Capital growth with downside protection Cambridge Advisors.
-
Upload
marvin-gary-townsend -
Category
Documents
-
view
220 -
download
2
Transcript of Capital growth with downside protection Cambridge Advisors.
Capital growth with downside protection
Cambridge team
Brandon SnowPrincipal & Portfolio Manager
Alan RadloChief Investment Officer & Portfolio Manager
Emi WintererAnalyst
Stephen GroffAnalyst
Greg DeanAnalyst
Robert SwansonPrincipal & Portfolio Manager
Importance of downside protection
STARTING $ % DECLINERETURN REQUIRED TO GET
BACK TO EVEN
$ 100 -1% 1.1%
$ 100 -15% 18%
$ 100 -25% 33%
$ 100 -50% 100%
Big losses make growing capital much more difficult
Importance of downside protection
STARTING $
% DECLINE YEAR 2 RETURN TOTAL
$ 100 -1% 10% 8.9%
$ 100 -15% 20% 2%
$ 100 -25% 33% 0%
$ 100 -50% 100% 0%
Protecting capital should lead to better compound returns
Philosophy
Long-term holdings
Management aligned with shareholders
Strong capital allocation
Competitive advantage
Examples:• CN Rail• Enghouse• Couche-Tard
Short-term investments
Information edge
An industry where we have experience
Path to value recognition
Examples:• F5 Networks• Petroleum Geo-Services ASA• Eagle Materials
Attractive risk/reward
Our sell discipline
Short-term investments
Reaches fair value
Thesis was wrong
Long-term holdings
Valuation becomes excessive
Thesis changes
We find better opportunities
Long-term holding example – Couche Tard
Need 20 yr chart for ATD/B CN Equity
Short-term investment – Eagle Materials
Downside protection in a difficult year
Source: PaltrakAs of April 30, 2012
YTD 2011 3 Year Inception
Cambridge Canadian Asset Allocation * 3.7% -0.7% 11.9% 3.3%
Quartile 2 1 1 n/a
Cambridge Canadian Equity* 7.8% -1.3% 13.3% 2.9%
Quartile 1 1 1 n/a
Cambridge Global Equity* 14.4% -12.0% 10.4% 2.0%
Quartile 1 4 1 n/a
Castlerock Canadian Growth A** 16.8% n/a n/a 17.9%
Quartile 1 n/a n/a n/a
Castlerock Pure Canadian Equity** 11.9% n/a n/a 10.5%
Quartile 1 n/a n/a n/a
Why invest with Cambridge? Results
Source: CI Investment Consulting
Market outlook
Today’s issues
The negatives
• European debt resolution and austerity measures
• Slowing growth in China and developing markets
• U.S. – headwinds from deleveraging and fiscal restraint
• Canada: personal debt levels and home prices
Today’s issues
The positives
• Current European policymakers more market friendly than predecessors
• U.S. – economic indicators improving; housing bottoming; unemployment topping
Key takeaways
• Global growth slowing, but still positive• Increasingly confident of European resolution• Low interest rates and improving earnings make
North American equities attractive• Systematic risk still warrants a conservative
approach– Large, stable dividend paying stocks– Short to intermediate investment & non-investment
grade bonds– Diverse set of income instruments
• Preferreds• Convertible Bonds• Infrastructure• Selected REITs
The case for equities
Source: Stifel Nicolaus
Dividends on high-quality companies exceed yields on high-quality bonds
Source: Deutsche Bank, Bloomberg
Why invest with Cambridge?
Why invest with Cambridge?
• Flexibility – we aren’t the index– Nimble asset base– Open mandates
• Conviction in what we own– We talk to management often– Site tours
• Aligned with fundholders– Focus on absolute returns
The importance of flexibility
As at March 30, 2012
SP/TSX - Current
20%
31%
The importance of flexibility
SP/TSX Dec 31, 1999 SP/TSX - Current
31%
20%
Cambridge doesn’t replicate the benchmark
Sector
Cambridge
Canadian
Equity CC S&P/TSX Difference
Cambridge Canadian
Asset Allocation
CC
60 S&PTSX/
40 DEX
Universe Difference
Cash 14 14 5 5
Bonds - - 16 40 -24
Financials 16 31 -15 23 19 4
Energy 14 26 -12 16 16 -
Materials 3 20 -17 6 12 -6
Consumer
Discretionary 6 4 2 4 3 1
Consumer
Staples 12 3 9 7 2 5
Information
Technology 13 1 12 9 1 8
Telecomm
Services - 5 -5 1 3 -2
Industrials 14 6 8 6 2 4
Health Care 5 2 3 3 1 2
Utilities 3 2 1 4 1 3
Source: Paltrak, March 30, 2012
Cambridge doesn’t replicate the benchmark
Castlerock Growth Companies
Top holdings as at April 30, 2012
Alimentation Couche-Tard 4.8%
Trilogy Energy Corp 4.1%
Brick Brewing Co. 3.9%
Bauer Performance Sports 3.3%
Shoppers Drug Mart 3.2%
Brookfield Asset Management 3.1%
Enghouse Systems Ltd 2.6%
Stewart Info Svcs 2.5%
ATS Automation Tooling System 2.5%
Boyd Group Income Fund 2.2%
Total 32.2%
Cambridge Canadian Equity
Top holdings as at April 30, 2012
Alimentation Couche-Tard 6.7%
Shoppers Drug Mart 4.5%
Tourmaline Oil Corp. 4.5%
Metro Inc 3.7%
Brookfield Infrastructure LP 3.2%
Keyera Corp. 3.0%
Progressive Waste Solutions 3.0%
Trilogy Energy Corp. 2.9%
Brookfield Asset Management 2.8%
MI Development 2.6%
Total 36.9%
Source: CI Investments
New fund
Cambridge Income Fund
Cambridge Income Fund
Cambridge Income Fund provides investors with what
they are looking for – a stable source of tax-efficient
income that will keep them ahead of inflation. Similar
to all Cambridge funds, it has low volatility and
downside protection built in.
Cambridge Income Fund
• Combination of global fixed income and high-yielding equities
• Diversified across regions, sectors and capital structure
• Focus on income stability, with potential for capital appreciation and inflation protection
Bonds are guaranteeing capital losses for clients
CompanyDividend
YieldBond Price at Dividend Yield
Required Capital Loss
Bristol-Myers 4.1% 110.2 -9.3%
Unilever 3.7% 110.4 -9.4%
Pfizer 3.8% 113.0 -11.5%
JNJ 3.8% 110.9 -9.8%
Merck 4.3% 114.1 -12.4% (as at April 27th) (4 to 6 year bond) Compound annual return
Stocks vs. bonds: the Metro story
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
$1,600
2011 2012E 2013E 2014E 2015E 2016E
Cumulative Interest
Bond Price
To
tal v
alu
e (
$)
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
$1,600
2011 2012E 2013E 2014E 2015E 2016E
Cumulative Dividend
Buyback Impact
Organic Growth
Base Business
Scenario #1: The bond story:2.4% annual gross return*
Scenario #2: The stock story:11.9% annual gross return*
*$1,000 investment a five-year BBB Metro bond trading at 112% above parInitial coupon payment: 5.0%Annual capital appreciation: -2.2%
*Assumes a constant P/E multiple and dividend payout ratio4.0% organic growth4.0% share buyback2.5% dividend yield on principal
Representative portfolio structure
Fund target yield: 4.0%
Investment grade 5.0%
Converts 6.0%
High-yield bonds 7.5%
REITS 5.0%
Preferred 6.6%
High-yield equity 4.9%
Infrastructure 4.5%
Utilities 5.0%
Yields
Cambridge Income Fund
Manager: Robert Swanson
Available in: Class A, E, F and OCorporate Class, T-Class, E, O and US$
Management fees: Class A – 1.90%; Class F – 0.90%
Trailer: 1.00% FE; 0.50% DSC
Tax-effective monthlydistribution: $0.03 (annual targeted yield 4.0%)
Mutual Fund: FEL – CIG 635 Corporate Class: FEL – CIG 2261 DSC – CIG 885 DSC – CIG 3261
Low Load – CIG 1235 Low Load – CIG 1261
Right team, right philosophy, right experience
Experienced investment teamFocused on capital growth with downside protection
With the flexibility to deliver in volatile markets
“If everything is coming your way, you’re probably in the wrong lane.” – Warren Buffett
Fund Fund CodeAssets
(million)Foreign Content
Cambridge Canadian Equity Corporate Class CIG2321 $867.5 maximum 49%
Cambridge Canadian Asset Allocation Corporate Class CIG2322 $831.9 maximum 49%
Cambridge Global Equity Corporate Class CIG2323 $638.7 no restrictions
Cambridge Income Corporate Class CIG2261 $26.4 no restrictions
Cambridge Income Fund CIG635 $42.0 no restrictions
Cambridge American Equity Corporate Class* CIG294 $220.0 no restrictions
Cambridge American Equity Fund* CIG 212 $51.7 no restrictions
Castlerock Canadian Growth Companies Fund HIC191 $13.3 maximum 49%
Castlerock Pure Canadian Fund HIC192 $2.0 maximum 10%
Cambridge multi-asset class, multi-manager
* Effective June 5, 2011 Cambridge assumed management of the funds and they were renamed from CI American Equity Corporate Class and CI American Equity Fund.
Source: RBC Dexia at April 30, 2012
All charts and illustrations in this guide are for illustrative purposes only. They are not intended to predict or project investment results.
®CI Investments, CI Investments design and Cambridge are registered trademarks of CI Investments Inc. Cambridge Advisors is the business name of CI Global Holdings Inc. 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.
Thank You