a unique approach delivering lower volatility and steady returns chris vokes, dealer relations team
TRANSCRIPT
A unique approach delivering lower volatility and steady returns
Chris Vokes, Dealer Relations Team
Introduction Alternative investment specialists Unique investment approach Delivering:
– Principal Protection – Safety
– Low Volatility – Peace of mind
– Steady Returns – Positive monthly statements
– Portfolio Diversification – Stabilize returns
– Tax Minimization – Pay less tax
Agenda Today’s investing environment Absolute return investing What the smart money is doing How Paradigm can make your money smart money
Today’s investing environment
“Every long bull market is followed by a long bear market.“
| Sir John
Templeton
Long bull markets Long bear marketsPeriod
1843-1853
1861-1881
1896-1906
1921-1929
1949-1966
1982-2000
Annual return
12.5%
11.5%
11.5%
24.8%
14.1%
14.8%
Duration
10 years
20 years
10 years
8 years
17 years
18 years
Period
1853-1861
1881-1896
1906-1921
1929-1949
1966-1982
2000- ?
Annual return
-2.8%
3.7%
-1.9%
1.2%
-1.5%
?
Duration
8 years
15 years
15 years
20 years
16 years
?
Source: Secular Market Trends
Changing investor priorities
Investor Priorities Are Shifting Towards Capital protection Fair and steady rate of return Absolute returns vs. relative returns Favourable tax treatment
Your Traditional Options GICs, bonds and savings accounts Money market accounts REITs and income trusts Real estate
An alternative option: absolute return investing?
The safest form of alternative investments which includes: fund of funds, hedge funds, real estate, private equity, etc.
Performs independently to traditional assets Uses various investing strategies not available to mutual
funds to achieve consistent positive performance Provides steady stable returns in all markets
Not a new concept
Proven since 1949 Alfred Jones, professor / financial advisor founded the first
alternative strategy fund in New York Systematically balanced long investments in undervalued
stocks with short positions in overvalued stocks Result: neutralized market risk
Focus of absolute return managers
Provide consistently positive returns month over month regardless of how markets perform
A conservative approach Mandate: positive monthly returns and wealth preservation Take advantage of a number of different investing strategies to
achieve their mandate
The difference between relative and absolute managers
Relative Return Manager Absolute Return Manager
Goal: deliver better returns than relative benchmark (e.g. beat the TSE)
Success: measured by how well a fund performs relative to a benchmark regardless of how benchmark performs
Result: Managers may be deemed successful even if they lose money provided the benchmark would have lost more
Goal: deliver steady stable returns month after month
Success: measured by ability to provide positive returns regardless of market movements.
Result: Managers are only deemed successful if the value you investment increases
Comparative returns – Absolute investments beat traditional investments
*Absolute Return Managers are represented by the Lyxor Global Index. The net of fees return is derived from deducting the estimated fees and expenses of the BancNoteTM Trust from the monthly returns of the Lyxor Global Index. Bonds are represented by the Scotia McLeod Bond Universe. Stocks are represented by the S&P/TSX Composite Index.
$150,000
$225,000
$300,000
Oct-98 Jun-99 Feb-00 Oct-00 Jun-01 Feb-02 Oct-02 Jun-03
Absolute Return ManagersAverage annual return (net of all fees) 8.69%*
Bonds*
Stocks*
Absolute Return funds*
S&P / TSX Composite Index
-15%
-20%
-5%
-10%
5%
0%
Jan‘98
Jan‘99
Jan‘00
Jan‘01
Jan‘02
Jan‘03
Period from January 1998 to June 2003
Jun‘03
Jun‘02
Jun‘01
Jun‘00
Jun‘99
Jun‘98
Portfolio impact – Absolute returns smooth out your returns
*The Lyxor Global Index was used in the calculation for illustration purposes, and the performance of the Lyxor platform may differ from the performance of absolute return investments.
Sources: GICs: Bank of Canada average 5 year GIC, rebalanced annually (since 1984), Market neutral funds: CSFB/Tremont Equity Market Neutral Fund Index (since 1994), Bond funds: FundMonitor.com Canadian Bond Fund Index (since 1973), Income trusts: FundMonitor.com Cdn Income Trust Index (since 1996), Hedge funds: FundMonitor.com Alternative Strategies Index (since 1995), Stock funds: FundMonitor.com Global Equity Fund Index (since 1973).
Downside risk - Less risk with absolute return
Inception to 2003
0% - 6% - 9% - 12% - 30%
GICsBond funds
Income trusts
Hedge funds
Stock funds
Downside risk as measured by biggest drop since inception
- 4%
Absolutereturnfunds
What the smart money is doing
Dale Richmond
President & CEO
Ontario Municipal Employees
Retirement System
(third largest pension fund in the country)
“Our fixed income and alternative investments offset some of the
losses, but we look at adjusting our asset mix and continue to
diversify into alternative assets that offer the potential for more
stable returns.”
As Quoted in the National Post
0%
15%
10%
5%
College Endowments
25%
20%
35%
30%
Financial Advisors
Allocation to absolute return managers –Conservative institutional endowments are early adopters
So why Paradigm?
“I believe that stable, consistent returns should be more than a goal for Canadian investors. Its what they should expect from their investments.”Boaz Manor, Chief Investment Officer
Because we believe
Steady returns over a reasonable period of time and protecting your investment us an admirable goal
Individual investors should have access to the same sophisticated form of alternative investments used by endowments and institutional investors
Absolute return investments are the safest form of alternative investments
Fund of funds of absolute investment deliver returns regardless of what happens in the world
Paradigm: a unique approachto creating a fund of fund
Paradigm’s 5 Step Fund Manager Selection Process
Database Utilization: Accessing performance records of 14,000 fund managers in proprietary database
Talent Identification: Remove the effects of leverage and directional market exposure to identify true performance
Talent Verification: Meet with identified top managers in person to ensure clear sustainable competitive advantage
Talent Demonstration: Paradigm opens test accounts to gauge performance first-hand before clients invest
Performance Stabilization: Managers with the lowest volatility receive the greatest portion of the investment
STEP1
STEP2
STEP4
STEP5
STEP3
† Paradigm Global Advisors, LLC - historical average annual return over 12 years. Past performance is not necessarily indicative of future results.Source: Bloomburg L.P.
Stable Consistent Returns
Paradigm Global Advisors Average compound annualized returns: 8.53%
S&P TSX Composite Index* Average compound annualized returns: 6.94%
†
*
Available by referral for both RSP & Non-RSP Accounts Short 5-year term 100% principal protection at maturity Returns tied to elite absolute return managers Weekly pricing Tax deferral until disposition then treated as capital gains Considered 100% Canadian content for registered plans Closing date: April 30th, 2004
What you experience
Principal Protection – Safety Steady Returns – Peace of Mind Lower Volatility – Positive Monthly Statement Portfolio Diversification – Stability Tax Minimization – You pay less taxes
Ena Yu, Client Services Team
Experience principal protection
Clients receive 100% capital protection if held to maturity (5 yrs) If a client invests $50,000 they will, at minimum, receive
$50,000 at maturity
Only Withdrawals reduce capital protection on a proportionate basis If a client originally invests $50,000 which increases to $67,000
in four years and wants to remove $25,000 prior to maturity, the original capital protection would be reduced by $18,656.
Experiencesteady returns with lower volatility
Experience consistent positive monthly returns regardless of market movement
Experience an annual return of 8-12% Based on our selection criteria of ability to reduce volatility The net result: peace of mind and capital growth
BancNote™ Trust
GICs
Money Marker Funds
Bond Funds
YEAR 2
–
46%
46%
46%
YEAR 3
–
46%
46%
46%
YEAR 4
–
46%
46%
46%
YEAR 5
23%
46%
46%
46%
YEAR 1
–
46%
46%
46%
Experience Tax efficiency
All taxes are deferred for 5 years Taxed at half the rate of GICs Potential return of 8-12% taxed as capital gain
Annual Taxes Payable
Summary Alternative investment specialists Unique investment approach Delivering:
– Principal Protection – Safety
– Low Volatility – Peace of mind
– Steady Returns – Positive monthly statements
– Portfolio Diversification – Stabilize returns
– Tax Minimization – Pay less tax
This communication is under no circumstances is to be construed as an invitation to make an investment in BancNote™ Trust, nor does it constitute a public offering of the units of the Trust.
The BancNote™ Trust is not regulated under the Bank Act, and its units are not insured by the Canada Deposit Insurance Corporation or any other government deposit insurer. Subscriptions for units of the BancNote™ Trust will be subject to the terms of the offering memorandum of the Trust.
There is no guarantee of performance and past or projected performance is not necessarily indicative of future results. There are fees and expenses associated with the BancNote™ Trust which will affect returns. The information contained in this material is subject to change without notice and Paradigm will not be held liable for any inaccuracies or misprints.
Thank You