Investment update fromCI Investment Consulting

Alfred Lam, MBA, CFAVP and Portfolio ManagerCI Investment Consulting

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Agenda

• Industry trends, CI’s Multi-Manager Excellence• Advantages of CI’s Managed Solutions• Challenges in the markets and how to navigate

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Destination investing

Average advisors

Focus:Out-performance

Value propositions:Fund selectionTactical shifts

Risk:Under-performance

Successful advisors

Focus: Relationship

Value propositions:Planning

Asset locationBehavioural coaching

Risk: Capacity

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CI’s income & balanced solutions

Investment Consulting

Signature Harbour Cambridge Black Creek

DiversifiedIncome

Portfolio Series

High Income

Portfolio Select Series

Diversified Yield

High Income

Balanced Portfolio Series

Canadian Balanced

Growth & Income

Canadian Asset Allocation

Global Balanced

Portfolio Select Series

Income & Growth

Global Growth & Income

G5|20 Global Income & Growth

Assets ($61.3billion)

$27.7 $23.8 $5.9 $2.9 $1.0

*As of August 2014

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Managed solution landscape

Fund Company Assets $ 3-year CAGR %

RBC 49 23

CIBC 41 19

TD 37 22

CI Investments 24 34

Scotia 24 22

BMO 20 29

Investors Group 20 8

Great-West Life 17 5

Desjardins 15 17

National Bank 11 20

Top 10 258 (77%) 20

Source: Investor Economics, Dec 2013

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Multi-Manager Excellence

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CI Investment Consulting

“We create investment solutions for investors and build

relationships with advisors” CI Investment Consulting

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Portfolio Management

$28 billion assets under management

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CI Investment Consulting

Name Title Credentials

Industry Experienc

e

Alfred Lam VP & Portfolio Manager CFA, MBA, BComm 14Yoonjai Shin Director CFA, BA Economics 11Lewis Harkes Senior Analyst CFA, BA Economics 10Marchello Holditch Senior Analyst CFA, BMath (Honours) 5

Andrew Ashworth Analyst Level II CFA, BMOS Finance 4

Responsibilities:

Portfolio management Alfred, Yoonjai

Trading/operations Yoonjai, Nick Asnani, Andrew

Manager selection Alfred, Yoonjai

Due diligence Yoonjai, Alfred, Marchello, Lewis, Andrew

Performance analysis & reporting Lewis, Andrew

Communications Alfred, Yoonjai, Marchello

Organizational Structure:

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What is an investment plan?

It’s a four-step process:

1. Discovery

2. Planning

3. Execution (Investments –TR Equation)

4. Review

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Total return = Asset mix + Alpha + Market beta + Currency – Tax – Fees

Optimize

Maximize Manage

Manage/reduce Minimize

Reduce

Total Return Equation

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Portfolio Series, Best Fund of Funds Award – 2011

Portfolio Series, Best Fund of Funds Award – 2012

Portfolio Select Series, Best Fund of Funds Award – 2013

Industry Recognition

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Stock market valuations

Source: TD Securities

Price-Earnings MultiplesBased on 12 Month Forward Operating Earnings

Bottom Up Earnings Based on CPMS (TSE) and IBES (S&P) ConsensusM84 OCT 2014

26 26

24 24

22 22

20 20

18 18

16 16

14 14

12 12

10 10

8 886 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

TSXS&P 500

14.615.1

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Suppressed volatility

0

10

20

30

40

50

60

70

80

90

8/31/2004 8/31/2005 8/31/2006 8/31/2007 8/31/2008 8/31/2009 8/31/2010 8/31/2011 8/31/2012 8/31/2013 8/31/2014

VIX Index: August 31, 2004 - August 31, 2014

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Equity market return expectations

Equity return = Risk-free return + Risk Premium

Historical Today

Risk-free 2-4% 0-1%

Risk Premium 4-6% 4-6%

Total Return 6-10% 4-7%

Dividends 2-3% 2-4%

Earnings Growth 4-8% 2-5%

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Implications

• As long as rates stay low:

• Incentive for business to grow is less

• Incentive for business to hire is less

• Low wage inflation

• Market volatility is low

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When will interest rates change

• Two years later?!

• When household and sovereign debts return to

normal

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1.00

1.25

1.50

1.75

2.00

2.25

3/30

/12

5/30

/12

7/30

/12

9/30

/12

11/3

0/1

2

1/31

/13

3/31

/13

5/31

/13

7/31

/13

9/30

/13

11/3

0/1

3

1/31

/14

3/31

/14

5/31

/14

7/31

/14

9/30

/14

Chart: Government of Canada Benchmark Bond Yield - 5 year

Source: Bank of Canada

Outlook: fixed income

Bond markets are in a trading range

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Represented by Select Income Managed Corporate Class

Source: CI Investments

Weighting (%)

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

2014Q3 Target

Cash 15 21 21 27 34 24 21 22 25 18 20 0%

Government & IG corporate

44 41 41 36 31 44 48 44 40 47 45 60%

High-yield bonds 22 19 18 15 13 12 11 14 15 15 14 20%

High-dividend Stocks

19 19 20 22 22 20 20 20 20 20 21 20%

Duration (years) 4.5 4.2 4.1 4.1 3.3 3.7 4.0 3.7 3.4 3.4 3.4

Historical asset allocations:

Select Income Managed Corporate Class (SIM)

20FOR INTERNAL USE ONLY

Select Income Managed Corporate ClassPerformance as of October 31, 2014

Performance has met expectations

% 3mth YTD 1yr 2yr 3yr 5yr

SinceInception*

3-yrStandard deviation

Select Income Managed Corporate Class (Class A)

0.8 4.9 4.9 4.8 5.6 5.3 4.1 2.1

FTSE TMX Universe Bond Index 1.0 6.5 5.8 2.8 3.8 5.0 5.1 3.1

*November 2005

21Total: 107 observations (months)

SIM: controlled volatility

>2% 1 to 2% 0 to 1% -1 to 0% <-1%0

10

20

30

40

50

60

70

3

19

62

17

67

21

42

31

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Monthly return distribution

Select Income FTSE TMX Universe Bond Index

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High consistency

1 yr 2 yr 3 yr 5 yr 7 yr SI (107 mths)

Select Income Managed Corporate Class (Class A)

11 20 31 49 67 84

TMX Universe Bond Index 8 15 23 40 56 70

Select Income Managed Corporate Class (Class A)

92% 83% 86% 82% 80% 79%

TMX Universe Bond Index 67% 63% 64% 67% 67% 65%

Frequency of positive months as at Oct 2014

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Recap of capital market outlook

• Record government and household debt levels

put a lid on interest rates

• Low interest rates lead to sub-par growth

• Equity volatility is suppressed

• Bond volatility is unusually high; with unusually

low expected returns

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Positioning

• Income allocation to drive alpha

• Safety is not limited to cash and government

bonds

• Take advantage of low equity market volatility

• Watch whether growth driven by p/e or earnings

• Watching EM bonds and stocks

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Thank you

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