Volume IV Issue II
Q2 JUNE 30, 2010 QUARTERLY FUND PROFILES / PRACTICE MANAGEMENT / OUTLOOK / OPINION
Turn up the heat We grill an expert on the latest BBQ trends and technologies
State of the union Your mid-year briefing on money and markets
Back of the Napkin
Leading your advisory practice Reverse engineering the leadership formula
Letter from the National Sales Manager
The G20 Summit, Canada Day and the World Cup are all finished, and with Labour Day just weeks away, the summer is closing fast. So as the holiday season nears its end, what should advisors be contemplating? This is a great opportunity to review your business plan! Take time to account for what has occurred during the first eight months of the year and implement a plan of action for the remaining four months. Set bi-weekly checks on how you’re progressing relative to your plan and make adjustments where necessary. September is an excellent time to grow your business by attracting new clientele. Reviews with your top clients should be scheduled at this time, with a genuine request for a referral afterward. If you have 20 top client meetings, that could quickly translate into 20 additional top prospects. Consider implementing a reward and recognition program for referrals and loyalty to your practice. Both will create a culture of belonging for your clients and enhance the experience of your brand. Consider recognizing clients who have given a referral by highlighting them in your newsletter or other client communications. Continue to make your clients’ experience a memorable one with every touch and they will continue to reward you with referrals and loyalty. Just as you have to earn your clients’ business every day, we at Renaissance Investments are working to earn your business. We want your experience with us to be worthy of a referral to your colleagues. With that in mind, please don’t hesitate to contact me with any questions or comments on how we can improve. Thank you for your business and confidence in Renaissance Investments.
Dave Wahl National Sales Manager 416 943 6959 P.S. Please ensure you attend one of our fall roadshow events being held in 18 cities across Canada. We will offer insight and information that enhances your client recommendations and help you build a better practice. To reserve your spot, contact your Renaissance Investments representative.
Table of Contents Tax and Estate Tax report card
Economic Outlook At the inflection point
Back of the Napkin Leading your advisory practice
Thanks to Our Supporters Caring for clients
Invest Well State of the union
Solution Highlight Be ready for anything with the Renaissance Optimal Income Portfolio
Axiom Portfolios Profiles Portfolio Essentials Performance Essentials
p 14 p 32 p 33
Renaissance Investments Fund Profiles Money Market Funds Fixed Income Funds Balanced Funds Equity Income Funds Canadian Equity Funds U.S. Equity Funds Global Equity Funds Specialty Funds Fund Essentials Performance Essentials
p 34 p 36 p 44 p 58 p 66 p 76 p 84 p 90 p 114 p 122 p 123
Live Better Turn up the heat
Tax and Estate
Managing Director, Tax & Estate Planningning Jamie Golombek
report card With half the tax year now behind us, tax returns for 2009 filed and refunds received, how will your clients measure up on our 2010 interim Tax Report Card? Here are three basic tax strategies — see how your clients did.
1. Tax-Free Savings Accounts Did you know that most eligible investors have still not opened up TFSAs, despite the fact that they can now contribute $10,000 (that’s $5,000 for 2010 plus another $5,000 carried forward automatically from 2009) to the account to earn tax-free income and gains for life? CRA statistics released in June 2010 indicate that as of the end of last year, only 4.7 million Canadians have opened up TFSAs. Hopefully, you’ve explained to your clients the valuable benefits of TFSAs, especially as a long-term retirement savings tool. In fact, unless your client is in the highest tax bracket and expects to be there in retirement as well, chances are they may be better off maximizing their TFSA before contributing to their RRSP. Sound contrary to general opinion? Let me explain.
With an RRSP, you get a tax deduction today but pay tax on the withdrawal later on. With a TFSA, you pay tax on the income earned today, but the after-tax amount goes in and can be withdrawn later, completely tax free. Because a TFSA withdrawal is not considered to be “net income” (unlike an RRSP or RRIF withdrawal), it has no impact on government benefits that are income-tested, such as Old Age Security, the GST/HST credit and the age credit. That means that most clients, once you consider the impact of the potential loss of government benefits, will actually be in a higher marginal effective tax rate upon retirement than they were in when they were working, making the TFSA the primary retirement savings vehicle.
2. Is your client’s debt tax deductible? If your client still has a mortgage on their home, a car loan or even a personal line of credit, but also holds investments outside a registered plan, have you talked to them about the “Singleton Shuffle” — a perfectly legitimate, Supreme-Court-approved method of making their interest tax deductible?
To do the Shuffle, your client may wish to consider selling their non-registered investments, using the funds to pay off their personal debt and then re-borrowing to buy back their investments, making the interest on the replacement debt fully tax deductible since the money was borrowed directly for investment earning purposes. Before engaging in this strategy, however, be mindful of the tax consequences of selling the investments and any potential fees, costs or penalties associated with paying off the non-deductible debt to ensure the total tax benefits outweigh the implementation costs.
3. Avoiding that tax refund Finally, if your client once again received a tax refund for 2009, why not sit down with them, complete CRA Form T1213 “Request to Reduce Tax Deductions at Source” and, once approved by the CRA, set up an automatic investment program to redirect the tax savings into an investment account throughout the balance of 2010. After all, while a tax refund may seem appealing, it’s a sign of poor tax planning because it means your client has loaned their hard-earned money to the government interest-free, for a year, or more.
Jamie Golombek is Managing Director, Tax & Estate Planning with CIBC Private Wealth Management. He works closely with advisors to help them provide integrated financial planning solutions for their high-net-worth clients. Jamie is frequently quoted in the media as an expert on taxation.
This information is provided for informational purposes only and is not intended to provide specific financial, investment, tax, legal or accounting advice for you, and should not be relied upon in that regard. The views expressed in the article are the personal views of Jamie Golombek and should not be taken as the views of CIBC Asset Management Inc. 2 renaissance investments
Deputy Chief Economist, CIBC Benjamin Tal
At the inflection point When markets reach an inflection point, economics can get really interesting. That’s exactly where the global economy sits as we head into summer. The question is: are we
The U.S. wasn’t quite so heated, but still saw more than 4% growth in the two quarters ended in March.
“China recorded 12% growth in the year leading up to the first quarter of 2010. In Canada, we are coming off of two quarters in which the economy averaged 5.5% growth.” seeing a turn for the worse — a period of slower growth — or a turn for the worst — meaning a renewed recession? After their recent pull-back, equities might be able to muddle through a period of slower growth, but would have a lot of additional downside if the worst-case scenario were to emerge. Equities are, of course, still miles from their March 2009 lows, but are clearly counting on earnings gains, not a recessionary dive in profitability. Trouble is, a turn to a slowdown looks a lot like a turn towards outright recession in its early stages. That’s particularly the case when the prior period saw very robust growth. China recorded 12% growth in the year leading up to the first quarter of 2010. In Canada, we are coming off of two quarters in which the economy averaged 5.5% growth.
Two-year U.S. Treasuries are back at their lowest levels since the depths of the recession, reflecting a consensus view that, whatever fate awaits the U.S. economy, the Fed is still a long way away from a tightening.
Slowdown or recession? Our own long-held view is that the global economy will see much slower growth ahead, with a trough at only 1.5% growth in both Canada and the U.S. by the fourth quarter. Based on this outlook, we are not shocked to see purchasing managers indices in both the U.S. and China move lower as they did in July to levels consistent with more modest growth.
Today’s anemic U.S. private sector hiring stats are not the deeply negative figures normally associated with the onset of recession, but are in line with a deceleration to below-trend GDP growth. Housing data was boosted by tax incentives, so again, a big drop in the month after their expiry is not a surprise. Our two favourite aggregate U.S. measures, the comprehensive Chicago Fed National Activity Index and the leaner but more contemporaneous ADS index from the Philadelphia Fed, are still both saying green for growth, even if the ADS index is saying so a little less vociferously than its broader counterpart. Closer to home, Canada’s flat GDP for April was consistent with a deceleration in growth rather than a turn to recession, given that it came off of a bloated 0.6% March advance. May GDP looks to be much better, as we already know it was a decent month for hiring. But don’t be surprised to see Canadian jobs data begin to taper off. It will be interesting to see how events unfold over the coming months, but we continue to believe that markets will pass this inflection point on a trajectory of continued — albeit slower — growth.
This information is provided for informational purposes only and is not intended to provide specific financial, investment, tax, legal or accounting advice for you, and should not be relied upon in that regard. The views expressed in the article are the views of Benjamin Tal and should not be taken as the views of CIBC Asset Management Inc. renaissance investments 3
Back of the Napkin
Director, Strategic Insights Grant Shorten
Leading your advisory practice Reverse engineering the leadership formula If you are an investment advisor or financial planner, you most likely have a box of personalized business cards in your desk drawer or in a filing cabinet somewhere. Included on those cards are your name and the title that seeks to define your role in this fascinating world of investing.
The reality is, as long as you are employed by your current organization, you essentially have a contractual obligation to fulfil the duties and responsibilities implied by that printed title. In other words, you are expected to do the “things” that investment advisors or financial planners do. Furthermore, you are expected to engage, manage and oversee the players in your virtual franchise. These individuals will include your team members, assistants, associates, marketing specialists, estate planning colleagues and, ultimately, your trusted clients and prospects.
Most readers would agree that there is a big difference between being an “overseer” of your practice… and being a “leader” of your practice. An overseer, advisor or planner fills an important function on a flow chart, but a leader, by definition, is somebody who is followed. There is much debate on the subject of “why” a leader is followed, but I believe that it ultimately comes down to one thing. A leader is followed simply because they embody the substance worthy of being followed! The ultimate quest, however, is to gain a deeper understanding of that “substance.”
With that in mind, I would now like to ask you a more important question: Are you the leader of your advisory practice and your virtual franchise?
Reverse engineering the leadership formula
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When we read books on leadership or attend a leadership training program, we often walk
away with a fairly standard list of the qualities and attributes of great leaders. The list will likely contain descriptors like charismatic, confident, intelligent, courageous, visionary, focused, inspiring, etc. Upon receiving this list, we are tacitly instructed to “go and do likewise.” Unfortunately, knowing the qualities of a leader does very little to help us to become one! Such a list might help us identify a leader somewhere out there in the world, but it does nothing to help us instil those qualities within ourselves. We need to drive the learning process much further by actively modelling the deeper structure of leadership — the mindset, habits and rituals of great leaders.
Any time we find excellence, in any area of our experience, we have the wonderful opportunity to model its structure and to accomplish four important things: 1. Unpack the underlying components 2. Analyze how each component functions 3. Install the findings within our own neurology 4. Replicate the results When it comes to unpacking leadership excellence, I have found it beneficial to model no less than seven critical elements. Notice how they build upon each other
in a sequential fashion, moving from deeply internal and then outward to the external evidence.
The Seven Components of Leadership “Substance” 1. Values In order to effectively solicit a person’s values, we simply need to ask them the question, “What’s most important to you about (fill in the blank)?” When the listener hears the question, it quickly will change their brain chemistry and force them to formulate a response (whether it is spoken or not), and to clarify their deepest-held values in a given area. Most of us operate with only a vague idea of what’s most important to us, in so many areas of our lives.
The Leaders’ Distinction: Great leaders have developed massive clarity around their values — what’s most important to them in the environment in which they lead. There is no doubt about what they hold most dear to their hearts. 2. Beliefs If our values are “what” is most important to us, our beliefs are “why” those things are so important. Once we have discovered a person’s values, we can efficiently elicit their beliefs by asking the question, “Why is that so important to you?” The answer to this question provides us with their religion — the belief system that supports their deepest values.
The Leaders’ Distinction: Great leaders carry a powerful set of beliefs that back up and embolden their value system. They know exactly why they do what they do, and can articulate those beliefs without wavering.
successful future. The image is bold and bright, it is placed in a central location within their minds, it is dynamic and it is vibrant! 4. Mission Our mission is our step-by-step process to actualize our vision. “Mission” includes the stuff of business planning, marketing planning, goal setting and project management. The Leaders’ Distinction: Great leaders have developed a documented, living roadmap to achieve their vision. Their mission is outcome-oriented, contains no wasted steps and is geared solely around the rapid manifestation of their vision.
5. Thoughts Our thought-life is the first piece of the all-important “decision triad.” The decision triad is comprised of our thoughts, words and actions. Any time we have achieved a
“Great leaders… know exactly why they do what they do, and can articulate those beliefs without wavering.” 3. Vision Our vision is our constructed image of a successful future. The word “vision” gives us clues as to the nature of this component. A vision is something that we can see in our mind’s eye. Most of us have never taken the time to proactively create an image of our desired, successful outcome. The Leaders’ Distinction: Great leaders have constructed a crystal clear image of a
meaningful accomplishment in our lives, it has always followed along the decision triad. The idea is first conceived in our thoughts, it is then articulated in words and then it is played out in our actions. The Leaders’ Distinction: Great leaders operate with the understanding that we can control our directing thoughts and that we have the power to take our thought-life captive. They challenge the thoughts that renaissance investments 5
7. Actions While our words are the auditory evidence of our deeper structure, our actions stand as the visible evidence. Ultimately, actions speak louder than words. Our predominant actions will provide powerful clues as to the nature and quality of the prior six components. These are the behavioural rituals that will define us in the eyes of others. The Leaders’ Distinction: Great leaders behave like leaders. They “do” certain things consistently — actions that flow naturally from the work done at a deeper level. Here are some examples of the predominant actions of leaders, as they engage their teams.
> Leaders inspire their teams > Leaders empower their teams > Leaders encourage and uplift their teams > Leaders include their teams > L eaders teach, coach and mentor their teams
> L eaders give credit to their teams for successes
> L eaders speak highly and often about their teams
> Leaders reprimand softly, but praise loudly
“The predominant thoughts of a leader are positive, creative, constructive, uplifting, empowering and inspiring.” come into their minds, they reject the thoughts that fail to serve them and they nurture the thoughts that inspire and empower them! The predominant thoughts of a leader are positive, creative, constructive, uplifting, empowering and inspiring. 6. Words As the second piece of the decision triad, our words give life to our thoughts. They affirm our thoughts and they subsequently install the action program. As the proverb says, “out of the abundance of the heart, the mouth speaks.” Therefore, if we want
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to understand the nature of an individual’s thought-life, all we have to do is to listen to their words! The Leaders’ Distinction: Great leaders speak from their hearts and they choose their words wisely. At this stage, we now get to experience the first “external evidence” of the deeper structure of leadership substance. As must happen, the predominant words of a leader are aligned with their predominant thoughts. Correspondingly, their words are positive, creative, constructive, uplifting, empowering and inspiring.
> Leaders are accountable to their teams As with any other discipline, strategy or process, we can successfully model the mindset, habits and rituals of great leaders. Using the framework above, take the time to apply the seven components of leadership excellence to your own experience. Mindfully and proactively seek to gain tremendous clarity under each of the elements. As you do so, you will automatically begin to install the substance worthy of being followed. Learn more about the concepts in this article live with Grant Shorten! He will be appearing this fall as one of our guest speakers during the crosscountry Renaissance Advisor Live & Interactive Roadshow. Book your seat early by contacting your Renaissance Investments representative.
Thanks to Our Supporters
Caring for clients What I love about the business The relationships I have built with my clients. I’ve had the opportunity to learn about a variety of industries. I’ve made some fantastic friends and have even driven across Alberta for a homemade supper! Best tip for gaining new clients Treat your existing clients well. What goes around, comes around. Most of my business comes from referrals, so treating clients well has been paramount to my success. The book I’m currently reading At this precise moment, I am moving my office and also moving to a new home, which does not leave a lot of time for reading. And with four kids, spare time is at a premium! Favourite vacation spot I prefer cruising with my family. My wife and I have taken a number of cruises both with and without the kids and we’ve always enjoyed it immensely. We’ve cruised in the Caribbean and the Panama Canal, and enjoyed a Disney cruise with the kids.
Name: Jason Boldt Firm: Spectra Wealth Management Group Years in business: 11 Team members: 4
Without the support of advisors like Jason Boldt, Renaissance Investments would not enjoy the privilege of helping so many Canadians invest well and live better. We are proud to work with this outstanding professional.
Favourite hobby when I’m not at work Golf — I’m your typical professional hacker, but I love going with friends. It’s a great social sport. Charity that means the most to me I am on the board of a family violence prevention centre in Edmonton, and the cause is very important to me. I believe every child should have the opportunity to grow up without being exposed to some of the harsher elements of life. We opened in January 2010 and the response has been spectacular. What do I offer to the local marketplace and to my clients? I believe what I offer is fairly simple. I fundamentally care about how my advice impacts my clients in both the short term and the long term. If you focus on revenue instead of the client, real people can suffer. I am focused on offering the best advice I can and ensuring product fit for my clients. My Renaissance Investments wholesaler offers fantastic support through idea generation, practical advice and giving me his time. He really knows his stuff, which allows me to put my clients first.
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State of the union
Your mid-year briefing on money and markets
In reviewing the global landscape at the end of the second quarter of 2010, it is clear that markets, asset classes, economic regions, currencies, interest rates and commodities don’t move in tandem — especially in these volatile times. That’s why careful due diligence, quality portfolio management and comprehensive asset allocation remain so important for investors. Following is a review of what has transpired so far this year, along with comments, perspectives and even a prediction scorecard from some of the portfolio management experts who help the team at Renaissance Investments make sense of a fast-changing world and continually deliver strong results to you and your clients.
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At the beginning of the year, who would have guessed that an Icelandic volcano would bring air traffic to a halt, or that an oil spill would threaten to topple one of the world’s largest energy companies? The world will always be unpredictable, but Renaissance Investments is committed to giving you and your clients a better perspective.
North American markets Losing ground North American stock markets finished 2009 on a powerful bull run, with the S&P 500 Index gaining more than 67% from its March low, and the S&P/TSX Composite Index up nearly 60% from its bottom just nine months earlier. Entering 2010, few expected these indices to maintain such a feverish pace, but it’s likely that even fewer expected them to be losing ground and posting year-to-date losses by the end of the second quarter. The unexpected event that erased stock market gains from earlier in the year was the European debt crisis. However, despite this economic disruption, the U.S. economy continued to strengthen, according to CIBC Global Asset Management’s Steven Dubrovsky, manager of the Renaissance U.S. Money Market Fund. Dubrovsky notes
that stimulus spending, which peaked in the first quarter of the year, largely has been effective. Brandywine Global Investment Management, LLC, manager of the Renaissance Global Bond Fund, concurs, saying that “While U.S. private sector job creation has disappointed, hiring will pick up. Overall, U.S. economic growth has been strong this year, in line with our expectations. The U.S. dollar has also met our expectations and performed well against the euro.” Meanwhile, Canada’s financial system has continued to demonstrate its resilience, boasting prudent financial discipline and one of the world’s strongest economies. According to CIBC Global Asset Management’s Colum 800 McKinley, manager of the Renaissance Canadian Core Value Fund, “Canadian equities 700 are currently trading near long-term historical 600 averages and Canada has become the envy 500 of many countries around the globe with a 400 stronger voice in shaping future financial regulatory changes.” 300
S&P/TSX Composite Index
S&P 500 Index 1,240 1,200 1,160 1,120 1,080 1,040 1,000
June 2010 Source: Bloomberg
“There are clear structural issues in some of Europe’s 13000 peripheral countries, such as government budget deficits, but much of core Europe does not share these issues. 12000 As always, when fear dominates the minds of investors, 11000 opportunities to purchase good companies at distressed 10000 prices may arise.” 9000 14000
BlackRock Investment Management International Ltd., manager of the Renaissance European Fund
800 700 600 500 400 300 2008
June 30, 2010
Global Market Performance 10% 5% 0% -5% -10% -15% -20%
The year began with concerns over the sovereign debt crisis in Greece and was swiftly followed by concerns over budget deficits in countries including Spain, Portugal and Ireland. As Standard & Poor’s downgraded the ratings of bonds in these regions in April, stock markets around the globe fell. Following the US$146 billion Greek bailout package assembled by the European Union and International Monetary Fund, Europe’s finance ministers aimed to ensure stability across Europe with the launch of an additional US$525 billion funding program for other European countries in need (source: Reuters).
Shanghai Composite Index
Global markets Europe, Asia and emerging markets fall behind
MSCI AC Asia Pacific Index
Nikkei 225 Index
MSCI EAFE Index
MSCI European Index
Source: MSCI Index data supplied by Rimes, Nikkei 225 Index data supplied by Bloomberg
After a spectacular rise in 2009, Asian stocks were flagging by the end of the second quarter this year. Hamon Investment Management Limited, manager of the Renaissance Asian Fund and the Renaissance China Plus Fund, said that Asian markets were consolidating over concerns about European debt. Chinese shares were off sharply, on additional concerns that Beijing will take strong action to slow the nation’s booming economy — despite publishing inflation numbers that have been well below expectations. Meanwhile, higher unemployment and a drop in industrial production hurt Japanese markets toward the end of the second quarter. renaissance investments 9
Following a volatile start to 2010, Renaissance Emerging Markets Fund manager Pictet Asset Management Limited is cautious about emerging markets over the remainder of the year, saying, “Whilst our constructive medium-term opinion of emerging markets remains firmly in place, we think it unlikely that emerging equities can exert significant outperformance over developed equities over the coming months.” The MSCI Europe, Asia and Far East (EAFE) Index and Japan’s Nikkei Index have lagged North American markets year-to-date as of June 30.
Currencies Rollercoaster for loonie
Five surprises in 2010 1. Gulf oil spill. On April 20, 2010, a catastrophic explosion occurred on the Deepwater Horizon offshore drilling rig about 64 km off the Louisiana coast. The subsequent oil leak has been called the biggest ecological disaster in American history, and BP has set aside at least $20 billion on the request of the U.S. administration to help cover damage to the livelihoods of gulf coast residents and the natural environment.
While still strong relative to the U.S. dollar and the beleaguered euro, the loonie has been on a rollercoaster ride this year. It broke through parity with the U.S. dollar in early April, was dragged back down by sagging commodity prices, then staged another rally before again declining to the $0.94 area.
2. Record growth for the Canadian economy in a decade. The first quarter of 2010 saw Canada’s Gross Domestic Product rise 6.1% — its fastest growth since 1999, and well ahead of virtually any economic forecasts and other countries around the world. A report from CIBC Global Asset Management predicted that the domestic economy is likely to continue to outpace its G8 peers for the next decade.
The Bank of Canada (BoC), which had earlier promised to hold its overnight rate at a record low until at least the middle of the year, raised it on June 1, making Canada the first G8 country to raise rates since the financial crisis.
Although the move followed the release of robust GDP data confirming that Canada is well on the road to recovery, a cautious BoC said, “Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.”
3. Greek debt downgraded to junk. On June 14, 2010, Moody’s rating agency downgraded the credit standing of debt issued by Greece by four notches from ‘A3’ to ‘Ba1’ — below investment grade, and what is commonly considered to be so-called junk status. Source: http://www.google.com/hostednews/afp/article/ALeqM5iSig9ZIG-ybxFWcj82kTMgpnobbg
Source: http://articles.latimes.com/2010/jun/11/news/la-banks-repay-loans-20100611-m and http://blogs.wsj.com/ deals/2010/06/15/tarp-scorecard-who-has-paid-it-back/
5. Health-care reform. In March, controversial U.S. legislation aimed at extending health-care coverage to millions of uninsured Americans narrowly passed the House of Representatives in a 219-212 vote. While some marketwatchers worried about fallout from the bill — which will cost $940 billion over a decade and potentially threaten the profitability of insurers and health-care providers — markets have so far appeared unfazed.
2010 CAD–USD exchange rate 1.02 1.00 0.98 0.96
0.94 0.92 0.90 0.88
4. U.S. firms repaying TARP loans. During the financial crisis, the U.S. government pumped more than US$500 billion into 800-plus firms through the Troubled Asset Relief Program (TARP). So far, it has already received about $195 billion back from 82 firms. “TARP repayments have continued to exceed expectations,” said a Treasury Department official.
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ource: http://www.boston.com/news/nation/washington/articles/2010/03/21/congress_ S approves_historic_health_care_legislation/?page=1
Surprises will always be part of investing. Yet, no matter what happens, the principles of success remain unchanged — focus on effective diversification and a long-term perspective. If you have questions about how to apply these principles in your practice, or want more information about anything discussed in this article, please contact your Renaissance Investments representative.
Commodities All 1200that glitters
that instantly converts your cash into gold bars.
In contrast to gold, other major commodities Gold 1000 prices gently trended lower in the first have generally declined in 2010. In a near three months of the year, then took off on mirror-image of gold price performance, another bull run in April, reaching all-time 800 the Deutsche Bank Liquid Commodity Index record highs in June. The commodity’s (DBLCI), which tracks the performance of strength appeared to be tied to weakness in 600 31-Dec-2009 4-Jan-2010 5-Jan-2010 6-Jan-2010 7-Jan-2010 8-Jan-2010 11-Jan-2010 12-Jan-2010 13-Jan-2010 14-Jan-2010 15-Jan-2010 19-Jan-2010 20-Jan-2010 21-Jan-2010 22-Jan-2010 25-Jan-2010 26-Jan-2010 27-Jan-2010 28-Jan-2010 29-Jan-2010 1-Feb-2010 2-Feb-2010 3-Feb-2010 4-Feb-2010 5-Feb-2010 8-Feb-2010 9-Feb-2010 10-Feb-2010 11-Feb-2010 12-Feb-2010 16-Feb-2010 17-Feb-2010 18-Feb-2010 19-Feb-2010 22-Feb-2010 23-Feb-2010 24-Feb-2010 25-Feb-2010 26-Feb-2010 1-Mar-2010 2-Mar-2010 3-Mar-2010 4-Mar-2010 5-Mar-2010 8-Mar-2010 9-Mar-2010 10-Mar-2010 11-Mar-2010 12-Mar-2010 15-Mar-2010 16-Mar-2010 17-Mar-2010 18-Mar-2010 19-Mar-2010 22-Mar-2010 23-Mar-2010 24-Mar-2010 25-Mar-2010 26-Mar-2010 29-Mar-2010 30-Mar-2010 31-Mar-2010 1-Apr-2010 5-Apr-2010 6-Apr-2010 7-Apr-2010 8-Apr-2010 9-Apr-2010 12-Apr-2010 13-Apr-2010 14-Apr-2010 15-Apr-2010 16-Apr-2010 19-Apr-2010 20-Apr-2010 21-Apr-2010 22-Apr-2010 23-Apr-2010 26-Apr-2010 27-Apr-2010 28-Apr-2010 29-Apr-2010 30-Apr-2010 3-May-2010 4-May-2010 5-May-2010 6-May-2010 7-May-2010 10-May-2010 11-May-2010 12-May-2010 13-May-2010 14-May-2010 17-May-2010 18-May-2010 19-May-2010 20-May-2010 21-May-2010 24-May-2010 25-May-2010 26-May-2010 27-May-2010 28-May-2010 1-Jun-2010 2-Jun-2010 3-Jun-2010 4-Jun-2010 7-Jun-2010 8-Jun-2010 9-Jun-2010 10-Jun-2010 11-Jun-2010 14-Jun-2010 15-Jun-2010 six commodities in the energy, precious the euro, which sent investors in search of a metals, industrial metals and grain sectors, more stable store of value. declined 9.8% year-to-date as of June. The decline is largely a reflection of a slowdown Gold’s strong performance has made it more in global demand. than just an investment asset — it’s also a cultural phenomenon. The trend includes a In 2010, oil has traded at about half its proliferation of “we buy your gold” print and all-time high price of roughly $145, set back TV advertisements, so-called “gold parties” in 2008. Despite potential pressure on Gulf hosted in private homes, and even the oil production, prices drifted lower in the unveiling in Abu Dhabi of an ATM-like, weeks following the disastrous BP spill. 24-carat, gold-plated “Gold to Go” machine
Spot Gold vs. Commodities 1,400 1,200 1,000
Detsche Bank Liquidity Commodity Index (T Financial reform SPOTdown $/OZ RegulatorsGOLD crack
Financial reform has been a hot topic so far in 2010, with the U.S. Senate passing landmark legislation in May to further regulate banks and brokers in what has been called the largest overhaul of the U.S. financial system since the 1930s. In the UK, the Financial Services Authority will hand back many of its regulatory powers to the Bank of England by 2012, and divide the rest between two new bodies — one to root out white-collar crime, the other to protect consumers and regulate markets. At the G20 meeting in Toronto at the end of June, world leaders agreed to phase in new bank capital standards, to improve transparency and regulatory oversight of hedge funds, credit rating agencies and certain derivatives and to remain focused on the importance of global accounting standards. While it also was agreed that the financial sector should help pay for “any burdens associated with government interventions,” agreement was not reached on a global bank tax.
Looking ahead January 2010 Gold spot $/OZ
Deutsche Bank Liquidity Commodity Index (Total Return)
“We believe any temporary or permanent loss of future [oil] production… will only exacerbate already severe long-term global supply issues and eventually drive oil prices higher, which should benefit our portfolio companies disproportionately.” Aletheia Research and Management Inc., manager of the Renaissance Global Focus Fund and the Renaissance U.S. Equity Growth Fund
Turn the page to see how the experts at CIBC Global Asset Management have scored on their 2010 forecasts. For more information about how our economic perspective can help you and your clients take advantage of opportunities while carefully managing risk, please speak with your Renaissance Investments representative.
The team at CIBC Global Asset Management sees a fragile world in the second half of 2010, as China’s growth decelerates and private demand has to replace the artificial demand created by fiscal stimulus programs. Nonetheless, the team predicts a global economic growth rate of 3.8% and equity market returns of between 10% and 18% over the next 12 months. RARE Infrastructure Limited, manager of the Renaissance Global Infrastructure Fund, believes the next leg of the bull market will depend on investors seeing more stability in Europe and the U.S. and less overall volatility. However, at mid-year 2010, they preach diversification and confidence as the keys to success: “In uncertain times, few investors have the time to react to events in a disciplined manner, and this emphasizes the need for a balanced spread of assets. In addition, those who go against the grain and seek out opportunities when others retreat will benefit the most.”
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Keeping score In their Perspectives report dated January 1, 2010, the portfolio managers and analysts at CIBC Global Asset Management laid out their forecasts for 2010. Here’s a look at how they have scored so far in 2010 on ten key economic indicators — impressive results given the volatility of markets. KEY INDICATORS
“The developed world is unlikely to experience the same kind of robust growth as the emerging world in 2010.”
Developed economies have indeed lagged the growth of emerging economies in 2010, with the notable exception of Canada, which grew at a record 6.1% annualized pace in the first quarter. Source: Statistics Canada
“Although we are seeing signs of economic improvement in the U.S., we believe the recovery will start to lose steam in 2010.”
Signs of a slower recovery have begun to emerge, including weakness in housing and employment statistics. Source: Reuters
North American markets Emerging markets
“We expect more modest returns from equities in 2010, with gains in the 3% to 13% range, depending on region.”
North American markets were down slightly for the year as of June 30.
“Emerging markets, especially in Asia, are most at risk for an equity market pullback.”
Emerging market equities have pulled back, with China’s Shanghai Composite Index declining about 19% year-to-date as of June 30.
“Our 12-month forecast for both 10-year U.S. Treasury and 10-year Government of Canada bond yields remains unchanged at 3.50%.”
As of June 30, the U.S. Treasury 10-year yield was 2.97% and the 10-year Government of Canada bond yield was 3.08%. Source: U.S. Department of the Treasury, the Bank of Canada
Canadian interest rates
“While the Bank of Canada will watch inflation numbers closely, it will likely honour its commitment to hold interest rates at current levels until mid-year.”
The Bank of Canada raised its overnight rate 25 basis points to 0.50% from 0.25% on June 1, and followed that with another 0.25% increase in July.
“Our forecast calls for [Chinese] inflation to register at over +5% by the end of the first half of 2010.”
China’s annual inflation rate hit 3.1% in May, a sharp rise from 2.8% in April.
Source: the Bank of Canada
Source: Associated Press
“While a replay of the 28% rally in 2009 is unlikely, we project a significant upside for the price of gold in 2010, in the range of +12%.”
Gold continued to climb in 2010, up 11.7% year-to-date as of June 30.
“Limiting the upside for the Canadian dollar are signals from our fair-value model that the Canadian dollar is overvalued against the U.S. dollar at current levels (.96 CDN$/US$).”
After breaking through the parity in April, the loonie was trading just above 0.94 CDN$/US$ as of June 30.
“In the next few months, the euro may gain as the U.S. dollar continues its slide.”
The euro has lost 14.6% of its value versus the U.S. dollar as of June 30.
Source: Bloomberg 12 renaissance investments
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Annualized MER for Class A units as at February 28, 2010. The MER would have been 2.12% had the Manager not waived some management fees and/or absorbed some operating expenses, with the exception of any taxes or new fees that may have been introduced by regulators or governments. This will be reviewed annually by the Manager. 2 Front-end load units. renaissance investments 13
Turn up the heat
We grill an expert on the latest BBQ trends and technologies One side effect of the recent recession is a trend towards spending less time out at expensive restaurants, and more time cooking at home with family and friends. That means the barbecue is going to be working overtime this summer.
“People are going back to basics,” confirms Leslie Waldner, Marketing Coordinator at Barbecues Galore, a family owned and operated barbecue retailer with two locations in Calgary and two just outside Toronto. “Barbecuing can be economical, and it’s also something people enjoy. We’re seeing more and more people starting to do it year-round. Here in Calgary, we don’t have much choice, because the summer season is so short.” Another sign that people are revisiting simpler times is a resurgence of old-school charcoal barbecues. “Charcoal grilling has always been popular in the southern U.S., but it’s really making a comeback here,” says Waldner. “Charcoal is definitely more work in terms of starting the barbecue and cleaning up afterwards, but it can offer more flavour than a gas grill, and also adds to the experience. It’s perfect for people who are looking to invest more time into what they’re cooking and eating.” 124 renaissance investments
Some argue that, for those who take their barbecuing seriously, charcoal grilling is not only the tastiest option, but a healthy one too. Tastiest, because it’s the best way to slow-cook meat for hours or even days, creating that fall-off-the-bone tenderness and authentic smoky taste. And healthy, because all that cooking time allows excess fat to drip away. Of course, for a truly balanced meal, vegetables are always a great choice on the grill.
“Charcoal grilling has always been popular in the southern U.S., but it’s really making a comeback here.” If you’re in the market for a charcoal grill, Waldner says there is a range of options depending on your needs and budget:
> T he Weber kettle is a backyard classic.
These basic charcoal grills are virtually indestructible, and come in a variety of sizes, including smaller versions that are fairly easy to take with you to the boat or cottage. www.weber.com
> T he Big Steel Keg is a charcoal grill in the
traditional Japanese “kamado” style. It offers high-end features — such as insulated steel construction and large cooking capacity — but claims to do so at half the price of its key competitors. www.bigsteelkeg.com
> T he Big Green Egg is the Cadillac of
charcoal grills. It uses the same ceramic technology as NASA spacecraft, so you know it can handle the demands of your burgers and dogs. It’s not cheap, but it claims to be the very best. www.biggreenegg.ca
Beer can chicken Beer can chicken is a tried-and-true summertime favourite. Here’s some advice on how to barbecue a wonderfully moist and tender chicken. Weber kettle One-Touch® Gold 22.5
Big Steel Keg™
Big Green Egg®
Photos courtesy of Weber-Stephen Products Co., Big Steel Keg™, Inc., and Big Green Egg Canada., used with permission.
Charcoal grilling is not for everyone — especially those who just want a delicious meal with minimal hassle. For those seeking the relative ease of a gas grill, there’s at least one recent innovation worth checking out: infrared grills. “An infrared grill is a special burner that’s added to a gas barbecue. It works by heating a ceramic tile that radiates heat upward much more efficiently than a standard stainless steel tube burner,” says Waldner. Indeed, infrared burners can reach over 500°C for super-high heat cooking. This makes it possible to very quickly sear meat, so your steak will not only be juicier on the inside, it will also look more delicious on the outside with a nice set of grill marks. Waldner says infrared grills were available from only a few manufacturers as recently as a season or two ago, but are now offered by many popular brands. With a variety of construction materials, fuel sources, price points and features to choose from, buying a new barbecue can be a daunting task. Waldner says you should
start by making a few basic decisions about your needs:
>W hat do you like to cook? If you’re planning to sear rare tuna steaks or slow-cook beef ribs, you may want features and accessories that go beyond the basic barbecue.
>H ow big is your crowd? Any barbecue can
handle dinner for four, but if you’re going to regularly invite the neighbourhood to join you, something larger will be in order.
>D o you want convenience or experience?
Some people like to make barbecuing an all-day ritual. Others want a quick solution with minimal clean-up. Decide which type of person you are.
With a good sense of your needs and your budget, it’s time to talk to an expert — preferably at a store that stocks a variety of brands and styles. At Barbecues Galore, barbecuing is practically a way of life. “We barbecue lunch here every Friday in the winter,” says Waldner. “Meat, potatoes, sandwiches, bacon, eggs, nachos, cookies, brownies — you name it!”
Here are five barbecue accessories to help take your backyard grilling to the next level. 1. Silicone basting brushes “They’re great because you don’t lose bristles in your sauce, and they’re made to withstand the heat.” 2. Specialized racks “Rib racks and chicken wing racks allow you to stand the meat up and fit more food on your grill.” 3. Remote thermometer “You stick the sensor in the meat, and keep the other unit with you so you can monitor the temperature without having to open the barbecue or even be near it.
This comes in really handy in our cold Calgary winters.” 4. Rotisserie “These work well if your barbecue has a rear burner. Something to think about when you’re shopping for a new barbecue.” 5. Smokers “A smoker can help you simulate the flavour of slow cooking over low heat, even with a hot gas grill. You can also infuse the meat with a variety of flavours, such as hickory or mesquite.”
The views expressed in this article are those of Leslie Waldner, Barbecues Galore representative, and should not be taken as the views of CIBC Asset Management Inc.
Instructions > Coat the bird — inside and out — with spice rub of your choice. Be generous with the rub. > Drink about half a can of beer, then poke a few holes in the top of the can for extra evaporation. > Put the half-full can in the centre of a drip pan and lock the support rods into place around the can. > Settle the bird (business end first) over the can and wire frame. > Grill over indirect heat until the internal temperature reaches 180˚F — about an hour. Use a temperature gauge to know for sure. > Be careful when removing your bird from the grill, as the drip pan will likely contain hot drippings. > Wrap the bird in foil and let it rest a while so it can reabsorb the juices before carving. Tips > A lmost any canned beverage works — try a few different varieties to find your favourite. > You can also add herbs and spices to the liquid inside the can if desired. > Consider a remote thermometer if you really want to relax and not have to keep lifting the lid every few minutes to find out the temperature. > Work rubs into the meat for best results. The longer the meat sits before cooking, the stronger the flavours will be. > Put half an onion over the neck cavity of the chicken and secure with a toothpick. > Brine the chicken overnight before cooking it. > L et the chicken warm up to room temperature before cooking. > For extra flavour, inject marinade or beer into the chicken with a marinade injector. > Put oil on the can and stand to prevent sticking.
renaissance investments 125
Unscramble the following letters to spell words from this issue’s “Invest Well” article:
Complete the Sudoku puzzle so that each and every row, column and 3x3 box contains the numbers one through nine only once.
1. laconov 2. eistiommodc
4. eridnla 5. voegnrnmte
6. stpcecalrua 7. llrrreeooastc
8. lgdo 9. srotaluger
3 2 Source: 4puz.com
Spot the difference: barbeque Can you spot the five differences between the pictures below?
Check your answers at www.renaissanceinvestments.ca/braincalisthenics 126 renaissance investments
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Call your Renaissance Investments representative today 1 888 888 FUND (3863) www.renaissanceinvestments.ca Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the Renaissance Investments family of funds simplified prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Renaissance Investments is offered by CIBC Asset Management Inc. ™ Renaissance Investments and “invest well. live better.” are registered trademarks of CIBC Asset Management Inc. 1 Annualized MER for Class A units as at February 28, 2010. The MER would have been 2.12% had the Manager not waived some management fees and/or absorbed some operating expenses. This will be reviewed annually by the Manager. 2 Front-end load units.
To learn more about how Renaissance Investments can help you and your clients invest well and live better, visit www.renaissanceinvestments.ca or call 1 888 888 FUND (3863). FOR DEALER USE ONLY Renaissance Investments and the Axiom Portfolios are offered by CIBC Asset Management Inc. This material was prepared for investment professionals only and is not for public distribution. It is for informational purposes only and is not intended to convey investment, legal or tax advice. The material and/or its contents may not be reproduced or distributed without the express written consent of CIBC Asset Management Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. The indicated rates of return are the historical annual compounded total returns for the class A units unless otherwise noted, including changes in unit value and reinvestment of all distributions, but do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. For money market funds, the performance data provided assumes reinvestment of distributions only but does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer, nor are they guaranteed. There can be no assurance that a money market fund will be able to maintain its net asset value per unit at a constant amount or that the full amount of your investment will be returned to you. The values of many mutual funds change frequently. Past performance may not be repeated. †Current yield is an annualized historical yield based on the seven-day period ended on June 30, 2010 and does not represent an actual one-year return. ™ Renaissance Investments and the Axiom Portfolios are offered by CIBC Asset Management Inc. ™ Axiom, Axiom Portfolios, Renaissance Investments and “invest well. live better.” are registered trademarks of CIBC Asset Management Inc. 02001E(201007)
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