tsang, CIM, CAIA Vice President, Trading and Operations Manager, Portfolio Manager Over three decades of international investment industry experience as global strategist, portfolio manager, business head. Former Head of Royal Bank Global Investment Group. Until 2002, President, CIO and Director of RBC Global Investment Management Inc., Vice President Investments and Director of Royal Mutual Funds and Chairman of RBC Investments Global Investment Strategy Committee. Recognized innovator in the design and application of global macro ETF portfolios. Recently, ETF.com profiled Tyler as one of the best and brightest working in the ETF Strategist industry and called him a money manager for the modern era. Primary responsibility for investment research with over 25 years experience in the investment management industry, including roles in portfolio management, investment consulting, quantitative research and investment strategy. Conducts a broad range of research analysis and due diligence for Forstrong s Investment Committee; leveraging 10 years of investment industry experience. Nearly two decades of investment management experience, focused primarily on trading, implementing and maintaining the firm s ETF managed portfolios. 11

12 AN ERA OF NEW REALITIES SOME UNTHINKABLES INCLUDE Populism: Brexit, the rise of Trump. Post-crisis behavior of gold Negative interest rates 12

13 MACRO MATTERS MOST Source: "Era of Uncertainty" Copyright 2011 by François Trahan and Katherine Krantz. 13

14 CURRENCY VOLATILITY HAS SOARED SINCE 2008 Shaded grey: period since global financial crisis Sources: FRED, Forstrong Global Asset Management 1. Measured as annualized standard deviation of rolling 3 month observations 14

15 ETFs $5 TRILLION AND GROWING Source: ETFGI 15

16 Avoiding big mistakes 2008 Global Financial Crisis 2011 European Sovereign Debt Crisis 2015 Commodity Bear Market Performance statistics for ETF Managed Portfolios are calculated from documented actual investment strategies as set by Forstrong s Investment Committee and applied to its portfolio mandates, and are intended to provide an approximation of composite results for separately managed accounts. Actual performance of individual separate accounts may vary with average gross composite performance statistics presented here due to client-specific portfolio differences with respect to size, inflow/outflow history, and inception dates, as well as intra-day market volatilities versus daily closing prices. Performance numbers are net of total ETF expense ratios and custody fees, but before withholding taxes, transaction costs and other investment management and advisor fees. Past investment results provide no indication of future performance. Future returns are dependent on the general investment environment, the nature of the investment mandate and specific portfolio risks. A rate of return for one year or less is not annualized. 16

17 GLOBAL INVESTING SIMPLIFIED CORE STRATEGIES Conservative Core Income oriented portfolio designed to moderate market draw downs for those in retirement or nearing retirement Moderate Core A mix of growth and income to manage risk and return Aggressive Core Emphasis on growth for investors looking to build consistent returns over the long term COMPLETION STRATEGIES Global Income Focus Emphasis on non-canadian income securities Global Balanced Emphasis on non-canadian equity and income securities Global Growth Emphasis on non-canadian equity securities Special Opportunities Focus Designed as a diversifier to traditional core balanced holdings, functioning as a satellite in a core/satellite portfolio construct. 17

18 Step 1: Determine supertrends Identify global investment classes set to outperform & assign probabilities to numerous proprietary macroeconomic scenarios. Our Macro approach Short-term tactical Short-term tactical asset mix Step 2: Identify Behavioural Biases Use behavioural analysis to manage short to medium term risk Long-term strategic asset mix Step 4: Monitor Portfolio Assess the effectiveness of chosen macro themes and selected ETFs through changing investment regimes. Step 3: Select ETFs Determine the appropriate ETF allocation using a seven factor bottom up selection process.

19 macro Investment Outlook

20 Shifting super trends Global perspective remains key to investing success Long, shallow economic cycle continues Conditions for (some) inflation to surface have arrived With central banks shifting course, expect return of volatility Emerging markets just starting long outperformance period 20

21 Post-crisis recovery: ON TRACK FOR THE longest, shallowest cycle ever 21

22 post-crisis myopia: living in the long shadow of the financial crisis 22

23 To be sure, some structural headwinds Deflation and fiscal-monetary experimentation Deleveraging Demographics: ageing populations China and EM credit bubbles Consumer exhaustion: nothing left to buy Energy and resource constraints Productivity slowdown: technology exhaustion Populist politics and protectionism 23

24 But what about tailwinds? Deflation and fiscal-monetary experimentation Unlimited monetary and fiscal stimulus Deleveraging Corporate cash mountains, permanently low interest rates Demographics: ageing populations Demographics: 3bn new producers and consumers China and EM credit bubbles EM consumption and housing booms Consumer exhaustion: nothing left to buy New products and services: Internet of Everything Energy and resource constraints New energy and commodity gluts Productivity slowdown: technology exhaustion Productivity acceleration Populist politics and protectionism New economic paradigms 24

25 First Time in Ten Years: All Countries Set For Growth 25

26 Trump s incredible timing 26

27 Shifting super trends Global investment environment is changing Fiscal stimulus levers have been engaged US household incomes are finally rising Real reform and a steady retreat from austerity in Europe Animal spirits are back (sort of) Unsurprisingly, volatility has made a comeback! 27

28 Recent volatility confirms that regime change is underway 28

29 Emerging markets resilience: qe to qt a quiet affair so far 29

30 Emerging markets resilience: Equity markets saying what Trade wars? 30 Source: Financial Times.

31 Emerging markets resilience: Equity markets saying what Trade wars? Source: Gavekal 31

32 Emerging markets: macro risks diminished Source: Alpine Macro 32

33 Meanwhile, Canada s big chill continues 33

34 Us stock valuations: Reality Bytes 34

35 Investor mistakes: misreading china 35

36 Feature of emerging markets: long cycles Source: Alpine Macro 36

37 Emerging markets break 10-year downtrend? yes 37

38 emerging markets: earnings acceleration 38

39 emerging markets: attractive income 39

40 Equity gains since 2009: us, europe, japan, em (US$) 40

41 Shifting super trends Global perspective remains key to investing success Long, shallow economic cycle continues Conditions for (some) inflation to surface have arrived With central banks shifting course, expect return of volatility Emerging markets just starting long outperformance period 41

42 Forstrong Global Asset Management Inc. Forstrong Global is part of Industrial Alliance Insurance and Financial Services Inc. family of wealth management companies together serving more than $105.3 billion in client assets. Forstrong Global was founded in 2001, and is owned 72% by IA and the remainder by key employees. IA was founded in 1892 and is the fourth largest life and health insurance company in Canada. Industrial Alliance stock is listed on the Toronto Stock Exchange under the ticker symbol IAG. Investment Management & Head Office Banks Road Kelowna BC V1X 6A1 Toll Free: Fax: Administration & Client Service St. Mary Avenue Winnipeg MB R3C 3Z5 Toll Free: Fax: Business Development & Relationship Management Wellington Street East Toronto ON M5E 1S2 Toll Free: Fax: