a3 - investment trends and outlook
TRANSCRIPT
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Community Foundations of Canada May 8, 2015 | William MacLachlan, CFA, Past Chairman and Institutional Portfolio Manager
October 19, 2014 |
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Seen from the Calgary Petroleum Club this morning…
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1. Mawer
2. Trends in asset management
3. Trends in the global economy and financial markets
Agenda
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• Founded in 1974 by Charles Mawer
• A 100% independent portfolio manager
• Broadly owned by 37 professionals within the firm
• Singular, team-based investment approach
• A strong values based, firm-wide culture
• A staff of 117, with offices in Calgary, Toronto and Singapore
• $20.4 billion in institutional assets under management
• $3.4 billion in not-for-profit and foundation assets
Firm Overview
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Mawer’s Core Values and Mission
Core Values • Act with integrity
• Put clients’ interests first
• Pursue excellence
• Work as a team
• Think long-term
Mission To be our clients’ most trusted investment manager, a position earned through long-term investment excellence, strong client partnerships, and a commitment always to do the right thing.
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Trends in Asset Management
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Industry Trends
• Technological change: data,
connectivity, immediacy,
simplicity, security
Technology Exploding
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Industry Trends
• Client confidence at risk
• Transparency
• Governance
• Risk Management
• Compliance
• Regulation
Trust Had Eroded
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Industry Trends Trust Had Eroded
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Industry Trends
• Passive and alternative investing gaining momentum
• Transitory or permanent shifts?
• Correlation to low interest rates
Investment Style Shifts
Source: PWC
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Industry Trends
• Move towards objective based outcomes - benchmark agnostic
• Socially responsible investing
• Search for fixed income solutions/alternatives
• Fee compression
• Globalization
Other Trends
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Trends in the Global Economy and Financial Markets
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Central Bank Quantitative Easing
Nov ‘08
Federal Reserve Announces Large Scale
Asset Purchase (LSAP) program
$600 billion
Nov ‘10
Fed launches LSAP2
$600 billion
Apr ‘13
BoJ unleashes largest QE push ever
$1.4 trillion
Jan ‘09
BoE creates Asset Purchase
Facility (APF) Fund
£200 billion
Sep ‘11
Fed announces Maturity Extension
Program (MEP) $400 billion
Oct ‘11
BoE expands APF £75 billion
Mar ‘09
FOMC expands LSAP
$1.15 trillion
Oct ‘14
Fed ends QE program
Mar ‘15
ECB QE $1.2 trillion
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Yields – How Low Can They Go? Treasury Yields Fall
Source: Bloomberg
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Discount?
Source: Bloomberg
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Inflation – MIA
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Normal?
• Waves of monetary policy easing continue to surprise market with level of stimulus
• Nestlé borrows at negative rates
• Rates will should rise in 2015 …sometime
• Oil…
• Greece, Ukraine, Libya, Syria, Iraq, Yemen…
• Geopolitical issues – globalization’s Achilles heel?
• Growing disconnect between financial markets and fundamentals
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A New Normal While in Europe…
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Conclusion: Build A Resilient Portfolio
• Diversify
• Cash and bonds a de facto insurance policy against equity risk
• Macro event forecasts fail – shift the focus to micro fundamentals, buying quality
securities at reasonable prices
• Expect lower nominal portfolio returns, but satisfactory real returns
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Looking Ahead
• U.S. stock returns from 1824 to 2013 were 8.4% annualized
• U.S. immediate post crisis returns were 9-12% per year
• Expected equity return now is 6-8% for typical developed market
• Fixed Income outlook challenging in near term
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Cognition
• Perspective
• Complacency increases risk
• Unpredictable – literally…
• Is it really different this time?
Perceiving Reality
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Cognition Perceiving Reality