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Investing in a low yield world David Irwin
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GOVERNMENT BONDS 4
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EQUITABLE ASSET MANAGEMENT GROUP Insurance Managers Internal function of the company since 1920 $1.8 billion in assets under management – general funds & segregated funds History of Solid Investment Performance Solid investment portfolio, proven even through weak economic conditions, which contributes to strong corporate earnings Experienced in asset allocation Nimble, top-down management
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Top-downConservative Asset class managers Security selection Equitable Asset Management Group INVESTMENT PHILOSOPHY
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94%
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LOOKING AT THE “BIG- PICTURE”
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The economy & valuations
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ZIRP QE LSAP WIT2
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HISTORICALLY LOW RATES
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INVESTORS NEED MORE YIELD
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13 CANADA SAVINGS BONDS
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US FED HAS DRIVEN EQUITY MARKETS HIGHER
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THE RETURN OF THE CONSUMER Consumer GDP contribution
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CONSUMER DEBT DECREASING IN THE US Source: Bloomberg
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US Canada HOUSING PERMITS > HOUSING STARTS
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SPENDING TRENDS IMPROVING Consumer confidence Personal consumption
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ECONOMIC OUTLOOK United StatesCanada +2.9%+1.7%
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S&P 500 SOURCES OF RETURN
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S&P 500 RECORD PROFIT MARGINS
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US MARKET OVERVALUED? 15.8x Source: Bloomberg
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EQUITIES LOOK BETTER THAN BONDS Source: Merrill Lynch BBB Corporate credit yield, Bloomberg Equities 6.0% Corporate bonds 4.7%
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KEY INVESTMENT RULES Asset class selection comes first Low interest rates => equities Inflation => equities No silver bullet portfolio BUT diversification is the best way to protect against catastrophic losses
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A BALANCED APPROACH
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ACTIVE MANAGEMENT
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OUR TOP-DOWN APPROACH Equitable Life Portfolios Quantitative Technical Fundamental Momentum and sentiment indicators Thematic drivers Market valuation
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PAR - NOT YOUR TYPICAL BALANCED FUND
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USE OF ILLIQUID ASSETS Commercial Mortgages: add diversification into an asset class challenging for clients to achieve on their own, by a team of experienced mortgage specialists. Private Placement Loans: provide corporate bond type returns with reduced risk and/or higher yields. Real Estate: adds equity-like returns with less volatility. Similar to commercial mortgages, a diversified portfolio of commercial real estate is challenging for clients to acquire and manage independently.
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A high quality fixed income portfolio, with long duration, supports the dividend scale Investment Mix Government50% Corporate50% Investment by Term Years to MaturityPercentage 0 to 5 years23% 5 to 10 years19% Over 10 years57% FIXED INCOME PORTFOLIO
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Performance is enhanced with a solid real estate portfolio, as well as a common and preferred equity program. Investment Mix Equity Type Percentage Common Stock41.2% Real Estate41.8% Preferred Shares16.9% Total Equity assets100.0% EQUITIES AND REAL ESTATE
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The real estate portfolio is comprised of high quality, income producing properties which are diversified geographically across Canada and by property type. 35% 23% 42% REAL ESTATE PORTFOLIO
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PAST PERFORMANCE
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EQUITABLE LIFE ACTIVE BALANCED PORTFOLIOS
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PORTFOLIO POSITIONING Equitable Life Active Balanced Growth Portfolio Equitable Life Active Balanced Portfolio Equitable Life Active Balanced Income Portfolio
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Global Neutral Balanced Global Equity Balanced Canadian Neutral Balanced Category Average MER3.12%3.04%2.85% Equitable Life Active Balanced Portfolios 2.42%2.35%2.40% Equitable Life Active Balanced cost advantage +0.7% +0.4% COMPETITIVE MER’S
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YTD1-YR3-YR Equitable Life Active Balanced Portfolio 8.2%13.6%6.8% Global Neutral Balanced Peer Group 5.5%12.3%7.4% Source: Morningstar, as of August 31 2014 PERFORMANCE
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1.Style diversification 2.“Core” funds 3.Cost & transparency REASONS TO OWN
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