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The Greystone Strategist

Winter 2018

Greystone.ca

300 Park Centre • 1230 Blackfoot Drive

Regina • Saskatchewan • Canada • S4S 7G4

Telephone: (306) 779-6400

Toll-Free: 1-800-213-4286

Suite 1907 • 201 Portage Avenue

Winnipeg • Manitoba • Canada • R3B 3K6

Telephone: (204) 956-1399

Toll-Free: 1-877-872-7686

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Toronto • Ontario • Canada • M5K 1J3

Telephone: (416) 309-2190

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International Commerce Centre

1 Austin Road West, Kowloon

Hong Kong

The Greystone Strategist | Winter 2018 2

Winter Overview

Figure 1: Asset Class Total Returns

2012 2013 2014 2015 2016 YTD 3-month

EM Eq 15.6

Glo. Eq 35.2

Long Bonds 17.5

Glo. Eq 18.9

Cdn. Eq 21.1

EM Eq 28.3

Infrastructure 9.7

Real Estate 14.0

Cdn. Eq 13.0

Glo. Eq 14.4

Infrastructure 11.5

Infrastructure 8.6

Infrastructure 15.7

EM Eq 7.6

Glo. Eq 13.3

Infrastructure 12.8

Infrastructure 10.6

Real Estate 7.8

EM Eq 7.3

Glo. Eq 14.4

Glo. Eq 5.7

Infrastructure 8.7

Real Estate 10.6

Cdn. Eq 10.6

Mortgages 4.0

Real Estate 6.1

Cdn. Eq 9.1

Long Bonds 5.2

Cdn. Eq 7.2

EM Eq 3.9

Bonds 8.8

Long Bonds 3.8

Glo. Eq 3.8

Real Estate 8.3

Cdn. Eq 4.5

Long Bonds 5.2

Mortgages 1.3

Real Estate 7.0

Bonds 3.5

Long Bonds 2.5

Long Bonds 7.0

Real Estate 3.8

Bonds 3.6

Cash 1.0

EM Eq 6.6

EM Eq 2.0

Mortgages 1.8

Bonds 2.5

Bonds 2.0

Mortgages 3.6

Bonds -1.2

Mortgages 6.0

Cash 0.6

Bonds 1.7

Mortgages 0.9

Mortgages 0.7

Cash 1.0

Long Bonds -6.2

Cash 0.9

Cdn. Eq -8.3

Cash 0.5

Cash 0.6

Cash 0.2

Calendar Year Q4 2017

Benchmarks

S&P/TSX Infrastructure2 Custom Mortgage Benchmark4

MSCI World (Net)1 IPD All Property3 FTSE TMX Cda 91 day T-bill

MSCI Emerging Markets (Net)1 FTSE TMX Cda Universe

FTSE TMX Cda LT Overall

1 MSCI, net of foreign dividend withholding taxes.2 Infrastructure returns are the Preqin Infrastructure Quarterly Index up to Q2 2017 and are Greystone Infrastructure Fund (Canada) LP returns thereafter.3 Real estate returns are the IPD All Property Index up to its most recent publication, Q3 2017 and are Greystone Real Estate Fund Inc. returns thereafter.4 Custom Mortgage Benchmark: FTSE TMX Cda Short Term Overall 60%, FTSE TMX Cda Mid Term Overall 40% + 0.5% per annum.

UPDATE

• Global equity markets continued to reach new highs through the end of 2017. The S&P 500 (in US$) posted positive returns in every calendar month for the first time in history. Economic growth continues to broaden, particularly in Europe where purchasing manager indices have accelerated. Profit margins across developed regions also have positive momentum and have increased in 2017. In the United States, tax reform should provide an additional push to a strong corporate earnings environment. While much has been said about equity valuations being driven by low interest rates, we believe that fundamental strength has and will likely continue to support stock markets in 2018.

• As we anticipated, the Canadian economy appears to be navigating a weaker housing market given global economic strength. The labour market and unemployment rate have surprised relative to consensus expectations, while oil prices are firm and appear to be drifting higher.

• Our base case for 2018 is a continuation of themes from last year, although it does mark an interesting phase in the economic cycle. Most estimates of capacity utilization indicate that Canada and the U.S. have only recently reached full potential. Globally, measures of developed market unemployment also indicate that excess labour capacity has been reduced. At the same time, central bankers have taken a cautious approach to raising interest rates due to inflation measures, which have disappointed relative to long-term targets. In our view, CPI is a lagging indicator of the economy and markets may be underappreciating the potential for higher inflation, particularly through the latter half of 2018.

• Bond yields in Canada rose for the second consecutive calendar year, as measured by 10-year Government of Canada (“GoC”) rates. Rate pressure was greater on shorter term bonds, which responded to higher overnight rates from the Bank of Canada. Conversely, long-term interest rates (30-year GoC yields) were lower due to subdued inflation expectations. With the potential for higher inflation going forward, our bias within balanced and fixed income portfolios is to hold less interest rate exposure relative to strategic benchmarks. Where portfolios have latitude for real asset exposure, such as real estate and infrastructure, we believe that the long run inflation hedging characteristics will be beneficial.


Winter Overview

Figure 2: Strong Fundamentals Supporting Equity Strength

Source: Bloomberg.

Figure 3: Long Term Expected Risk & Return

4.05.1

-10

-5

0

5

10

15

20

High Yield 50% Global Equity & 50% Mortgages

Exp

ecte

d R

etu

rn +

/-

1 S

tan

dar

d D

evia

tio

n

Asset Class

Source: Bloomberg. Greystone. Standard deviations are annual expected. Returns represent 7-10 year horizon. No assurance that expected return will be achieved.

• While we are constructive on equities, we are cautious on the forward return potential of corporate bonds and have positioned portfolios close to benchmark weights. As we enter the later stages of the economic expansion, we believe equities provide greater potential to participate through earnings growth. In our risk assessment, we see investment grade corporate, high yield and emerging market bonds as exposed to downside risks with limited upside potential. Where we have credit latitude, we view private market yield enhancements from mortgages as defensive relative to corporate bonds.

• Real assets such as real estate and infrastructure performed well in 2017. We have witnessed more competitive bidding in private real estate debt markets but still see healthy yield enhancement opportunity compared to fixed income. As part of a prudently diversified portfolio, we continue to see clients allocating to private markets in order to mitigate total portfolio volatility.

• While in the later stages of an economic cycle, we are focused on execution in high-quality and sustainable real estate and infrastructure assets. Infrastructure deal flow continues in the mid-market with reasonable valuations relative to risk. Within real estate, the multi-unit residential sector has provided strong total returns supported by immigration, high housing costs and continued low vacancy. Industrials have also performed well, particularly in Toronto and Vancouver where land constraints limit future development potential. From a deal flow perspective, we have seen office and retail real estate opportunities for assets within strategic urban centres.

• Our overall risk assessment focuses on geopolitical event risk, potential market complacency and higher risk of policy missteps. Geopolitically we believe that rhetoric around North Korea creates a low probability but immeasurable tail risk. Within capital markets, the potential for complacency following five years of strong and stable markets means future readjustments may be swift and potentially more severe than expected. Finally, we will keep a keen eye on the tapering of global central bank balance sheets as it is untraveled terrain for capital markets.

• In response to our risk assessment and fundamental outlook, the theme in our portfolios is on positions that can continue to grow but with a high-quality bias. This results in a more modest equity overweight relative to earlier stages of the cycle, a moderation of credit risks, continued focus on earnings growth potential and cash flow generating real assets.

We think equities and private mortgage are more attractive than high yield


Canadian Short-Term

Rates of Return Periods ended December 31, 2017 (Annualized Compound C$)

(%) Q4-2017 1 Year 3 Years 5 Years 10 Years

FTSE TMX Canada 91 Day T-Bill Index 0.2 0.6 0.6 0.7 1.0

Figure 4: Canadian Core CPI YOY

0

1

2

3

2012 2014 2016

%

Canadian Core CPI YOY

Source: Statistics Canada. Bloomberg.

Figure 5: Canadian Dollars to U.S. Dollars

0.65

0.7

0.75

0.8

0.85

Jan-17 Apr-17 Jul-17 Oct-17

CAD to USD

Source: Bloomberg.

Figure 6: Canadian 3 Months Banker’s Acceptance Yield vs. Canadian 3 Months Treasury Yield

0

0.5

1

1.5

2

Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17

%

Canadian 3 Months Banker's Acceptance Yield Canada 3 Months Treasury Yield

Source: Bloomberg.

UPDATE

• Following two rate hikes in the third quarter, Governor Poloz of the Bank of Canada (“BoC”) kept the overnight policy rate on hold during the final quarter of 2017. Labour market growth surpassed expectations, increasing the likelihood of continued rate hikes in early 2018.

• Core CPI measures for Canada surprised to the upside in December, further supporting the case for rate hikes.

• Economic growth also accelerated south of the border with U.S. economic surprise indicators reaching five-year highs in December.1 The U.S. Federal Reserve subsequently increased the overnight policy rate, which was its third hike in 2017,1 and the market has priced in another hike in the first quarter of 2018.

• Strong synchronized growth across Europe has the European Central Bank (“ECB”) committed to reducing monetary stimulus through tapering of its bond-buying program. In fact, the ECB is expected to halve its monthly pace of asset purchases from €60 billion to €30 billion in January 2018.1

• Value has been derived by tactically overweighting banker acceptances while underweighting treasury bills. Treasury bill auction sizes have been reduced while banker acceptance supply remains steady, creating additional yield pickup in the latter.

1 Bloomberg.

WATCH FOR... ■ Growth in U.S. core inflation in the first half of 2018

■ Floating rate notes to add value with minimal interest rate risk




FTSE TMX Canada Universe Bond Index 2.0 2.5 2.6 3.0 4.7

Canadian Bonds

Figure 7: Cdn 10-Year Bond Yield

0

1

2

3

2012 2013 2014 2015 2016 2017

%

Source: Tullett Prebon Inofrmation, FactSet.

Figure 8: Change in Canadian Jobs YOY

-500

-250

0

250

500

Jul-92 Jul-95 Jul-98 Jul-01 Jul-04 Jul-07 Jul-10 Jul-13 Jul-16

Thou

san

ds

of W

orke

rs

Total Labour YOY Change

Source: Bloomberg. Statistics Canada.

UPDATE

• We believe fixed income investors should take a cautious approach to interest rate and credit risk in 2018. Three primary factors create the potential for higher rates and lower bond prices: strength of the Canadian labour market, global bond market technical factors and underappreciated inflation risk.

• Canadian labour market data beat even the most optimistic of projections over the last two months of 2017, adding over 150,000 new jobs. Wages have also trended higher and will see the impact of minimum wage increases to start 2018. With unemployment rates near the lowest levels on record, we believe that momentum for Canadian bond yields will likely continue higher. This will be further supported if commodity and oil prices stay on course with a rising trend.

• We believe that technical factors in global bond markets will also support higher interest rates. In the U.S., fiscal expansion, deficit spending associated with tax cuts and QE tapering will likely increase U.S. Treasuries supply. In Europe, improving economic conditions increase the likelihood that the European Central Bank will begin to taper its purchases of bonds, reducing global bond demand.

• Finally, there is a risk that investors are anchored to disappointing inflation levels of recent years. Consumer price indices often react with a lag to underlying economic fundamentals and measures of U.S. economic capacity have only recently closed.

• Corporate bond valuations also pose a potential headwind for investors. Fundamentally, we believe the global economy will continue to expand; however, when the spread (or premium over government bonds) is tight, there is an asymmetry that results in more downside risk versus upside potential.

WATCH FOR... ■ Movement in break-even inflation expectations as growth continues

■ Moderation of investor demand for credit as interest rates continue to rise

January 2012 - December 2017




Greystone Mortgage Benchmark* 0.7 0.9 2.2 2.8 5.0

* FTSE TMX Cda Mid Term Overall 40% + FTSE TMX Cda Short Term Overall 60% + 50bps per annum.

Commercial Mortgages

Figure 9: Lenders’ 2018 Budget Intentions by Property Type

0

20

40

60

80

100

Industrial Multi-unit Residential Office Retail

%

Increase Maintain Decrease N/A

Source: CBRE 2017 Canadian Real Estate Lenders’ Report.

Figure 10: Expectations for Increased Competition in 2018 by Lender Type

0

20

40

60

80

100

Life Insurance Private Debt Capital Foreign Banks Pension Funds Domestic Banks CMBS

%

Increase Neutral Decrease

Source: CBRE 2017 Canadian Real Estate Lenders’ Report.

UPDATE

• 2017 was an active year for the Canadian commercial mortgage market with record high levels of available lending capital. Tighter spreads over Government of Canada bond yields reflect the competitive nature of the market with five and 10-year spreads compressing 35 bps in 2017. Spreads for five and 10-year mortgages on high-quality assets ended the year at 150 bps and 160 bps, respectively.

• The multi-unit residential market continues to be a desirable property type for lenders as this market tends to perform well throughout all economic cycles. According to CBRE’s 2017 Canadian Real Estate Lenders’ Report, 33.3% of lenders exceeded their 2017 plan for apartment underwriting. Increased demand for multi-unit residential units in Canada has stemmed from an increase in immigration, housing affordability and a shift in millennial preferences.

• The student housing sub-market is generating several lending opportunities as universities without adequate funding partner with private developers to build housing in close proximity to campuses. Underwriting for this property type is supported by quick lease up periods, as well as countercyclical characteristics. Historically, lower levels of lending capital available in this segment of the market have resulted in accretive yields for lenders.

• According to CBRE’s 2017 Canadian Real Estate Lenders’ Report, the 2018 outlook for the Canadian mortgage market is positive with 60% of survey respondents looking to increase their real estate lending allocations and 40% intending to maintain their current book in the coming year. In fact, competition is expected to be strong as insurance companies increase lending and private debt lenders continue to enter the market. Lenders are expected to have interest in all regions across Canada, including commodity-dependent regions such as Alberta, as the economic environment in these regions has improved.

WATCH FOR... ■ A competitive lending environment in 2018

■ Increased lending activity in the multi-unit residential market, particularly in student housing




MSCI EAFE (Net) Index 4.4 16.8 10.7 13.0 4.4

International Equity

Figure 11: MSCI EAFE Index (C$)

1,000

1,500

2,000

2,500

2012 2013 2014 2015 2016 2017

Source: MSCI. FactSet.

Figure 12: Positive Earnings Momentum in International Markets

-15

-10

-5

0

5

10

15

2012 2013 2014 2015 2016 2017

%

Relative Portion of EPS Upgrades

Source: MSCI, FactSet, Greystone.

UPDATE

• International equities returned double-digit returns for 2017. Emerging markets led developed markets for much of the year, while key themes that dominated the markets include the synchronization of global growth and an upswing in capital spending. In this environment, cyclical sectors were the best performing sectors. The Information Technology sector led MSCI EAFE sector returns for the year by returning 30% in Canadian dollars. Information Technology is also the largest sector in the Emerging Markets Index, where it returned 50%.

• The global regulations for bank capital and liquidity, also known as Basel III, were finalized in December and came in less harsh than expected. Implementation will occur gradually over a nine-year period. The model’s risk weight is lower than previously proposed for some corporate and mortgage loans. There was relief among banks as the Stoxx Europe 600 Banks Index surged the day following the announcement.

• Private consumption has been the main driver of growth in the past few years but the reacceleration of capital spending in the eurozone and Japan could be a catalyst to kick economic growth up to a healthy and sustainable pace. Capital spending (particularly in Japan) has been triggered by stimulative economic policies, which are mainly monetary but also include fiscal.

• The Chinese economy continues to grow at a controlled pace with signs of slow progress in the effort of policy makers to restructure to a more consumer driven economy. At the recent Communist Party National Congress, President Xi prioritized curbing rapid credit growth and a more sustainable economy, which bodes well for the long-term business environment.

• We believe that it remains a good environment for stocks as leading indicators point to the continuation of economic growth, easy monetary policy and muted inflation pressures. We have seen positive earnings momentum in International equities and expect that earnings growth will continue to support stock market returns in 2018. Current estimates for earnings growth over the next 12 months are 21% for International markets and 26% for emerging markets.

•

WATCH FOR... ■ How the ECB starts the unwind process of easy monetary policy

■ The impact of slowing credit growth on the Chinese economy

More upgrades than downgrades





S&P 500 Index 6.8 13.8 14.4 21.2 11.1

U.S. Equity

Figure 14: U.S. Top Marginal Corporate Tax Rate

0

15

30

45

60

1922 1936 1950 1964 1978 1992 2006

%

Source: taxpolicycenter.org.

Figure 13: S&P 500 Index (US$)

1,000

1,500

2,000

2,500

2012 2013 2014 2015 2016 2017

Source: S&P. Factset.

UPDATE

• The S&P 500 ended Q3-2017 at a new all-time high. While technology stocks have been the clear trailblazers this year, seven out of 11 sectors have posted double-digit returns providing good breadth to the overall 14% (in US$) S&P 500 return this year.

• While it has been 318 days since the S&P 500 has had a correction of 5% or more, this has not meant that stock prices have not been tested by current events. Mounting tension with North Korea, a harsh U.S. hurricane season and domestic political turmoil were on the docket this summer. However, stocks brushed these concerns aside and focused on data confirming continued economic growth and another successful earnings season, which saw earnings grow 10% year over year.

• Technology stocks are up 27% (in US$) this year and the FAANG stocks (an acronym for Facebook, Apple, Amazon, Netflix and Google) have all seen their market capitalization grow considerably. Today, these five stocks are 1.3x bigger than all 251 stocks in the Canadian S&P/TSX Composite. Their performance has been the main driver for U.S. growth stocks (+19.3%) outperforming value stocks (+8.5%) this year.

• From an economic perspective, the U.S. economy continues to moderately expand. Job growth is averaging 130,000 new jobs every month over the last year and 2017 GDP growth is expected to be 2.2%, even after accounting for lost productivity from the hurricanes. This steady growth has seen a steady response from the Fed who recently announced they will be reducing their bloated balance sheet.

• The Fed’s intentions have been telegraphed well ahead of time, which has been one of the reasons for volatility levels to remain low. The S&P 500 is trading at 18x expected earnings — this is far from inexpensive, but well supported by expected earnings growth, especially if there is positive news around tax reform in the coming months.

WATCH FOR... ■ Details on Trump’s tax reform and what that will mean for corporate

America

■ Other sectors outside of Information Technology to lead the way for this rally to continue


Trump’s new tax plan aims to make U.S. more globally competitive




S&P/TSX Composite Index 4.5 9.1 6.6 8.6 4.6

Canadian Equity

Figure 15: S&P/TSX Composite Index (C$)

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

2012 2013 2014 2015 2016 2017

Source: S&P, FactSet.

Figure 16: Canadian Heavy Oil (WCS) (US$) & U.S. Light Oil (WTI) (US$)

30

40

50

60

Dec-16 Mar-17 Jun-17 Sep-17

Canadian Heavy Crude U.S. Light Oil

Source: Bloomberg.

UPDATE

• A strong rally in the final quarter led the TSX to all-time highs by the end of the year. However, the year’s 9% return lagged other global equity markets as energy stocks underperformed. All sectors outside of Energy posted positive returns as equities benefitted from lower volatility compared to recent years.

• Going into the year, headline issues such as central bank tightening, NAFTA renegotiations and how the Vancouver and Toronto housing markets would play out were all at the top of investor concerns. While these were valid concerns, and still are, stocks grinded higher and were in line with global economic and corporate earnings growth.

• Canadian energy stocks proved to be challenging for investors. Natural gas prices remained weak all year and while crude oil prices (WTI) rebounded to finish the year above US$60 (up 12% in 2017), Canadian heavy oil pricing lagged closer to US$30 due to pipeline bottlenecks. Investors are hoping this differential will narrow in the first few months of 2018 and alongside colder weather will provide some much needed support to oil and gas stocks.

• NAFTA renegotiations remain an overhang going into 2018. While the threat of the U.S. walking away remains very real, we don’t expect it to be as significant an issue for Canada as it could be for Mexico. Companies that would be most affected did not see their stock prices come under any significant pressure, which backs up our expectations.

• Canadian equities can continue to move higher alongside other equity markets as long as global growth remains robust. We continue to see economic data firmly pointing to the late stages of economic growth rather than an impending recession. While equity valuation levels remain high, they remain more reasonable in Canada due to the weakness in the resource sectors. Continued commodity strength may see Canadian stocks turn from a laggard into a leader in the new year.

WATCH FOR... ■ A rebound in resource stocks if commodity prices can maintain recent

price gains

■ Canadian banks reaction to new housing market regulation aimed at curbing demand


Canadian heavy oil producers have not fully benefitted from recent move higher in headline oil prices


Rates of Return Periods ended September 30, 2017 (Annualized Compound C$)


IPD All Property Index* 1.5 6.8 7.1 8.4 8.4

* Most recently reported period.

Real Estate

Figure 17: Rising Consumer Confidence in the Wake of Low Unemployment

Jan-15 Jan-16 Jan-17

125

105

85

65

7.2

6.8

6.4

6.0

Ind

ex B

ase

10

0 =

20

14

Un

emp

loym

ent

Rat

e (%

)

Consumer Confidence Index Unemployment Rate

Source: Conference Board of Canada, Statistics Canada, September 2017.

UPDATE

• The Canadian commercial real estate market continues to benefit from a strong domestic economy that is experiencing positive GDP growth and declining unemployment across most of the country. Within the office property market, unemployment has dropped below pre-financial crisis levels with over 85,000 office jobs added in the first three quarters of 2017.1 There continues to be stronger leasing demand for downtown office space versus suburban office space in major cities, which is led by technology companies that have historically been located in the suburbs.

• Retail space continues to be the most dynamic property type. While the Sears Canada store closures will negatively impact vacancy, the overall vacancy rate has currently fallen below 4%, which is a level not seen since 2015 before Target Canada discontinued all operations within the country.2 Moreover, Canadian consumer confidence has steadily climbed over time and indicates greater optimism towards future retail spending. Within the industrial market, demand for space has led to historically low availability rates in the Greater Toronto and Greater Vancouver markets. As a result, average asking rents grew over the past year by 9% and 12%, respectively.3 Given limited new construction and land constraints, industrial rental rates are expected to continue facing upward pressure.

• The multi-unit residential market experienced a year-over-year decrease in national vacancy rate from 3.7% to 3.0%.4 In addition to purpose-built rentals now effectively operating at full capacity in Ontario and British Columbia, fundamentals in Alberta improved and the province experienced its first decline in vacancy following four consecutive years of increases. Going forward, national demand for rental options is expected to outpace supply due to a confluence of increasing international migration, greater propensity to rent by a younger demographic, a significant baby boomer population looking to downsize, and government regulation negatively impacting the speed of new supply.

1 CBRE Limited.2 Ibid.3 Ibid.4 Canada Mortgage Housing Corporation.

WATCH FOR... ■ Continued upward rental pressure within the industrial sector

■ Stable, growing demand for purpose-built residential properties across Canada

Figure 18: Availability Rates within Industrial Across Canada

2.3% 2.6% 3.8% 4.3% 4.8% 6.2% 7.4% 8.1% 8.5% 10.7%

Toronto Vancouver Winnipeg WaterlooRegion

Ottawa Montreal London Edmonton Calgary Halifax

CANADA 4.3%

Source: CBRE.


Infrastructure

Rates of Return Periods ended December 31, 2017 (Annualized Compound US$)


Infrastructure Fund Benchmark (in US$) * 2.0 8.0 8.0 n/a n/a

* Current benchmark is 8% gross return rolling over four year period.

Figure 19: Global Unlisted Infrastructure Fundraising 2007 - Q3-17

0

5

10

15

20

25

30

35

40

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD17

Nu

mb

er o

f Fu

nd

s

Fun

d V

alu

e (U

SD

bill

ion

)

Aggregate Fund Value Number of Closed Funds

Source: Fundraising Round-Up 3Q17: Capital Continues to Pour In, Infra-Deals, 2017.

Figure 20: Sector Activity by Value

4%

25%

30%

36%

3%

2%

4%

27%

20%

42%

3%4%

Social Infrastructure

Renewables

Transport

Power

Environment

Telecoms

Q3 2016

Q3 2017

Source: InfraDeals 3Q17 Project Finance League Table and Trend Report, Infra-News, 2017.

UPDATE

• Unlisted infrastructure funds raised a total of US$44.17 billion in the first nine months of 2017,1 which is an increase of approximately US$9 billion from the US$35.5 billion secured in the first nine months of 2016.2 With the average size of infrastructure funds continuing to rise, 2017 stands to be the largest year on record for infrastructure investments.

• 1027 transactions totaling US$278 billion closed globally in the first three quarters of 2017 with the power, renewables and transportation sectors accounting for 41%, 27% and 20% of deal value, respectively. Investment in Brownfield assets accounted for US$113.8 billion in deal value, up from US$111.2 billion in the same period last year and more than double the US$51 billion raised in 2012, which highlights the continued demand for infrastructure assets among fund managers.3

• Deal value in Europe increased in the first three quarters of 2017, representing approximately 40% of total transaction value compared to 36% at the end of Q3-2016. In particular, the U.K. saw US$12.1 billion in deal value in Q3-2017 alone, which is up from US$6.9 billion in Q3-2016, and further highlights investor confidence despite the ongoing political uncertainty surrounding Brexit.4

• Alberta and Saskatchewan continue to be strongholds for Canada’s power generation market. On December 13, Alberta Electric System Operator awarded Power Purchase Agreements to 595 megawatts (“MW”) of wind projects, some of which could seek financing next year, while SaskPower qualified 15 developers for its 200 MW wind procurement with winning bidders expected to be announced in fall 2018.5

1 Fundraising Round-Up 3Q17: Capital Continues to Pour In, Infra-Deals, 2017.2 Fundraising Round-Up 1Q16: What Follows Brookfield and GIP?, Infra-Deals, 2017.3 InfraDeals 3Q17 Project Finance League Table and Trend Report, Infra-News, 2017.4 Ibid.5 Outlook 2018: M&As and refis to drive power and energy deals, Infra-News, 2017.6 Tax bill leaves renewable industry better off than expected, Infra-News, 2017. 7 Outlook 2018: European brownfield multiples to reach new highs, Infra-News, 2017.8 Outlook 2018: Europe’s Greenfield Infrastructure Set to Take Off.

WATCH FOR... ■ With the recent passing of the U.S. tax reform, the renewable sector can breathe a

sigh of relief as renewable tax credits were left untouched; however, the base-erosion anti-abuse tax may affect the availability and value of tax equity investments.6

■ Europe will continue to see high levels of M&A activity over the next 12 months with the sale of several large brownfield and greenfield infrastructure assets set to kick off in early 2018.7,8


Asset Class Rates of Return

Figure 21: Annual Compound C$ (Periods Ending December 31, 2017)

Total Returns (%) Annualized Rates of Return

Major Asset Class Indices & Greystone Pooled Funds* 4th Quarter YTD 1 Year 2 Years 3 Years 4 Years 5 Years

Balanced Funds

Greystone Balanced Fund 3.9 10.8 10.8 7.6 8.0 8.8 10.2

Balanced Benchmark1 3.9 8.7 8.7 7.7 7.3 8.2 9.0

Greystone Balanced Plus Fund 3.8 10.4 10.4 7.6 n/a n/a n/a

Balanced Plus Fund Benchmark2 3.6 8.1 8.1 7.5 n/a n/a n/a

Fixed Income Funds

Greystone Canadian Fixed Income Fund 2.0 2.8 2.8 2.6 2.6 4.0 3.0

FTSE TMX Canada Universe Bond 2.0 2.5 2.5 2.1 2.6 4.1 3.0

Greystone Long Bond Fund 5.0 7.3 7.3 5.2 4.7 7.6 4.9

FTSE TMX Canada Long Term Overall Bond 5.2 7.0 7.0 4.7 4.4 7.5 4.6

Greystone High Yield Bond Fund 0.6 4.1 4.1 8.0 5.3 5.0 5.3

High Yield Fund Benchmark3 0.6 7.2 7.2 15.1 7.0 5.7 6.1

Greystone Real Return Bond Fund 3.8 0.8 0.8 1.9 2.2 4.8 1.0

FTSE TMX Canada Real Return Bond 3.8 0.7 0.7 1.8 2.1 4.8 0.9

Greystone Bond Plus Fund 2.2 3.5 3.5 3.1 3.1 n/a n/a

FTSE TMX Canada Universe Bond 2.0 2.5 2.5 2.1 2.6 n/a n/a

Greystone Corporate Bond Fund 2.1 4.2 4.2 4.2 3.6 4.5 3.8

FTSE TMX Canada All Corporate Bond 1.9 3.4 3.4 3.6 3.3 4.3 3.6

Greystone Short Bond Fund 0.4 0.6 0.6 1.0 n/a n/a n/a

FTSE TMX Canada Short Term Overall Bond 0.3 0.1 0.1 0.5 n/a n/a n/a

Greystone Short Bond Plus Fund 0.8 1.9 1.9 2.0 n/a n/a n/a

FTSE TMX Canada Short Term Overall Bond 0.3 0.1 0.1 0.5 n/a n/a n/a

Greystone Money Market Fund 0.3 0.9 0.9 0.7 0.8 0.8 0.9

FTSE TMX Canada 91 Day T-Bill 0.2 0.6 0.6 0.5 0.6 0.7 0.7

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses.1 Current Balanced Fund Benchmark: FTSE TMX Cda 91 Day T-Bill 3%, FTSE TMX Cda Universe 37%, S&P/TSX Composite 24%, S&P 500 18%, MSCI EAFE (Net) 18%. Prior to April 1, 2014 benchmark was FTSE TMX Cda 91 Day T-Bill 3%, FTSE TMX Cda Universe 37%, S&P/TSX Composite 35%, S&P 500 12.5%, MSCI EAFE (Net) 12.5%. 2 Please refer to the Disclosures page for the benchmark details. 3 Current High Yield Fund Benchmark: 50% ML US HY Master II Trust Hedge to CAD + 50% ML CAD and USD HY Canadian Issuers Hedge to CAD.






Duration Funds

Greystone 3 Year Duration Fund** 0.4 0.4 0.4 0.8 1.5 2.1 1.9



Greystone 20+ Year Duration Fund** 10.5 12.5 12.5 7.5 6.8 12.1 6.1

Canadian Equity Funds

Greystone Canadian Equity Fund 3.1 8.1 8.1 9.9 4.3 6.2 8.7

S&P/TSX Composite 4.5 9.1 9.1 14.9 6.6 7.6 8.6

Greystone Canadian Equity Income & Growth Fund 3.9 9.5 9.5 12.0 4.8 5.7 7.5

Canadian I&G Fund Benchmark4 (Primary) 4.1 9.0 9.0 15.0 6.7 7.9 8.8

S&P/TSX Composite (Secondary) 4.5 9.1 9.1 14.9 6.6 7.6 8.6

Greystone Canadian Equity Small Cap Fund 4.2 7.3 7.3 16.4 7.9 4.7 10.3

S&P/TSX SmallCap 4.7 2.8 2.8 19.3 7.2 4.8 5.3

U.S. Equity Funds

Greystone U.S. Equity Fund 8.8 19.9 19.9 12.9 16.7 18.4 22.7

Greystone U.S. Income & Growth Fund 8.4 15.3 15.3 11.7 16.3 17.9 21.5

S&P 500 6.8 13.8 13.8 10.9 14.4 16.7 21.2

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses.** Name change effective January 1, 2018. 4 Current Canadian I&G Fund Benchmark: S&P/TSX Capped Composite 80%, Telecommunication Services 5%, Utilities 5%, Oil & Gas Storage & Transportation 5%, Equity Real Estate Investment Trusts 5%. Prior to April 1, 2014 the benchmark was S&P/TSX Capped Composite 70%, Financials 10%, Telecommunication Services 10%, Utilities 10%.






International Equity Funds5

Greystone International Equity Fund 4.0 22.1 22.1 9.2 14.1 12.6 15.6

MSCI EAFE (Net) 4.4 16.8 16.8 6.7 10.7 8.9 13.0

Greystone International Income & Growth Fund 4.9 21.0 21.0 7.4 12.9 9.9 14.0

International I&G Fund Benchmark6 (Primary) 4.4 16.8 16.8 6.7 8.9 7.9 12.4

MSCI EAFE (Net) (Secondary) 4.4 16.8 16.8 6.7 10.7 8.9 13.0

Greystone China Income & Growth 14.7 57.8 57.8 22.4 27.5 n/a n/a

CSI 300 (Net) 7.4 23.6 23.6 0.5 7.4 n/a n/a

Global Equity Funds5

Greystone Global Equity Fund** 5.4 18.8 18.8 9.1 14.9 15.9 19.2

Greystone Global Income & Growth Fund 6.9 18.7 18.7 10.4 14.4 13.6 17.2

MSCI World (Net) 5.7 14.4 14.4 8.9 12.2 12.7 16.9

Real Estate and Mortgages

Greystone Real Estate Fund Inc. 3.8 10.6 10.6 9.2 8.2 7.7 8.5

Greystone Real Estate LP Fund 3.0 9.0 9.0 7.0 n/a n/a n/a

Greystone Mortgage Fund 1.2 4.1 4.1 3.6 4.0 4.9 4.5

Mortgage Fund Benchmark7 0.7 0.9 0.9 1.4 2.2 3.2 2.8

Infrastructure

Greystone Infrastructure Fund (Canada) LP*** 9.7 15.6 15.6 24.7 30.1 n/a n/a

Infrastructure Fund Benchmark8 2.0 8.0 8.0 8.0 8.0 n/a n/a

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses. ** Global Equity fund moved from a fund-on-fund strategy to a segregated security managed strategy on December 17, 2013.*** The Greystone Infrastructure Fund (Canada) LP and the Greystone Infrastructure Fund (Canada) LP II (the “Feeder Funds”) invests in units of a master fund, the Greystone Infrastructure Fund (Global) LP (the “Master Fund”). The Master Fund invests in the allowable infrastructure investments outlined in its Investment Policy. Master: The Master Fund is priced monthly in USD and includes any working capital within the Master Fund, as well as the current USD value of the most recent valuation of the underlying investments. Valuations of the investments held in the Master Fund are done semi-annually in the local currency of the investment. Interim valuations may be done as the result of special situations. At each monthly pricing period, the investment valuations are converted to USD at the rate in effect at the pricing date. Feeder: The Feeder Funds are priced monthly in U.S. dollars and reported to clients in Canadian dollars and include working capital held within the Feeder Funds as well as the updated monthly value of the units held in the Master Fund. The value of the Feeder Funds’ investment in the Master Fund is determined based on the updated monthly price of the Master Fund. 5 International Equity and Global Equity funds and MSCI EAFE and World indices performance is net of foreign dividend withholding taxes. 6 Current International I&G Fund Benchmark: MSCI EAFE (Net). From April 1, 2008 to June 30, 2015 the benchmark was MSCI EAFE High Dividend Yield (Net). 7 Current Mortgage Fund Benchmark: FTSE TMX Canada Short Term Overall 60%, FTSE TMX Canada Mid Term Overall 40% + 0.5% per annum. From October 1, 2007 to September 30, 2009 the benchmark was FTSE TMX Canada Conventional Mortgage. 8 Infrastructure Fund Benchmark is an absolute gross return of 8% USD over a rolling four year period for comparison purposes.






Target Date Funds

Greystone Retirement Plus Fund 3.2 7.6 7.6 5.8 7.2 n/a n/a

Retirement Plus Benchmark9 3.1 6.4 6.4 6.2 6.6 n/a n/a

Greystone 2020 Target Date Plus Fund 3.2 7.7 7.7 5.9 7.2 n/a n/a

2020 Target Date Plus Benchmark9 3.1 6.4 6.4 6.2 6.6 n/a n/a















* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses. 9 Target Date Plus Fund benchmarks are determined on a quarterly basis based on the strategic asset mix for the subsequent quarter. Details regarding changes to the Target Date Funds benchmark compositions is available upon request.


Glossary of TermsAbsorption Absorption: The rate at which available properties are sold in a specific real estate market in a given time period.

Bearish/Bullish Bearish: A sentiment that the performance of the market, a specific security, or an industry will fall moving forward.Bullish: A sentiment that the performance of the market, a specific security, or an industry will rise moving forward.

BoC The Bank of Canada: The Bank of Canada is the central bank of Canada. (Related terms - See central bank rate and monetary policy.)

BoE The Bank of England: The Bank of England is the central bank of the United Kingdom. (Related terms - See central bank rate and monetary policy.)

BoJ The Bank of Japan: The Bank of Japan is the central bank of Japan. (Related terms - See central bank rate and monetary policy.)

Bond market rally/sell-off Bond market rally: A period of sustained increases in the price of bonds, typically following a period of flat or declining prices.Bond market sell-off: A period of increased selling of bonds, which leads to decreases in the price of bonds and yields increasing.

Bond yield curve Yield curve: A line that plots the interest rates of bonds at a set point in time. The bonds have equal credit quality, but differing maturity dates.Steepening of the yield curve: An increase in the gap between the yields on short-term bonds and long-term bonds, which will make the curve appear steeper.Flattening of the yield curve: A decrease in the gap between the yields on short-term bonds and long-term bonds, which will make the curve appear flatter.Inverted yield curve: A situation in which a yield curve flattens to the point that short-term rates are higher than long-term rates. An inverted yield curve typically precedes a period of recession.

Bond yield Real yield: An investment return that has been adjusted to account for inflation.Nominal yield: Also referred to as the nominal rate, coupon yield, or coupon rate; it is the interest rate that a bond issuer is obligated to pay to the bond purchaser. This rate is fixed and applies to the life of the bond.Back-up in bond yields: A term for the movement in bond yields which makes bonds more expensive to issue. A back-up is characterized by an increase in bond yields and a decrease in price.

bps Basis points: One hundredth of one percent, used for describing small changes in figures such as interest rates.

Brownfield Brownfield: An infrastructure asset that is fully operational.

Cap rate Capitalization rate: A rate of return on a real estate investment property based on the expected income that the property will generate.

CBRE Limited CBRE Limited: A Fortune 500 and S&P 500 company headquartered in Los Angeles that is the world’s largest commercial real estate services firm. CBRE Limited offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.

Central bank rate – in U.S. Fed Funds rate, in Canada Overnight rate

Central bank rate: The rate of interest the central bank charges on the loans and advances to a commercial bank.Federal funds rate: The interest rate at which a depository institution lends funds maintained at the U.S. Federal Reserve to another depository institution overnight. The federal funds rate is generally only applicable to the most creditworthy institutions. Overnight rate: The interest rate at which a depository institution lends funds to another depository institution (short term) or the interest rate the central bank charges a financial institution to borrow money overnight. The overnight rate is the lowest available interest rate and, as such, it is only available to the most creditworthy institutions.

China’s City Tier System First Tier cities: Refers to China’s “Big Four” cities: Beijing, Shanghai, Shenzhen, and GuangzhouSecond Tier cities: Refers to capital cities of each province or coastal cities such as Tianjin, Chongqing, Chengdu, Wuhan, Xiamen; cities tend to be located primarily in Central ChinaThird Tier cities: Refers to mid-tier cities from more developed provinces and some cities within less developed provinces (mostly in central or western China); cities tend to lag behind first and second tier cities in terms of economic growth and development, although many of them are still considered to be very significant economically and historicallyFourth Tier cities: Refers to less developed cities from more developed provinces and more developed cities from less developed provinces; cities tend to represent the majority of China’s urban population and combined income


Class A Office Class A Office: The most prestigious commercial real estate buildings competing for premier office users with rents above average for the area.

CMHC Canadian Mortgage and Housing Corporation: A Crown corporation of the Government of Canada, through the 1944 National Housing Act.

CMLS Financial CMLS Financial: One of Canada’s largest independently owned mortgage companies, providing a wide range of commercial lending services, residential mortgages, and institutional services.

CMBS Commercial mortgage-back securities: A type of fixed-income security that is collateralized by commercial real estate loans.

Commercial mortgage Commercial mortgage: A mortgage loan that is secured by commercial property.

Commercial real estate Commercial real estate: Property that is used solely for business purposes, usually classified into the following categories: office, retail, industrial, multi-family, land and miscellaneous.

Consensus expectations Consensus expectations: A figure or prediction based on the combined estimates of the analysts covering a specific company, marketing or economic event. Common consensus expectations include earnings per share and gross domestic product.

Contagion Contagion: A situation where a shock in a particular economy or region spreads out and affects others. Contagion can cause economic crises or booms at a global level.

CRB Index Commodity Research Bureau Index: An index that measures the overall direction of commodity sectors. The CRB was designed to isolate and reveal the directional movement of prices in overall commodity trades.

Credit risk Credit risk: The risk that a borrower will default on any type of debt by failing to make required payments.

Credit spread Corporate credit spread: The difference in yield of investment grade corporate bond relative to a risk-free rate, usually measured in basis points (bps)High yield credit spread: The difference in yield of non-investment grade corporate bond relative to a risk-free rate, usually measured in basis points (bps) Option Adjusted Spread (OAS): The difference in yield of a corporate bond relative to a risk-free rate, which is adjusted to take into account an embedded option, usually measured in basis points (bps)

Cyclical/Defensive sectors Cyclical sectors: Sectors where performance will rise and fall with the stages of the business cycle. These sectors tend to perform well when the economy is in expansion, and poorly when the economy is in recession. Cyclical sectors include: Materials, Technology, and Industrials. Defensive sectors: Sectors that remain stable during various stages of the business cycle. These sectors tend to perform better than the market during recessions and worse than the market during expansions. Defensive sectors include: Telecom, Utilities, and Consumer Staples.

DJIA The Dow Jones Industrial Average: The DJIA is a price-weighted average of 30 significant stocks traded on the NYSE and the NASDAQ.

Dovish/Hawkish Dovish: A sentiment that generally favours low interest rates in order to encourage growth within an economy. Hawkish: A sentiment that generally favours relatively high interest rates in order to keep inflation in check. (Related term - See Monetary Policy.)

Duration Duration: Degree of sensitivity of the market value of a fixed income instrument (e.g. mortgage, bond) to changes in interest rates.

Earnings Analysts’ earnings estimates: An estimate for a company’s future quarterly or annual earnings. Used in company valuation.Earnings per share (EPS): The portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability.

ECB The European Central Bank: The central bank of the European Union. (Related terms - See central bank rate and monetary policy.)

EU The European Union: A group of European countries that participates in the world economy as one economic unit and operates under one official currency, the euro.

Emerging markets Emerging markets: A nation’s economy that is progressing towards becoming advanced, as shown by some liquidity in local debt and equity markets and the existence of some form of market exchange and regulatory body.

Expansion/Recession Expansion: A period when business activity surges and gross domestic product expands until it reaches its peak.Recession: A period of significant decline in activity across the economy, lasting longer than a few months.


Fed U.S. Federal Reserve: The central bank of the United States. (Related terms - See central bank rate and monetary policy.)

Flight to quality Flight to quality: The action of investors moving their capital away from riskier investments to the safest possible investment vehicles.

FOMC The Federal Open Market Committee: The branch of the Federal Reserve Board that determines the direction of monetary policy.

G8 The Group of Eight: The G8 refers to the group of eight highly industrialized nations that hold annual meetings to foster consensus of global issues. Members: France, Germany, Italy, U.K., Japan, U.S., Canada, and Russia.

GDP Real gross domestic product: A macroeconomic measure of the value of economic output adjusted for inflation/deflation.Nominal gross domestic product: A macroeconomic measure of the value of economic output at current market prices.

GoC bond yield Government of Canada bond yield: The amount of return an investor will realize on a Government of Canada bond.

Greenfield Greenfield: An infrastructure asset under development (prior to being operational).

GTA Greater Toronto Area: The city of Toronto and the four regional municipalities that surround it: Durham, Halton, Peel, and York.

Hard/Soft landing Hard landing: An economic state wherein the economy is slowing down sharply or is tipped into outright recession after a period of rapid growth.Soft landing: A term used to describe a rate of growth high enough to avoid recession, but slow enough to avoid high inflation.

Headwind/Tailwind Headwind: A condition or situation that will make growth more difficult.Tailwind: A condition or situation that will help move growth higher.

High beta stocks/low beta stocks

High beta stocks: A stock with a market beta of greater than one, meaning that the security will be more volatile than the market.Low beta stocks: A stock with a market beta of less than one meaning that the security will be less volatile that the market.

IMF International Monetary Fund: The IMF is an international organization created for the purpose of promoting global monetary and exchange stability, facilitating the growth of international trade, and assisting in the establishment of multilateral system of payments for current transactions.

Inflation/Deflation Inflation: A general increase in prices and fall in the purchasing value of money.Core inflation: A measure of inflation that excludes items that face volatile price movements, such as energy and food products.Headline inflation: The raw inflation figure as reported through the Consumer Price Index.CPI: The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services such as transportation, food, and medical care.Core PCE: Core Personal Consumption Expenditures is a measure in the change of price of consumer goods and series excluding food and energy prices.Deflation: The reduction of the general level of prices in an economy.

IPD All Property Index Investment Property Databank All Property Index: The most common benchmark for Canadian real estate funds.

Leasing activity Leasing activity: Refers to both the expiry of existing leases and the new leases signed at a property.

LIBOR London Interbank Offered Rate: A benchmark rate that some of the world’s leading banks charge each other for short-term loans.

Market correction/Market pullback

Market correction: A reverse movement, usually negative of at least 10% in a stock, bond, commodity, or index to adjust for an overvaluation.Market pullback: A falling back of a price from its peak. This price movement might be seen as a brief reversal of the prevailing upward trend.

Margin Pressure Margin Pressure: A term for the effect of certain internal or market forces on a company’s operating, gross or net margins.

Market valuation Market valuation: The process of determining the current worth of the overall market.Market price-to-earnings (P/E) ratio: A market valuation technique that divides the total value of all the market’s constituents by their combined earnings. The resulting ratio gives insight into whether the market may be over or under priced.Cheap market valuation: A statement about the pricing of financial assets within a market. Cheap would imply a market P/E ratio lower that it has historically been, meaning that investors are paying less for each dollar of earnings than in the past.Expensive market valuation: A statement about the pricing of financial assets within a market. Expensive would imply a market P/E ratio higher than it has historically been, meaning that investors are paying more for each dollar of earnings than in the past.


Monetary policy Monetary policy: Monetary policy is used by a central bank of a country to control the circulation and value of a nation’s currency.Quantitative easing: A monetary policy in which a central bank purchases government or other securities from the market in order to lower interest rates and increase the money supply.Quantitative tightening: Tight monetary policy is a course of action undertaken by a central bank to constrict spending in an economy that is seen to be growing too fast, or to curb inflation when it is rising too quickly.

MSCI EAFE Index The MSCI EAFE Index: A stock market index designed to measure the equity market performance of developed markets outside of the U.S. and Canada. The acronym stands for Europe, Australasia and Far East.

MSCI World Index The MSCI World Index: A stock market index of over 1,600 global stocks, it is commonly used as a benchmark for world or global stock funds.

Multiples Multiples: A term for a measure of some aspect of a company’s financial position, determined by dividing one metric by another metric.

New construction New construction: Construction of entirely new structures and/or significant extensions to existing structures whether or not the site was previously occupied.

OECD Organisation for Economic Cooperation and Development: OECD is a group of 30 democratic countries that support free market economies; they discuss and develop economic and social policy.

Oil price Brent Oil: A major trading classification of sweet light crude oil, which serves as a major benchmark price of oil worldwide.Western Canadian Select (WCS): One of North America’s largest heavy crude oil streams used as a benchmark for emerging heavy, high acidic crudes. West Texas Intermediate Oil (WTI): WTI, also known as Texas light sweet, is a grade of oil used as a benchmark in oil pricing.

OPEC Organization of the Petroleum Exporting Countries: OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, with the hopes of avoiding fluctuations that may affect both oil purchasing and producing economies.

P/E Ratio Price-to-earnings ratio: A valuation ratio of a company’s current share price compared to its per-share earnings. (Related term - See market valuation.)

PBOC The People’s Bank of China: The central bank of the People’s Republic of China. (Related terms - See central bank rate and monetary policy.)

Purpose-built rental properties

Purpose-built rental properties: Multi-unit residential properties constructed for the purpose of renting out the units in the rental housing market; these properties include apartment buildings.

REITS Real Estate Investment Trust: A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

Rental rate Rental rate: A periodic charge per unit for the use of a property; the period may be a month, quarter or year.

Risk-on/Risk-off Risk-on/Risk-off: An investment setting in which price behavior responds to, and is driven by, changes in investor risk tolerance. Risk-on/Risk-off refers to changes in investment activity in response to global economic patterns. A risk-on situation occurs during a period of low perceived financial risk, thus encouraging investors to take on risk. A risk-off situation occurs during periods of high perceived financial risk, thus encouraging investors to reduce risk.

S&P 500 Index The S&P 500 Index: The S&P 500 is an American stock market index made up of the 500 largest companies by market capitalization, listed on the NYSE and NASDAQ.

S&P/TSX Index The S&P/TSX Index: An index of the stock prices of the largest companies on the Toronto Stock Exchange.

Sovereign credit risk Sovereign credit risk: The credit rating of a country or sovereign entity. This rating provides insight into the level of risk associated with a particular country.

Stock market volatility Stock market volatility: The vigorous fluctuation of share prices within the stock market.

TMX FTSE 91-day Treasury Bills

TMX FTSE 91-day Treasury Bills: A benchmark used to track the performance of Government of Canada Treasury Bills.

TMX FTSE Canada Bond Universe

TMX FTSE Canada Bond Universe: A benchmark which is designed to track the performance of the Canadian bond market.

Top-line revenue growth Top-line Revenue Growth: A reference to the growth in the gross sales or revenues of a company.

Vacancy rates Vacancy rate: A numerical value calculated as the percentage of all available units in a rental property that are vacant or unoccupied at a particular time.

World Bank World Bank: The World Bank is a United Nations international financial institution that provides loans to developing countries for capital programs.


This report is provided for informational purposes only, is not meant as investment advice and should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any predictions or projections made will occur. Past performance is not indicative of future results.

Commentary contained in this report reflects the opinions of Greystone Managed Investments Inc. at the date of the report. It was developed from sources that Greystone believes to be reliable. Greystone does not guarantee the accuracy or completeness of such information. Greystone’s opinions and viewpoints may change over time. Likewise, holdings may change by the time you receive this report. The securities discussed do not represent all of the portfolio’s holdings and may represent only a small percentage of a strategy’s holdings.

Figures shown in this report are in Canadian dollars except as noted, and may be subject to rounding error. Returns are gross of investment management fees.

Greystone claims compliance with the Global Investment Performance Standards (GIPS®). A GIPS® compliant presentation is available upon request. Greystone has been independently verified for the period January 1, 2000 to December 31, 2016. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS® standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS® standards. Verification does not ensure the accuracy of any specific composite.

Indices & BenchmarksCurrent benchmark weights and indexes are noted on each asset class page. Benchmark returns reflect any index and weighting changes made since inception. Index returns include reinvestment of dividends, if applicable, but not the deduction of any fees or expenses, which would reduce returns.Indices used in Greystone reporting are copyrighted by and used with the permission of their respective providers: Standard & Poors, TMX Inc., Russell Investments, Merrill Lynch & Co. Inc., BMO Capital Markets, Investment Property Databank Limited; ©IPD 2015 and its licensors (IPD), and Morgan Stanley Capital International (MSCI). Index use will vary by Greystone client and not all indices or index providers may be cited in this report.

MSCI disclosure: neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing, or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

For clients with benchmarks that blend two or more indices (e.g. FTSE TMX Canada 91 Day T-Bill 3%, FTSE TMX Canada Universe Bond 37%, S&P/TSX Composite 35%, S&P 500 Composite 12.5%, MSCI EAFE (Net) 12.5%): Our reporting system rebalances your benchmark to its stated asset mix on a daily basis. Consequently, there may be discrepancies between benchmark returns presented in this report and those calculated with a monthly or quarterly rebalancing.

For clients who hold fixed income: FTSE TMX Global Debt Capital Markets Inc. is the source for credit ratings. If a particular security is not identified by FTSE TMX Global Debt Capital Markets Inc., an equivalent, recognized, independent rating agency is used. Greystone does not rate securities.

FTSE TMX Global Debt Capital Markets Inc(“FTDCM”), FTSE International Limited (“FTSE”), the London Stock Exchange Group companies (the “Exchange”) or TSX INC. (“TSX” and together with FTDCM, FTSE

and the Exchange, the “Licensor Parties”). The Licensor Parties make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE TMX Canada Universe Bond and sub-indices (“the Index”) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTDCM and all copyright in the Index values and constituent lists vests in FTDCM. The Licensor Parties shall not be liable (whether in negligence or otherwise) to any person for any error in the Index and the Licensor Parties shall not be under any obligation to advise any person of any error therein.

Current Balanced Plus Fund benchmark: FTSE TMX Canada Universe Bond 24%, Mortgage Fund benchmark 8%, S&P/TSX Composite 21.5%, S&P 500 10.7%, MSCI EAFE (Net) 10.7%, MSCI World (Net) 10.7%, IPD All Property 10%, Infrastructure benchmark 4.4%. History:

• Dec 13, 2016 – Jan 24, 2017: FTSE TMX Canada Universe Bond 24.6%, Mortgage Fund benchmark 8%, S&P/TSX Composite 22%, S&P 500 11%, MSCI EAFE (Net) 11%, MSCI World (Net) 11%, IPD All Property 10%, Infrastructure benchmark 2.4%.

• Apr 1, 2016 – Dec 12, 2016: FTSE TMX Canada Universe Bond 25.4%, Mortgage Fund benchmark 8%, S&P/TSX Composite 22.7%, S&P 500 11.3%, MSCI EAFE (Net) 11.3%, MSCI World (Net) 11.3%, IPD All Property 10%.

• Mar 1, 2016 – Mar 31, 2016: FTSE TMX Canada Universe Bond 26.1%, Mortgage Fund benchmark 8%, S&P/TSX Composite 23.3%, S&P 500 11.6%, MSCI EAFE (Net) 11.6%, MSCI World (Net) 11.6%, IPD All Property 7.8%.

• Feb 1, 2016 – Feb 29, 2016: FTSE TMX Canada Universe Bond 27%, Mortgage Fund benchmark 8%, S&P/TSX Composite 24%, S&P 500 12%, MSCI EAFE (Net) 12%, MSCI World (Net) 12%, IPD All Property 5%.

• Jan 5, 2016 – Jan 31, 2016: FTSE TMX Canada Universe Bond 27.9%, Mortgage Fund benchmark 8%, S&P/TSX Composite 24.7%, S&P 500 12.3%, MSCI EAFE (Net) 12.3%, MSCI World (Net) 12.3%, IPD All Property 2.5%.

• Apr 24, 2015 - Jan 4, 2016: FTSE TMX Canada Universe Bond 28.7%, Mortgage Fund benchmark 8%, S&P/TSX Composite 25.32%, S&P 500 12.66%, MSCI EAFE (Net) 12.66%, MSCI World (Net) 12.66%.

• Apr 1-23, 2015: FTSE TMX Canada Universe Bond 36.7%, S&P/TSX Composite 25.32%, S&P 500 12.66%, MSCI EAFE (Net) 12.66%, MSCI World (Net) 12.66%.

IPD returns are not immediately available at quarter-end; therefore, the prior quarter’s index return is used in this report.

The Infrastructure fund is priced semi-annually at the end of June and December in U.S. dollars. Interim valuations may be done as the result of special situations. Performance is calculated based on the last available price obtained from the semi-annual or interim valuation and daily FX movement. Net of investment management fees.

No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient without the prior written consent of Greystone.

Greystone is registered as a portfolio manager and exempt market dealer in all provinces and in the Northwest Territories and is registered as an investment fund manager in Saskatchewan, Ontario, Quebec and Newfoundland and Labrador. Greystone is also registered as an investment adviser with the Securities and Exchange Commission in the US.

© Greystone Managed Investments Inc. All rights reserved. Strategist and the Greystone Strategist are registered trademarks of Greystone Capital Management Inc. and licensed to Greystone Managed Investments Inc. ISSN 1201-4613.

Disclosures


Investment Management

Robert L. Vanderhooft, CFA1

Chief Executive Officer & Chief Investment Officer

FIXED INCOME PUBLIC EQUITIESQUANTITATIVE RESEARCH/RISK MANAGEMENT & PORTFOLIO RISK SOLUTIONS

CHAIR, ESG Committee & UNPRI INITIATIVES

Blaine S. Pho, CFA1

Chief Investment Officer, Fixed Income

Jeff Tiefenbach, CFA1

Chief Investment Officer, Public Equities(Lead, Global Equity & International Equity)

Jonathan Jacob, CFA, FSA, FCIA1

Senior Vice-President, Quantitative Research/Risk Management & Head of Portfolio Risk Solutions3

Scott Linner, CFAVice-President, Research

Chad Toews, CFA, CMTSenior Vice-President

Curtis Schimmelmann, CFAVice-President

Neil Schell, CFA, CPA, CMASenior Portfolio Manager

Michael Geng, CFA, MBA, CPA, CMAPortfolio Manager

Jennifer Melcher, CFA4

Portfolio Manager

Rankin Jaworski, CFAPortfolio Manager

Max Moore,CFATrader

Mark RumpelTrader

Client Portfolio Managers (Fixed Income)

Jafer Naqvi, CFA1

Vice-President, Fixed Income & Multi-Asset

David Tallman, CFAClient Portfolio Manager,Fixed Income & Multi-Asset

Alou Koumare, MFRMAnalyst,Fixed Income & Multi-Asset

Zahra Ahanchian, MEconAnalyst,Fixed Income & Multi-Asset

Portfolio Management

Himanshu Sharma, CFA, MBASenior Vice-President & Lead, Canadian Equity & Head of Fundamental Research

James Baldwin, CFA1

Senior Vice-President & Co-Lead, Canadian Equity

Grant A. M. Stahl, CFA1

Senior Vice-President & Lead, U.S. Equity

Alfred Z. Li, CFA, MBA, FRMVice-President & Co-Lead, International Equity

J. Blair Ledingham, CFASenior Director & Co-Lead, U.S. Equity

Fundamental Research

Himanshu Sharma, CFA, MBASenior Vice-President & Lead, Canadian Equity & Head of Fundamental Research

James Baldwin, CFA1

Senior Vice-President & Co-Lead, Canadian Equity

Travis Wetsch, CFAVice-President

J. Blair Ledingham, CFASenior Director & Co-Lead, U.S. Equity

Michael E. Brown, CFASenior Director

Heather Greenman, CFA2

Senior Director

Mark Scollan, CFASenior Director

Ivo Ciurlizza, CFASenior Analyst

Paula Brinton, CFA Senior Analyst

Solo Zhang, M.Sc., FRMSenior Analyst

Raymond ChanSenior Analyst/Trader

Terence Chung, CFA, MBA Senior Analyst

Product Specialist & Market Research

Lisa Moen, CFAVice-President, Market Research, Public Equities

Chirag Patel, CFAVice-President, Product Specialist

Graeme CaswellResearch Analyst, Market Research, Public Equities

Public Equities Trading

Craig R. Martin, CFA1

Vice-President

Amanda R. Reich, CFASenior Director

Janeen Snell, CFASenior Equity Trader

Presley GiblerEquity Trader

Jeff Evans, CFA, LLMVice-President, Quantitative Research/ Risk Management

Kelvin Nan, M.Eng, PhDSenior Analyst, Quantitative Research/ Risk Management

Chantal Laplante, CFA, M.Sc.Senior Analyst, Portfolio Risk Solutions

Carlin Pohl, CFASenior Analyst, Portfolio Risk Solutions

1 Asset Strategy Team Member.2 On leave.

3 Quantitative Research/Risk Management reports to Jeff Tiefenbach and Portfolio Risk Solutions reports to Rob Vanderhooft.4 Returned from maternity leave on October 24, 2017.


Alternative Investments

Robert L. Vanderhooft, CFA1

Chief Executive Officer & Chief Investment Officer

Ted R. Welter1

Managing Director & Chief Investment Officer, Alternative Investments

Jeff Tripp, CFA, MBASenior Vice-President, Real Estate Investments

Greg ZahorskiSenior Vice-President, Real Estate & Mortgage Investments

Luke Schmidt, CFA, M.Sc.Vice-President, Real Estate Investments

Peter-Paul Bloeman, MBA4

Vice-President,Real Estate Asset Management

Jimmy Buzaglo, CFASenior Portfolio Manager, Real Estate Investments

Matt Sych, CFA, CPA, CMASenior Portfolio Manager, Real Estate Investments

Mark Cooksley, MBASenior Director, Real Estate Investments

Garrett Meier, CFA, M.Sc.Portfolio Manager, Real Estate Investments

Michael Ostrander Research Analyst, Real Estate Investments

Tom Harder, CFASenior Vice-President, Mortgage Investments

Viktor Mosiy, CFASenior Portfolio Manager, Mortgage Investments

Karolyn KarpinsSenior Manager, Mortgage Investments

Myles Routly, CFA, MBASenior Analyst, Mortgage Investments

Tyler NguyenAnalyst, Mortgage Investments

Jeff Mouland, P.Eng., MBAExecutive Director / Head of Infrastructure, Infrastructure Investments

Matthew Press, MBAVice-President, Infrastructure Investments

Adam ThouretSenior Director, Infrastructure Investments

Natalie Sekiritsky, CFASenior Analyst, Infrastructure Investments

Tony GuoAnalyst, Infrastructure Investments

Connie C. Ashton, CFA, CPA, CGAChief Operating Officer, Alternative Investments

Brad Vance, LLB3

Senior Vice-President & Legal Counsel

Shane Lewis, CFA Senior Portfolio Manager, Alternative Investments

David Steffensen, CPA, CADirector of Finance, Alternative Investments

Blake Zimmer, CFASenior Analyst, Alternative Investments

Joëlle Guilbault, CFAAnalyst, Alternative Investments

Val Marie Sikorski Senior Administrator, Alternative Investments

Andrew Croll, CFA, CAIAVice-President, Alternative Investments

Elina Betman, CFA2

Client Portfolio Manager, Alternative Investments

Alexandra Katz, CIMClient Portfolio Manager, Alternative Investments

Monish Arora, CFAClient Portfolio Manager, Alternative Investments

Hiranga Jayawardana, CFA, CAIA, MFinSenior Analyst, Alternative Investments

Emily Williams, MFinAnalyst, Alternative Investments

1 Asset Strategy Team Member.2 On leave.

3 Indicates shared resource.4 New hire as at October 23.


Marketing & Operations Management

Jeff Robertson, CFA President, Managing Director & Chief Operating Officer

Marketing

Nazmin GuptaChief Marketing Officer

Human Resources

Dianne Conlon Senior Vice-President

Legal & Compliance

Jacqueline Hatherly, LLBChief Compliance Officer & Senior Legal Counsel

Jared Hein, CPA, CADirector, Compliance

Investment Operations

Jackie AlbanoSenior Vice-President

Tana CameronSenior Manager

Lisa L. NagyManager, Reporting

Michelle KrenbrinkManager

Marnie PerepelukManager

Finance, Performance Analytics, Information Technology

Tom Mamic, CPA, CAManaging Director & Chief Financial Officer

Finance

Brendan Bailey, CPA, CASenior Manager,Fund Accounting

Kristen Schneider, CPA, CGAController,Corporate Accounting

Performance Analytics

Hung Q. Truong, CIPMDirector

Information Technology

Steven Engel, MBA, CMCSenior Vice-President

James GoodchildVice-President & Chief Information Security Officer

Bruce ChernoffEnterprise Architect

Jonathan SalgadoDirector

John TimmonsDirector

Executive Office Initiatives

Frank H. Hart, FCMCVice Chair, Managing Director & Chief Risk Officer

Colin Lynch, MBASenior Vice-President, Strategy & Growth

Client Strategy & Innovation

Louis R. Martel, CFA, FSA, FCIA, ICD.D Managing Director & Chief Strategist

Executive Office

Peggy M. HoganDirector & Secretary to the Board

Institutional Relationships

Sean Collins, CFASenior Vice-President

Michael R. GillisSenior Vice-President

Frank R. GrecoVice-President

Jay Wiltshire, CFAVice-President

Loren Gee, CFA, MBAVice-President

Elizabeth A. Marr, CFAVice-President

Chris Chernecki, CFAVice-President

Simon Segall, MA, ASA Vice-President

David Blyth, CFAVice-President

Bruno Saintonge, CFADirector

Branding & Communications

Anne Bilczuk, CPA, CGASenior Vice-President

Lenn McDonaldDirector

Karl HamblinCreative Director

Lorrie WrightManager

Marketing Intelligence and Analytics, Client Experience and Technology,Institutional Services

Shari LavaVice-President

Chris MacLean Senior Manager Client Experience & Technology

Denise Fray ThompsonManager,Institutional Services

Nicole Lomax, CFAManager,Marketing Intelligence & Analytics

THE POWER OF DISCIPLINED INVESTING®

Our investment management looks to the long term, and our process doesn’t vary across the years. Ultimately, we aren’t satisfied until we give our clients the finest in investment performance and service.

Robert L. Vanderhooft, CFAChief Executive Officer & Chief Investment OfficerGreystone Managed Investments Inc.

““

Headquartered in Regina, with additional offices in Winnipeg, Toronto and Hong Kong, Greystone Managed Investments Inc. is a Canadian-based institutional asset manager, providing investment management services to its broad client base since 1988.

Greystone.ca

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