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Capital growth with downside
protection
Cambridge team
Robert Swanson
Alan Radlo
Brandon Snow
Principal & Portfolio Manager
Chief Investment Officer & Portfolio Manager
Principal & Portfolio Manager
Greg Dean
Stephen Groff
Emi Winterer
Analyst
Analyst
Analyst
Importance of downside protection
Big losses make growing capital much more difficult
STARTING $
% DECLINE
RETURN REQUIRED TO GET
BACK TO EVEN
$
100
-1%
1.1%
$
100
-15%
18%
$
100
-25%
33%
$
100
-50%
100%
Importance of downside protection
Protecting capital should lead to better compound returns
STARTING
$
%
DECLINE
YEAR 2 RETURN
TOTAL
$
100
-1%
10%
8.9%
$
100
-15%
20%
2%
$
100
-25%
33%
0%
$
100
-50%
100%
0%
Philosophy
Long-term holdings
Short-term investments
Management aligned with
shareholders
Information edge
Strong capital allocation
An industry where we have
experience
Competitive advantage
Path to value recognition
Attractive risk/reward
Examples:
• CN Rail
• Enghouse
• Couche-Tard
Examples:
• F5 Networks
• Petroleum Geo-Services ASA
• Eagle Materials
Our sell discipline
Long-term holdings
Valuation becomes excessive
Thesis changes
Short-term investments
Reaches fair value
Thesis was wrong
We find better opportunities
Long-term holding example –
Couche Tard
Need 20 yr chart for ATD/B CN Equity
Short-term investment –
Eagle Materials
Downside protection in a difficult year
Cambridge Canadian Asset
Allocation *
Quartile
Cambridge Canadian Equity*
Quartile
Cambridge Global Equity*
Quartile
Castlerock Canadian Growth A**
Quartile
Castlerock Pure Canadian
Equity**
Quartile
Source: Paltrak
As of April 30, 2012
YTD
2011
3 Year
Inception
3.7%
-0.7%
11.9%
3.3%
2
1
1
n/a
7.8%
-1.3%
13.3%
2.9%
1
1
1
n/a
14.4%
-12.0%
10.4%
2.0%
1
4
1
n/a
16.8%
n/a
n/a
17.9%
1
n/a
n/a
n/a
11.9%
n/a
n/a
10.5%
1
n/a
n/a
n/a
Why invest with Cambridge? Results
Source: CI Investment Consulting
Market outlook
Today’s issues
The negatives
• European debt resolution and austerity measures
• Slowing growth in China and developing markets
• U.S. – headwinds from deleveraging and fiscal
restraint
• Canada: personal debt levels and home prices
Today’s issues
The positives
• Current European policymakers more market
friendly than predecessors
• U.S. – economic indicators improving; housing
bottoming; unemployment topping
Key takeaways
• Global growth slowing, but still positive
• Increasingly confident of European resolution
• Low interest rates and improving earnings make
North American equities attractive
• Systematic risk still warrants a conservative
approach
– Large, stable dividend paying stocks
– Short to intermediate investment & non-investment
grade bonds
– Diverse set of income instruments
•
•
•
•
Preferreds
Convertible Bonds
Infrastructure
Selected REITs
The case for equities
Source: Stifel Nicolaus
Dividends on high-quality companies
exceed yields on high-quality bonds
Source: Deutsche Bank, Bloomberg
Why invest with Cambridge?
Why invest with Cambridge?
• Flexibility – we aren’t the index
– Nimble asset base
– Open mandates
• Conviction in what we own
– We talk to management often
– Site tours
• Aligned with fundholders
– Focus on absolute returns
The importance of flexibility
SP/TSX - Current
31%
20%
As at March 30, 2012
The importance of flexibility
SP/TSX Dec 31, 1999
SP/TSX - Current
31%
20%
Cambridge doesn’t replicate the
benchmark
Sector
Cash
Cambridge
Canadian
Equity CC
Difference
Cambridge Canadian
Asset Allocation
CC
14
14
5
-
-
16
40
-24
Bonds
S&P/TSX
60 S&PTSX/
40 DEX
Universe
Difference
5
Financials
16
31
-15
23
19
4
Energy
14
26
-12
16
16
-
Materials
3
20
-17
6
12
-6
Consumer
Discretionary
6
4
2
4
3
1
Consumer
Staples
12
3
9
7
2
5
Information
Technology
13
1
12
9
1
8
Telecomm
Services
-
5
-5
1
3
-2
Industrials
14
6
8
6
2
4
Health Care
5
2
3
3
1
2
Utilities
3
2
1
4
1
3
Source: Paltrak, March 30, 2012
Cambridge doesn’t replicate the
benchmark
Cambridge Canadian Equity
Top holdings
Castlerock Growth Companies
Top holdings
as at April 30, 2012
as at April 30, 2012
Alimentation Couche-Tard
6.7%
Alimentation Couche-Tard
4.8%
Shoppers Drug Mart
4.5%
Trilogy Energy Corp
4.1%
Tourmaline Oil Corp.
4.5%
Brick Brewing Co.
3.9%
Metro Inc
3.7%
Bauer Performance Sports
3.3%
Brookfield Infrastructure LP
3.2%
Shoppers Drug Mart
3.2%
Keyera Corp.
3.0%
Brookfield Asset Management
3.1%
Progressive Waste Solutions
3.0%
Enghouse Systems Ltd
2.6%
Trilogy Energy Corp.
2.9%
Stewart Info Svcs
2.5%
Brookfield Asset Management
2.8%
ATS Automation Tooling System
2.5%
MI Development
2.6%
Boyd Group Income Fund
2.2%
Total
36.9%
Total
32.2%
Source: CI Investments
New fund
Cambridge Income Fund
Cambridge Income Fund
Cambridge Income Fund provides investors with what
they are looking for – a stable source of tax-efficient
income that will keep them ahead of inflation. Similar
to all Cambridge funds, it has low volatility and
downside protection built in.
Cambridge Income Fund
• Combination of global fixed income and
high-yielding equities
• Diversified across regions, sectors and
capital structure
• Focus on income stability, with potential for
capital appreciation and inflation protection
Bonds are guaranteeing capital
losses for clients
Company
Dividend
Yield
Bond Price at
Dividend Yield
Required Capital
Loss
Bristol-Myers
4.1%
110.2
-9.3%
Unilever
3.7%
110.4
-9.4%
Pfizer
3.8%
113.0
-11.5%
JNJ
3.8%
110.9
-9.8%
Merck
4.3%
114.1
-12.4%
(as at April 27th)
(4 to 6 year bond)
Compound annual return
Stocks vs. bonds: the Metro story
Scenario #1: The bond story:
Scenario #2: The stock story:
2.4% annual gross return*
11.9% annual gross return*
$1,600
$1,500
$1,600
Cumulative Interest
Cumulative Dividend
Buyback Impact
$1,500
Organic Growth
Total value ($)
Bond Price
$1,400
$1,400
$1,300
$1,300
$1,200
$1,200
$1,100
$1,100
$1,000
$1,000
$900
$900
$800
$800
$700
$700
2011 2012E 2013E 2014E 2015E 2016E
*$1,000 investment a five-year BBB Metro bond trading at 112%
above par
Initial coupon payment: 5.0%
Annual capital appreciation: -2.2%
Base Business
2011
2012E 2013E 2014E 2015E 2016E
*Assumes a constant P/E multiple and dividend payout ratio
4.0% organic growth
4.0% share buyback
2.5% dividend yield on principal
Representative portfolio structure
Fund target yield: 4.0%
Yields
Investment grade
5.0%
Converts
6.0%
High-yield bonds
7.5%
REITS
5.0%
Preferred
6.6%
High-yield equity
4.9%
Infrastructure
4.5%
Utilities
5.0%
Cambridge Income Fund
Manager: Robert Swanson
Available in:
Management fees:
Class A, E, F and O
Corporate Class, T-Class, E, O and US$
Class A – 1.90%; Class F – 0.90%
Trailer:
1.00% FE; 0.50% DSC
Tax-effective monthly
distribution:
$0.03 (annual targeted yield 4.0%)
Mutual Fund: FEL – CIG 635
DSC – CIG 885
Corporate Class: FEL – CIG 2261
DSC – CIG 3261
Low Load – CIG 1235
Low Load – CIG 1261
Right team, right philosophy,
right experience
Experienced investment team
Focused on capital growth with downside protection
With the flexibility to deliver in volatile markets
“If everything is coming your way, you’re probably in the wrong lane.”
– Warren Buffett
Cambridge
multi-asset class, multi-manager
Fund Code
Assets
(million)
Cambridge Canadian Equity Corporate Class
CIG2321
$867.5
maximum 49%
Cambridge Canadian Asset Allocation Corporate Class
CIG2322
$831.9
maximum 49%
Cambridge Global Equity Corporate Class
CIG2323
$638.7
no restrictions
Cambridge Income Corporate Class
CIG2261
$26.4
no restrictions
Cambridge Income Fund
CIG635
$42.0
no restrictions
Cambridge American Equity Corporate Class*
CIG294
$220.0
no restrictions
Cambridge American Equity Fund*
CIG 212
$51.7
no restrictions
Castlerock Canadian Growth Companies Fund
HIC191
$13.3
maximum 49%
Castlerock Pure Canadian Fund
HIC192
$2.0
maximum 10%
Fund
Foreign
Content
* Effective June 5, 2011 Cambridge assumed management of the funds and they were renamed from CI American
Equity Corporate Class and CI American Equity Fund.
Source: RBC Dexia at April 30, 2012
Thank You
All charts and illustrations in this guide are for illustrative purposes only. They are not intended to predict or project investment results.
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name of CI Global Holdings Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund
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indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume
reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes
payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past
performance may not be repeated.