Transcript Slide 1

Investing in a low yield world
David Irwin
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EQUITABLE ASSET
MANAGEMENT GROUP
Insurance Managers
 Internal function of the company since 1920
 $1.8 billion in assets under management – general
funds & segregated funds
History of Solid Investment Performance
 Solid investment portfolio, proven even through
weak economic conditions, which contributes to
strong corporate earnings
Experienced in asset allocation
 Nimble, top-down management
INVESTMENT PHILOSOPHY
Top-down
Conservative
Equitable
Asset Management Group
Asset class
managers
Security
selection
94%
LOOKING AT THE “BIGPICTURE”
The economy
&
valuations
ZIRP
QE
LSAP
WIT2
HISTORICALLY LOW RATES
INVESTORS NEED MORE YIELD
CANADA SAVINGS BONDS
13
US FED HAS DRIVEN EQUITY
MARKETS HIGHER
THE RETURN OF THE
CONSUMER
Consumer
GDP
contribution
CONSUMER DEBT
DECREASING IN THE US
Source: Bloomberg
HOUSING PERMITS > HOUSING
STARTS
US
Canada
Source: Bloomberg
SPENDING TRENDS
IMPROVING
Personal consumption
Consumer confidence
ECONOMIC OUTLOOK
United States
Canada
+2.9%
+1.7%
S&P 500 SOURCES OF RETURN
S&P 500 RECORD PROFIT
MARGINS
S&P 500 profit margins
12%
10%
8%
6%
4%
2%
0%
10.9%
US MARKET OVERVALUED?
30
S&P 500 PE ratio
25
16.0X
Forward PE
20
15
15.8x
10
5
0
Forward PE
Source: Bloomberg
Average Forward PE
EQUITIES LOOK BETTER THAN
BONDS
Equities 6.0%
Corporate bonds 4.7%
Source: Merrill Lynch BBB Corporate credit yield, Bloomberg
KEY INVESTMENT RULES
Asset class selection comes first
Low interest rates => equities
Inflation => equities
No silver bullet portfolio BUT diversification is the
best way to protect against catastrophic losses
A BALANCED APPROACH
ACTIVE MANAGEMENT
OUR TOP-DOWN APPROACH
Momentum
and sentiment
indicators
Fundamental
Thematic
drivers
Technical
Quantitative
Equitable Life
Portfolios
Market valuation
PAR - NOT YOUR TYPICAL
BALANCED FUND
USE OF ILLIQUID ASSETS
Commercial Mortgages: add diversification into an asset class
challenging for clients to achieve on their own, by a team of
experienced mortgage specialists.
Private Placement Loans: provide corporate bond type returns
with reduced risk and/or higher yields.
Real Estate: adds equity-like returns with less volatility. Similar
to commercial mortgages, a diversified portfolio of
commercial real estate is challenging for clients to acquire
and manage independently.
FIXED INCOME PORTFOLIO
A high quality fixed income portfolio, with
long duration, supports the dividend scale
Investment Mix
Government
50%
Corporate
50%
Investment by Term
Years to Maturity Percentage
0 to 5 years
23%
5 to 10 years
19%
Over 10 years
57%
EQUITIES AND REAL ESTATE
Investment Mix
Equity Type
Percentage
Common Stock
41.2%
Real Estate
41.8%
Preferred Shares
16.9%
Total Equity assets
100.0%
Performance is enhanced with a solid
real estate portfolio, as well as a
common and preferred equity program.
REAL ESTATE PORTFOLIO
23%
35%
42%
The real estate portfolio is comprised of high
quality, income producing properties which are
diversified geographically across Canada and
by property type.
PAST PERFORMANCE
30
20
10
0
-10
Net Par Account Yield
S&P/TSX Composite Index
-20
5 Year GIC
Consumer Price Index
-30
EQUITABLE LIFE ACTIVE
BALANCED PORTFOLIOS
PORTFOLIO POSITIONING
100%
4.6%
4.9%
7.7%
90%
80%
70%
45.4%
59.7%
60%
74.9%
50%
Cash
Real estate
Equity
40%
Fixed income
30%
20%
47.7%
32.5%
10%
16.2%
0%
Income
Balanced
Equitable
Life
Moderated
balanced
Equitable
Life
Active Balanced
Income Portfolio
Active Balanced
Portfolio
Growth
Balanced
Equitable
Life
Active Balanced
Growth Portfolio
COMPETITIVE MER’S
Global
Neutral
Balanced
Global
Equity
Balanced
Canadian
Neutral
Balanced
Category Average MER
3.12%
3.04%
2.85%
Equitable Life Active Balanced
Portfolios
2.42%
2.35%
2.40%
Equitable Life Active
Balanced cost advantage
+0.7%
+0.7%
+0.4%
PERFORMANCE
YTD
1-YR
3-YR
Equitable Life
Active Balanced
Portfolio
8.2%
13.6%
6.8%
Global Neutral
Balanced Peer
Group
5.5%
12.3%
7.4%
Source: Morningstar, as of August 31 2014
REASONS TO OWN
1. Style diversification
2. “Core” funds
3. Cost & transparency