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Fund launch: Fund launch : Renaissance Renaissance Canadian Canadian All-Cap A ll-Cap Equity Equit y Fund Fund Su uzann zann Pennington Pennington answers answers qquestions uestions about about Renaissance Investments’ newly n ewly launched launched Canadian Canadian all-cap all-cap fund f u nd .

What’s W hat ’s the the appeal appeal of of all-cap? all-cap?

The opportunity to consider small- and mid-cap stocks provides a broader depth of business sectors and earning streams than the large-cap Canadian market which is concentrated in companies within the energy, financials and materials sectors. Access to small and mid caps increases diversification opportunities and mitigates sector concentration risk.

Large-cap companies are widely covered by analysts and portfolio managers, but many mid- and small-cap companies fly under the radar and can often be purchased at a significant discount to fair value. The “small-cap effect” describes companies that are under-researched and subject to more market inefficiencies. We try to take ntage of the mispricing that frequently results. lll-cap universe is simply bigger with hundreds more stocks to choose from find good value even if one part of the market is temporarily expensive. e long term, small/mid cap stocks have outperformed the large caps ty that can be associated with small-cap investing often prevents participating in that segment of the market. By holding small caps tex ext of a diversified all-cap portfolio volatility is typically reduced.

Can you describe i the e portfolio’ss cconstruction onstruction fframework? r a m ewor k ? ork simple. I don’t believe I can time the market with the consistency necessary to add value so I don’t try. This means that the portfolio alw ways includes both stocks that are economically sensitive and stocks that are s inimized recognizing that equities outperform cash term. rm. The fu fund will be deeply diversified with respect to macro risk factors and maintains exposure e to a minimum of six sectors at all times. Risk controls are re built into int the framework (see main article). This leads to a portfolio that is often significantly different from the index. signific What W hat ccharacteristics haracteristics will will tthe he pportfolio or t folio hhave? av e ?

Market cap exposure is dictated by bottom-up valuations and portfolio n objectives. Typically one-quarter to one-third of the fund would be e in mid caps.

We cannot completely eliminate volatility, but I will be disappointed if the fund doesn’t have lower volatility than the index over a cycle for two reasons: 1. I believe it will be better diversified than the benchmark.

2. Buying stocks at a discount to fair market value provides a margin of safety against unforeseen circumstances.

What’s W at s tthe he ddifference if ference between bet ween this this and and other other funds funds you’ve you’ve managed? m an ag e d ?

I’ve followed essentially the same portfolio construction and stock selection process for the last 20 years. The difference is that, with a team of 15 Canadian equity professionals, and an industry-leading Research MAP we’ve added the additional support that will be so important to positive returns and consistency in the years to come. renaissance investments 11