Report Card Quarter Ending December 31, 2013 Date: Prepared for:, Compliments of: IPC Investment...
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Transcript of Report Card Quarter Ending December 31, 2013 Date: Prepared for:, Compliments of: IPC Investment...
Report Card Quarter Ending December 31, 2013
Date: <Date>
Prepared for:
<Client Name(s)>
<Address>
<City>, <Prov>
<Postal Code>
Compliments of:
<Advisor Name>
IPC Investment Corporation or
IPC Securities Corporation
<Street Address>
<City>, <Prov>, <Postal Code>
Phone: <Telephone Number>
Email: <Email address>
Website: www.ipcc.ca
The Report Card provides a comprehensive review of past, current and potential factors that may impact your investments. Our goal is to continuously monitor your investments to help you meet your financial objectives.
About This Report• Comments in Report Card refer to last three and 12 months.
• Market discussions related to indices and do not analyze or reflect personal investments.
• We review performance, risk management and overall effectiveness of each sub-advisor and underlying fund manager.
• Counsel investment solutions adopt a long-term approach to investing. Each portfolio solution diversified to reflect appropriate:
– Asset mix
– Geographic allocation
– Investment style
• Benchmarks for each Counsel investment solution can be found at end of presentation.
Agenda
1. Market and economic overview
2. What our investment specialists say
3. Review of Counsel investment solutions
4. Benchmarks and Disclaimers
1. Market and Economic Overview
Global Stock Markets: Index Movements
Performance is calculated using local currency. Data as at: December 31, 2013Source: Morningstar Direct, Counsel Portfolio Services
• Quantitative easing (QE) continues to influence
• Leaders: U.S. and Japan, United Kingdom and Germany – (QE’ing frenzy)
• Mediocre: rest of Europe (sense of recovery)
• Laggards: China, Brazil (no QE in place – makes commodities weaker; this impacts on commodity based countries like Canada and Australia)
• Biggest risk is “recency bias”
Source: Morningstar
1 Year
•QE + low rates: helped equities (Risk ON)
•Fears of reduction in QE: hurt Fixed Income (Risk OFF)
A bi-polar world – those that QE and those that don’t
Source: Morningstar
0.00
2.00
4.00
6.00
8.00
10.00
12.00
October-13 November-13 December-13
S&P/TSX Composite TR S&P 500 TR CAD MSCI EAFE GR CAD DEX Universe
3 Months
• The fear of large tapering is off the table – equities breathed a large sigh of relief.
• The concern is that much of the rise in the equity markets is based on low volumes and large margin debt.
Canadian Dollar Performance
• China slowing and the Iran/U.S. accord meant oil and geographic risks were lower – this impacted commodity based countries like Canada.
• U.S. prospects seemingly looking better helped the U.S. dollar vs. Canadian dollar.
• Stability in Europe (no more scares from the weaker nations) helped the euro vs. the Canadian dollar.
• Bank of Canada governor has stated that a lower Canadian dollar will support exports – can expect Canadian dollar to go lower.
CAD vs. U.S. Dollar CAD vs. Euro
Source: Bank of Canada
0.88
0.9
0.92
0.94
0.96
0.98
1
1.02
1.04
12/3
1/20
12
1/31
/201
3
2/28
/201
3
3/31
/201
3
4/30
/201
3
5/31
/201
3
6/30
/201
3
7/31
/201
3
8/31
/201
3
9/30
/201
3
10/3
1/20
13
11/3
0/20
13
12/3
1/20
13
0.62
0.64
0.66
0.68
0.7
0.72
0.74
0.76
0.78
0.8
12/3
1/20
12
1/31
/201
3
2/28
/201
3
3/31
/201
3
4/30
/201
3
5/31
/201
3
6/30
/201
3
7/31
/201
3
8/31
/201
3
9/30
/201
3
10/3
1/20
13
11/3
0/20
13
12/3
1/20
13
Canada: Equities Vs. Bonds
• The fear of tapering hurt bonds – it’s the uncertainty of what might happen.
• Yields in equities are greater than fixed income, hence the move to higher yielding equities.
• Canadian equities also moved up with the momentum of U.S. equities.
• Fixed income is not only a yielding component of a portfolio but is also an important diversification tool. There is almost always a place for fixed income.
Short-term: Equities vs. Bonds Long-term: Equities vs. Bonds
Source: Globe and Mail
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
1 Month 3 Month 6 Month 1 Year
DEX Universe S&P/TSX Composite TR
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
3 Year 5 Year 10 Year 15 Year 20 Year
DEX Universe S&P/TSX Composite TR
Canadian Market Overview
• Materials - Commodities, especially gold was hurt by the increasing U.S. Dollar.
• Utilities were hurt because the yields are lower.
• The rest of the market was strong, mainly on the back of buoyancy in the U.S. market.
Investment Style Market Cap
Source: Morningstar Direct Source: Morningstar Direct
3/2013 6/2013 9/2013 12/20139.8K
10K
10.2K
10.4K
10.6K
10.8K
11K
11.2K
11.4K
11.6K
11.8K
12K
Investment Name Value
MSCI Canada Growth GR CAD (Market Return, CAD, Pre... 11.19K MSCI Canada Value GR CAD (Market Return, CAD, Pre-... 11.94K
MSCI Canada Value GR CAD
Time Period: 12/31/2013
Value: 11,940.70
Cumulative Return from 12/1/2012: 19.41%
MSCI Canada Growth GR CAD
Time Period: 12/31/2013
Value: 11,188.32
Cumulative Return from 12/1/2012: 11.88%
Source: Morningstar Direct
MSCI Canada Growth Index
MSCI Canada Value Index.
3/2013 6/2013 9/2013 12/20139.2K
9.4K
9.6K
9.8K
10K
10.2K
10.4K
10.6K
10.8K
11K
11.2K
11.4K
11.6K
Investment Name Value
S&P/TSX 60 TR (Market Retu... 11.43K S&P/TSX Completion TR (Mar... 11.33K S&P/TSX Small Cap TR (Mark... 10.93K
S&P/TSX 60 TR
Time Period: 12/31/2013
Value: 11,434.05
Cumulative Return from 12/31/2012: 14.34%
S&P/TSX Completion TR
Time Period: 12/31/2013
Value: 11,327.61
Cumulative Return from 12/31/2012: 13.28%
S&P/TSX Small Cap TR
Time Period: 12/31/2013
Value: 10,926.38
Cumulative Return from 12/31/2012: 9.26%
Source: Morningstar Direct
S&P TSX 60 Total Return
S&P TSX Completion Total Return
S&P TSX Small Cap Total Return
Market SectorYear-on-
YearYear-to-
dateQ4
2013Energy 13.32 13.32 4.19Materials - 29.11 - 29.11 - 1.98Industrials 37.55 37.55 16.28Consumer Discretionary 43.04 43.04 7.96Consumer Staples 23.57 23.57 4.08Healthcare 44.20 44.20 9.29Financials 26.78 26.78 10.69Info. Technology 36.12 36.12 8.78Telecom Services 11.38 11.38 5.97Utilities - 4.44 - 4.44 3.06
U.S. Market Overview
• Obamacare helped boost Healthcare stocks, especially the insurers.
• Liquidity has been the wind behind the sails of the U.S. economy.
• Utilities and telecom services performed the weakest because of their lower yields.
Investment Style
Returns measured in U.S. dollar terms
Market Cap
Source: Morningstar Direct Source: Morningstar Direct
3/2013 6/2013 9/2013 12/201310K
10.5K
11K
11.5K
12K
12.5K
13K
13.5K
14K
Investment Name Value
Russell 1000 Growth TR USD (Market Return, USD, Pre-... 13.58K Russell 1000 Value TR USD (Market Return, USD, Pre-T... 13.47K
Russell 1000 Growth TR USD
Time Period: 12/31/2013
Value: 13,584.62
Cumulative Return from 12/31/2012: 35.85%
Russell 1000 Value TR USD
Time Period: 12/31/2013
Value: 13,465.84
Cumulative Return from 12/31/2012: 34.66%
Source: Morningstar Direct
Russell 1000 Value Index
Russell 1000 Growth Index
3/2013 6/2013 9/2013 12/201310K
10.5K
11K
11.5K
12K
12.5K
13K
13.5K
14K
14.5K
Investment Name Value
S&P 500 TR USD (Market Ret... 13.46K S&P MidCap 400 TR (Market ... 13.56K S&P SmallCap 600 TR USD (... 14.41K
S&P SmallCap 600 TR USD
Time Period: 12/31/2013
Value: 14,408.27
Cumulative Return from 12/31/2012: 44.08%
S&P 500 TR USD
Time Period: 12/31/2013
Value: 13,463.18
Cumulative Return from 12/31/2012: 34.63%
S&P MidCap 400 TR
Time Period: 12/31/2013
Value: 13,564.25
Cumulative Return from 12/31/2012: 35.64%
Source: Morningstar Direct
S&P 500 Total Return
S&P Mid Cap 400 Total Return
S&P Small Cap 600 Total Return
Market SectorYear-on-
YearYear-to-
dateQ4
2013Energy 22.27 22.27 7.74Materials 22.73 22.73 10.05Industrials 37.63 37.63 12.92Consumer Discretionary 40.96 40.96 10.37Consumer Staples 22.68 22.68 7.89Healthcare 38.74 38.74 9.60Financials 33.21 33.21 9.82Info. Technology 26.23 26.23 12.75Telecom Services 6.49 6.49 4.17Utilities 8.75 8.75 1.78
International Market Overview
• Japan was boosted by their own version of QE, in fact they are ‘QE on steroids’, putting approximately $225 billion instead of the U.S.’s $85 billion into monthly purchases.
• China had a marked slowdown that impacted other countries, especially the commodity producing countries like Brazil.
• The QE tapering discussion hurt emerging market bonds.
• Gold was affected by slowing global growth and a rising perception of U.S. growth.
Investment Style
Returns measured in Canadian dollar terms
Source: Morningstar Direct
3/2013 6/2013 9/2013 12/20139.75K
10K
10.25K
10.5K
10.75K
11K
11.25K
11.5K
11.75K
12K
12.25K
12.5K
Investment Name Value
MSCI EAFE Growth GR USD (Market Return, USD, Pre-T... 12.28K MSCI EAFE Value GR USD (Market Return, USD, Pre-Tax) 12.35K
MSCI EAFE Growth GR USD
Time Period: 12/31/2013
Value: 12,277.76
Cumulative Return from 12/31/2012: 22.78%
MSCI EAFE Value GR USD
Time Period: 12/31/2013
Value: 12,348.04
Cumulative Return from 12/31/2012: 23.48%
Source: Morningstar Direct
MSCI EAFE Value
MSCI EAFE Growth
Market SectorYear-on-
YearYear-to-
dateQ4
2013Energy 18.84 18.84 6.99Materials 3.91 3.91 4.44Industrials 32.80 32.80 9.32Consumer Discretionary 39.80 39.80 8.33Consumer Staples 22.03 22.03 6.12Healthcare 37.06 37.06 9.02Financials 27.95 27.95 7.81Info. Technology 29.30 29.30 11.97Telecom Services 32.37 32.37 9.90Utilities 13.73 13.73 2.15
Recency Bias
• Definition: the tendency of people to place too much weight on the most recent events.
• What just happened will keep happening.
• Events from the past might be less important.
Example: an Earthquake occurs.
People change their buying habits based on the fact that they recently experienced an earthquake; they might buy too many earthquake supplies even though strong earthquakes are quite rare.
This market was brought to you by the letters Q & E
It was all about Q & E
QE
Source: MYRA Capital
Despite all the things thrown at it – S&P 500 moved up as if made from Teflon
Range-Bound Markets are Typical
18
U.S. Stock Market
13 Years • Markets have been range-bound in 109 of the last 144 years
• Secular bull runs are a rarity; not the norm
• After major bull markets, markets trend sideways for a minimum of 15 years
13 years into this consolidation market – best one before this was 15 years – so have about 4 years left in this range bound market
SOURCE: Sionna Investments
Inflation Adjusted Market Is Not At New Highs
19 Source: Gary Shilling’s Insight January 2014
Markets have not broken a record when inflation is taken into account
Source: STAWEALTH.COM
Margin Debt is getting to concerned levels
Chart to Jan 9. 2014
Trading volumes have been trending lower, suggesting new buyers may be scarce.
Only the Tech era had higher P/E’s
(NTM – Next Twelve Months)
Bear Arguments
1.Fed quantitative easing is over
2.Interest rate rise will kill rally
3.Growth is too weak
4.Corporate profit margins are peaking
5.Business cycle/bull market is getting old
6.Dysfunction remains in Washington
7.A hard landing in China may occur
8.Stocks are in a bubble (valuations too high)
Benign, if Not Bullish for Stock Prices
•Monetary Ease (Dovish Fed)
•Fiscal Restraint (Falling Deficit)
Big Themes for 2014
•Economic Recovery
•Obamacare
•Further Fiscal Restraint
•Loss of Global Prestige
•Mid-Term Elections
2. What our Investment Specialists say
As we look ahead to 2014, we expect another solid year for the Canadian equity market, but are more cautious on the U.S. market given the rapid price appreciation of the last two years. We believe the U.S. economy is poised to accelerate as the private sector is finally strong enough to withstand stimulus withdrawal and still post 3%+ GDP growth.
Canadian Dividend Equities
Commodities have been a drag on the resource laden Canadian equity market this past year. With the expected improvement in global growth, the free fall in commodity prices should moderate. This assumes no adverse change to China’s current level of GDP growth. Gold remains a concern as investors appear to no longer need the safety gold typically offers due to the improved growth outlook and lack of geopolitical/financial turmoil.
North American economies will continue to show signs of improvement. In the U.S., recent gains in housing, consumer confidence and manufacturing will sustain growth going forward. Canada will be a net benefactor from the strengthening U.S. economy. A weaker Canadian dollar will also contribute to Canada’s growth through improved exports.
Canadian Quantitative Growth Equities
Global Fixed Income
Despite the relatively strong fundamental outlook in many emerging-market countries, we believe the emerging-market asset class is likely to see broad-based bouts of elevated volatility surrounding the issue of Fed tapering. We believe that selecting countries with relatively good fundamentals, avoiding countries with poor fundamentals, and actively managing risk within emerging markets may prove more successful than a passive allocation to emerging markets as an asset class.
Global Dividend
For Europe, the challenges of divergent economic profiles being managed under a singular monetary authority remain at the forefront. Although many euro zone nations, especially the weaker southern European countries, appear to be on more solid economic footing, having returned to modest growth, the frailty of those recoveries and weakness in France's large economy are likely to keep European GDP only modestly positive.
Global Real Estate
From a real estate perspective the supply side remains limited. Even though the availability of real estate financing was relaxed during 2013 and is more readily available than a year before, particularly in Europe which is still undergoing the deleveraging process, we expect development capacity to be very specific and de-risked, and we do not expect that targeted development activity would bring supply out of balance.
Equity markets have risen consistently over the past year, with a number of market indices approaching record highs. Investors have bid up equity valuations on signs that the global economy was strengthening and on relief that the U.S. Federal Reserve Board would use a measured approach in tapering its quantitative-easing program. The portfolio management team believes rising equity markets have led to an increase in valuation of many businesses, which may not be warranted.
U.S. Small Cap
Our outlook for the Canadian small cap sector remains positive. With global economies on a firmer footing, we would expect many companies to benefit from improved demand for their products and services, leading to growth in earnings and cash flows. Should the economy be in a self propelling recovery, this should give the U.S. Fed the leeway to engage in further tapering of Quantitative Easing without alarming investors too much.
Canadian Small Cap
We expect a slightly better backdrop for the U.S. In addition, we expect to see continued economic improvement in Europe and China which should have a positive effect on the global economy. With a more constructive macro outlook, an investment posture that increases the portfolio’s exposure to companies that are leveraged to global growth may be appropriate. We continue to focus on companies with dependable solid top-line growth and visible earnings streams.
U.S. Growth Equities
3. Review Of Counsel Investment Solutions
* Target asset allocation weights adjusted following annual review of Counsel portfolios and with the renewal of the Simplified Prospectus.This Portfolio is managed using a multi-manager process. The current sub-advisor or underlying mutual fund manager for each mandate is listed beside the mandate for which it provides portfolio management / sub-advisory services. This Portfolio invests in underlying mutual funds (which may be managed by Counsel) currently sub-advised by the sub-advisors listed beside each investment mandate. For information on the underlying funds, please refer to the Simplified Prospectus, which is available on our websiteat www.counselservices.com or on the SEDAR website at www.sedar.com.
Mandate Target Allocation (Oct 2009)*
Current Target Allocation*
Canadian short term fixed income n/a 7.00%Fixed income 40.00% 33.00%Canadian value equities 8.00% 7.75%Canadian growth equities 8.00% 7.75%U.S. value equities 7.50% 7.00%U.S. growth equities 7.50% 7.00%International value equities 7.50% 7.00%International growth equities 7.50% 7.00%Global small cap 8.00% 10.50%Global real estate 6.00% 6.00%
Counsel Balanced Portfolio
Counsel Balanced PortfolioEffective Asset Class Mix Effective Top 10 Sector Allocation
Effective Geographic Mix
Counsel Balanced Portfolio
Positive and negative attribution for Q4 2013
Positive and negative attribution for the 12 months ended December 31, 2013
+ Positive attribution to overall Portfolio, reflecting that the mandate outperformed its relative benchmark on a gross returns basis.
- Negative attribution to overall Portfolio, reflecting that the mandate underperformed its relative benchmark on a gross returns basis.
Mandate
Canadian short term
fixed incomeFixed
income
Cdn value
equities
Cdn growth equities
U.S. value
equities
U.S. growth equities
Int'l value equities
Int'l growth equities
Global small cap
Global real
estate
Portfolio Design &
ConstructionAttribution + + - + + + + + - + -
Mandate
Canadian short term
fixed incomeFixed
income
Cdn value
equities
Cdn growth equities
U.S. value
equities
U.S. growth equities
Int'l value equities
Int'l growth equities
Global small cap
Global real
estate
Portfolio Design &
ConstructionAttribution + + + + + + + - + - -
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 0.92 5.63 8.95 14.56 6.12 9.01 4.43 4.30 1/15/02Net Benchmark* 1.22 6.76 9.97 18.38 8.98 7.98 4.10 3.11
Performance (%)
Compound Returns vs. Benchmark
Counsel Short Term Bond
Effective Investment Mix Effective Bond Maturity
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' -0.17 0.49 0.74 0.44 1.64 n/a n/a 1.61 1/25/10Net Benchmark* -0.15 0.57 1.07 0.99 2.04 n/a n/a 2.29
Compound Returns vs. Benchmark
Performance (%)
Counsel Short Term Bond
Contributors Detractors
Q4 • Security selection in the Financial sector
• Incremental yield associated with the overweight exposure to corporate credit
• Negative impact from yield curve positioning, as the shortest sections of the yield curve moved down and the 4-6 year section moved up
Past 12 months
• Incremental yield associated with the overweight exposure to corporate credit
• Security selection, particularly in financial and communication sectors
NA
Counsel Fixed Income
Effective Investment Mix Effective Bond Maturity
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' -0.26 0.64 1.07 -0.78 2.75 4.50 4.15 5.36 5/31/01Net Benchmark* -0.50 0.18 0.10 -1.99 3.13 3.98 4.36 5.08
Performance (%)
Compound Returns vs. Benchmark
Canadian Core Fixed Income
Contributors Detractors
Q4 • Overweight in corporate bonds• Overweight in BBB-rated corporate
bonds • Shorter-than-index duration
• Tactically reducing provincial bond exposure into a rallying provincial bond market hurt performance
• Overweight position in mid-term bonds
High Yield Fixed Income
Contributors Detractors Strategic Shifts
Q4 • First Data Corp. • Sprint Communications• Valeant Pharmaceutical
International
• Bombardier Inc.• Quebecor Inc. • Lone Pine Resources
Inc.
• Increased Technology and Transportation
• Reduced Paper & Packaging
Past 12 months
• Rite Aid Corp. • First Data Corp. • Intelsat Investments SA
• Bombardier Inc. • First Quantum Minerals
Ltd. • Lone Pine Resources
Inc
Global Fixed Income
Contributors Detractors
Q4 • In Q4 2013, the portfolio’s currency positions led positive absolute performance, followed by sovereign credit exposures and interest-rate strategies
• The portfolio’s currency positions in Asia ex-Japan added to results. The portfolio’s positions in peripheral European currencies against the euro also benefited absolute results
• Select duration exposures in Europe added to results
In Q4 2013, there were no significant detractors from absolute performance
Counsel Canadian Value
Contributors Detractors Strategic Shifts
Q4 • Methanex Corporation • Thomson Reuters
Corporation • Silver Wheaton Corp.
• Empire Co. Ltd. Class A • Central Fund of Canada
Limited Class A • Canadian Pacific Railway
Overweight sectors • Financials• Energy• Consumer Discretionary• Consumer Staples
Underweight sectors • Materials• Industrials• Telecommunication
Services• Information Technology• Health Care
Past 12 months
• Methanex Corporation • Thomson Reuters
Corporation • Canadian Tire Corporation,
Limited Class A
• Central Fund of Canada Limited Class A
• Valeant Pharmaceuticals International, Inc.
• Barrick Gold Corporation
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 1.38 5.80 10.51 12.54 3.71 n/a n/a 10.49 01/14/09Net Benchmark* 1.89 6.98 13.38 11.74 2.15 n/a n/a 11.51
Performance (%)
Compound Returns vs. Benchmark
Effective Asset Class Mix Effective Top 10 Sector Allocation
Counsel Canadian Value
Counsel Canadian Growth
Effective Asset Class Mix Effective Top 10 Sector Allocation
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 1.50 7.35 12.98 15.41 2.72 n/a n/a 11.10 01/14/09Net Benchmark* 1.89 6.98 13.38 11.74 2.15 n/a n/a 11.51
Compound Returns vs. Benchmark
Performance (%)
Canadian Growth EquitiesContributors Detractors Strategic Shifts
Q4 • Positioning in the Consumer Discretionary
• Positioning in the Materials sector
• Canadian Tire Corp was the top individual relative contributor
• Positioning in the Financials Sector
• Positioning in the Consumer Staples Sector
• Potash Corp of Saskatchewan was the largest individual relative detractor
We reduced our underweight position in materials and energy during the quarter. We also reduced our cash position.
Overweight sectors We are positioned for continued cyclical growth led by the U.S. economy by being overweight cyclical sectors (particularly non-resource cyclical). Underweight sectors We are underweight in interest rate sensitive groups as we expect interest rates to continue to rise gradually as global growth improves and Monetary Policy becomes less accommodative.
Past 12 months
• Positioning in the Consumer Discretionary sector
• Positioning in the Materials Sector
• Top individual contributors were Barrick Gold Corp., Magna International and Canadian Tire Corp.
• Positioning in the Financials Sector
• Positioning in the Telecom Sector
• Positioning in Bank of Montreal, New Gold and Silver Wheaton were the largest individual detractors from relative performance
Canadian Quantitative Growth Equities
Contributors Detractors Strategic Shifts
Q4 • Constellation Software Inc.
• Methanex Corporation • Enerplus Corporation
• CGI Group Inc. • Stantec Inc. • Canadian Pacific Railway
The strategy is based purely bottom up stock selection, sector changes are a residual of stock selection.
Sector exposure moved from six to seven with the addition of industrials and consumer staples and the elimination of financials. Sector exposure until the February 28th rebalancing will consist of Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, and Information Technology.
Past 12 months
• Methanex Corporation • Valeant
Pharmaceuticals International Inc.
• Magna International Inc.
• Agnico-Eagle Mines Limited
• Franco-Nevada Corporation
• Canadian Pacific Railway
Counsel U.S. Value
Contributors Detractors Strategic Shifts
Q4 • Valero Energy Corporation • Marathon Petroleum
Corporation • Tesoro Corporation
• Safeway Inc. • Murphy USA, Inc. • Berkshire Hathaway Inc.
There were no sector allocation shifts during
the fourth quarter. Past 12 months
• Safeway Inc. • Seagate Technology PLC • Western Digital Corporation
• D.R. Horton, Inc. • L-3 Communications
Holdings, Inc. • McCormick & Company,
Incorporated
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 2.08 18.22 22.10 47.76 14.73 n/a n/a 16.71 01/14/09Net Benchmark* 2.80 13.41 14.56 40.22 17.48 n/a n/a 13.91
Compound Returns vs. Benchmark
Performance (%)
Counsel U.S. ValueEffective Asset Class Mix Effective Top 10 Sector Allocation
Counsel U.S. Growth
Contributors Detractors Strategic Shifts
Q4 • Pharmaceuticals Biotechnology & Life Sciences Industry – Gilead Sciences and Biogen Idec
• Software & Services Industry – Google and Visa
• Consumer Services Industry – Wynn Resorts, Starwood Hotels & Resorts Worldwide, and Chipotle Mexican Grill.
• Cash - 5% of average net assets dampened performance as the benchmark index returned +10.5%
• Consumer Durables & Apparel Industry – Lululemon Athletica
• Food Beverage & Tobacco Industry – Green Mountain Coffee Roasters.
The portfolio reduced its allocation to Financials from 14% to 9% due primarily to the sale of Wells Fargo and paring of our AIG position.
Additionally, Industrials were reduced from 11% to 9% due primarily to the sale of Union Pacific.
The portfolio increased sector allocations modestly in Consumer Discretionary Health Care and Energy.
Past 12 months
• Pharmaceuticals Biotechnology & Life Sciences Industry – Gilead Sciences and Biogen Idec
• Consumer Services - Wynn Resorts, Chipotle Mexican Grill and Starbucks Corp.
• Information Technology – Google, Facebook Inc. and Visa Inc.
• Cash - 5% of average net assets dampened performance as the benchmark index returned +32%
• Industrials – In aggregate, the portfolio’s holdings in the sector returned +32% but underperformed the +41% sector return in the benchmark index; in particular, Precision Castparts Corp. and Cummins Inc. lagged.
• Food Beverage & Tobacco Industry – Green Mountain Coffee Roasters
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 2.66 14.07 18.07 41.61 15.02 n/a n/a 15.12 01/14/09Net Benchmark* 3.13 13.85 19.65 41.24 17.88 n/a n/a 16.73
Performance (%)
Compound Returns vs. Benchmark
Counsel U.S. GrowthEffective Asset Class Mix Effective Top 10 Sector Allocation
Counsel International Value
Contributors Detractors Strategic Shifts
Q4 • ING Groep NV • PostNL NV • Aryzta AG Net Euro exposure via
securities and cash balance net of hedge helped portfolio performance
• Henderson Land Development
Canadian dollar weakness against most currencies, particularly the Euro, hurt the portfolio via currency hedge. Hedge levels were scaled back for all currencies except the Yen, mitigating the loss potential
Changes are stock specific and not done to specifically over or underweight sectors.
Past 12 months
• Nokia OyJ • Renault SA • ING Groep NV On an annual basis net of the
currency hedge appreciation of the Euro vs. Canadian dollar was beneficial.
• Canon Inc• Henderson Land Development The currency hedge program hurt
the portfolio as a whole in 2013, the only exception being the Japanese Yen as the Yen weakened in 2013, in this case the hedge helped.
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 0.50 8.08 18.73 31.25 7.27 n/a n/a 9.25 01/14/09Net Benchmark* 1.17 6.53 15.36 26.29 8.70 n/a n/a 11.48
Compound Returns vs. Benchmark
Performance (%)
Industrials 0.42% Financials -1.93% Cons. Discretionary -4.96% Cons. Staples 1.64% Energy 2.01% Materials -0.13% Information Technology -1.69% Telecom. Services 0.22%
Counsel International ValueEffective Asset Class Mix Effective Top 10 Sector Allocation
Counsel International Growth
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 2.05 8.13 14.82 21.55 9.70 n/a n/a 13.21 01/14/09Net Benchmark* 1.89 8.36 16.38 29.79 9.38 n/a n/a 9.76
Performance (%)
Compound Returns vs. Benchmark
Effective Asset Class Mix Effective Top 10 Sector Allocation
Counsel Global Real Estate
Contributors Detractors Strategic Shifts
Q4 • Stock selection in the U.S. and Canada
• Allocation and stock selection in Japan
• Stock selection in Western Europe
• Stock selection in Hong Kong and China
• Allocation to the United Kingdom
The biggest shift that occurred during the quarter was an increase in weighting towards specialty (data centers) as the portfolio bought into a small cap data center company QTS in the U.S. This shift was funded via a reduction in weighting towards the industrial sector (via an exit from Segro in the U. K.).
Past 12 months
• Stock selection and allocation in the U.S.
• Allocation and stock selection in Singapore
• Stock selection in Australia
• Cash • Stock selection in Japan • Allocation to Latin America
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 0.41 2.18 1.55 6.17 6.70 n/a n/a 11.47 01/14/09Net Benchmark* 0.43 2.46 1.87 9.79 8.99 n/a n/a 13.58
Compound Returns vs. Benchmark
Performance (%)
Counsel Global Real EstateEffective Asset Class Mix Effective Geographic Mix
Counsel Global Small Cap
Positive and negative attribution for Q4 2013
Positive and negative attribution for the past 12 months ended December 31, 2013
+ Positive attribution to overall Portfolio, reflecting that the mandate outperformed its relative benchmark on a gross returns basis.
- Negative attribution to overall Portfolio, reflecting that the mandate underperformed its relative benchmark on a gross returns basis.
MandateCdn Small
Cap
U.S. small cap
Int'l small cap
Portfolio Design &
ConstructionAttribution + - - +
MandateCdn Small
Cap
U.S. small cap
Int'l small cap
Portfolio Design &
ConstructionAttribution + - + +
Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yrIncept.
Return
Incept.
Date
Series 'A' 2.65 9.33 17.59 34.16 9.65 17.18 n/a 6.15 6/6/05Net Benchmark* 2.65 10.79 20.26 40.46 13.93 16.34 n/a 5.79
Performance (%)
Compound Returns vs. Benchmark
Counsel Global Small CapEffective Asset Class Mix Effective Top 10 Sector Allocation
Canadian Small Cap
Contributors Detractors Strategic Shifts
Q4 • Low weight in mining and metals - a weak performing sector during the quarter.
• An overweight allocation to alternative lenders and asset managers.
• Auto related stocks were up significantly in the quarter.
• Paladin Labs was acquired by Endo Health and was sold at a 54% premium after the announcement.
• Dundee Precious Metals• Interest sensitive stocks, such as
Boralex Power, Agellan Commerical REIT and Dundee Industrial REIT came under pressure due to fears over rising interest rates.
• Martinrea International lost 20% of its value after the company disclosed misreported financials in the past. The position was sold out of the portfolio prior to the announcement mostly due to concerns over ongoing legal battles and the potential impact on its operations.
There were no major sector shifts, but we were actively reducing the portfolio’s exposure to metals and mining companies.
Past 12 months
• Low weight in mining and metals - a very weak performing sector during the past 12 months.
• Paladin Labs• CCL Industries• Winpak• Western Forest products
• Material stocks such as Dundee Precious Metals and Major Drilling
• Surge Energy and Angle Energy
U.S. Small Cap
Contributors Detractors Strategic Shifts
Q4 • Alliance Data Systems Corp. (ADS) • Alere Inc. •Global Payments Inc.
• Cash • ION Geophysical Corp • Energy sector
There were no significant changes to the sector allocation within the portfolio during the period
Past 12 months
• Alliance Data Systems Corp.
• International Rectifier Corp.
• Alere Inc.
• Cash • ION Geophysical Corp. • Energy sector
International Small Cap
Contributors Detractors Strategic Shifts
Q4 The Information Technology sector was the largest contributor for the period. The companies in the portfolio returned, on average, 5.6% while those in the benchmark returned, on average, 3.5%. The portfolio’s top two contributors were in this sector. •Oxford Instruments Plc. was up 19% in the period. •Infomart Corporation was up over 25% in the period.
The portfolio is structurally overweight in the Consumer Discretionary sector at 25.5% versus the benchmark at 18.7%. The securities in the portfolio were up, on average, 1% while those in the benchmark were up 1.7%. The portfolio’s three largest detractors were in this sector. •REA Group was down -9.1% during the period. •Merida Industry, a Taiwanese bicycle manufacturer, was down -7.7% during the period.• United Arrows Ltd. was down -11.2% during the period.
Not applicable as Wasatch assumed the investment management of this mandate on November 30, 2013.
Past 12 months Not applicable. Wasatch assumed the investment management of
this mandate on November 30, 2013.
4. Benchmarks and Disclaimers
Net Benchmarks
Investment Solution Index
Counsel Conservative Portfolio 60% DEX Universe Bond, 40% MSCI World Total Return
Counsel Regular Pay Portfolio 50% DEX Universe Bond, 20% MSCI World Total Return, 30% S&P/TSX Composite Dividend Total Return
Counsel Balanced Portfolio 40% DEX Universe Bond, 60% MSCI World Total Return
Counsel Growth Portfolio 20% DEX Universe Bond, 80% MSCI World Total Return
Counsel All Equity Portfolio 100% MSCI World Total Return
Counsel Managed Yield Portfolio 55% DEX Universe Bond Index, 25% JP Morgan Global Government Bond Index, 20% S&P/TSX Composite Dividend Total Return
Counsel Managed High Yield Portfolio 40% DEX Universe Bond, MSCI AWCI High Dividend Yield, 25% Bank of America Merrill Lynch Global High Yield & Emerging Market Corporate Bond Total Return
Counsel Income Managed Portfolio 40% DEX Universe Bond, 40% S&P/TSX Composite Dividend Total Return, 20% MSCI World Total Return
Counsel Managed Portfolio 40% DEX Universe Bond, 15% MSCI World Total Return, 45% S&P/TSX Composite Total Return
Counsel World Managed Portfolio 40% DEX Universe Bond, 60% MSCI World Total Return
Net benchmark return is calculated using the actual management expense ratio(s) of the equivalent exchange traded fund(s) and weighing that/those MER(s) by the benchmark/hybrid benchmark weight(s). The weighted MER(s) is/are then added to a typical retail management fee of 1%. In February 2009, the typical retail management fee for Counsel Fixed Income was revised from 1% to 0.5%.
Net Benchmarks
Investment Solution Index
Counsel Short Term Bond 100% DEX Short Term Bond Index
Counsel Fixed Income 100% DEX Universe Bond Index
Counsel High Yield Fixed Income 70% Bank of America Merrill Lynch U.S. High Yield Master II Total Return, 30% Bank of America Merrill Lynch Emerging Market Liquid Corporate Plus Total Return
Counsel Canadian Dividend 100% S&P/TSX Dividend Composite Total Return
Counsel Canadian Value 100% S&P/TSX Composite Index
Counsel Canadian Growth 100% S&P/TSX Composite Index
Counsel U.S. Value 100% Russell 1000 Value Index
Counsel U.S. Growth 100% Russell 1000 Growth Index
Counsel International Value 100% MSCI EAFE Value Index
Counsel International Growth 100% MSCI EAFE Growth Index
Counsel Global Dividend 100% MSCI ACWI High Dividend Yield Index
Counsel Global Real Estate 100% FTSE EPRA/NAREIT
Counsel Global Small Cap 100% MSCI World Small Cap Total Return
Net benchmark return is calculated using the actual management expense ratio(s) of the equivalent exchange traded fund(s) and weighing that/those MER(s) by the benchmark/hybrid benchmark weight(s). The weighted MER(s) is/are then added to a typical retail management fee of 1%. In February 2009, the typical retail management fee for Counsel Fixed Income was revised from 1% to 0.5%.
General DisclaimersThis report may contain forward-looking statements which reflect our current expectations or forecasts of future events. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as: “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, “preliminary”, “typical” and other similar expressions. In addition, these statements may relate to future corporate actions, future financial performance of a fund or a security and their future investment strategies and prospects. Forward-looking statements are inherently subject to, among other things, risks, uncertainties and assumptions which could cause actual events, results, performance or prospects to differ materiality from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, the volatility of global equity and capital markets, business competition, technological change, changes in government regulations, changes in tax law, unexpected judicial or regulatory proceedings, catastrophic events and the ability of Counsel Portfolio Services to attract or retain key employees. The foregoing list of important risks, uncertainties and assumptions is not exhaustive. Please consider these and other factors carefully and not place undue reliance on forward-looking statements.
The forward-looking information contained in this report is current only as of the date of this report. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Simplified Prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The indices cited are widely accepted benchmarks for investment performance within their relevant regions, sectors or asset class, represent non-managed investment portfolios, exclude management fees and expenses related to investing in the indices, and are not necessarily indicative of future investment returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
To learn more about Counsel’s investment solutions, please speak to your Advisor.
Review Checklist Your portfolio mix remains consistent
with your risk tolerance.
Your portfolio mix has been rebalanced
to your pre-determined mix (see
Portfolio Review).
Your portfolio’s long-term performance
is acceptable given your investment
strategy and financial objectives.
Sub-advisors and underlying fund
managers have been effective in their
respective areas of expertise.
Do you have any questions or
concerns?
Is an action plan required?
We are committed to helping youachieve your financial goals through:
• effective investments
• accountability of all parties
• operating with your objectives and goals as our guide
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