Partnering with Bissett for your Segregated Fund Clients

Transcription

1 January 2013 Andrew Buntain, CFA Vice President Institutional Portfolio Manager Bissett Investment Management Partnering with Bissett for your Segregated Fund Clients CFA and Chartered Financial Analyst are registered trademarks owned by CFA Institute. For Broker/Dealer Use Only. Not for Distribution to the Public.

2 2 Agenda Corporate Strength and Insurance Platform Partnerships Bissett Investment Management Process Our Key Bissett Mandates Overview Investment Outlook and Summary of Competitive Advantage For Broker/Dealer Use Only. Not for Distribution to the Public. 2

3 3 The Expertise of Many, the Strength of One Strong Focus on Investment Excellence 559 Investment Professionals Over 60offices Over Global Insight with Local Expertise 30countries BISSETT $737B Strength and Stability A Valued Partner As of September 30, For Broker/Dealer Use Only. Not for Distribution to the Public.

4 4 4 How did Franklin Templeton do versus the competition? FY2012 Segregated Fund Assets. FTI is the 3rd largest (noninsurance asset manager) in seg funds with $2.2 Billion in AUM FTI was the 3rd best in gross sales of non-insurance asset managers with $376.2 Million FTI was the TOP net seller of noninsurance asset managers in Canada with $121.3 Million Note: Rolling 12 month data as of September 30 th, 2012 Source: Investor Economics *Fiscal Year spans October to September For Broker/Dealer Use Only. Not for Distribution to the Public.

5 5 Franklin Templeton Insurance Carrier Relationships 9 Segregated Fund Platforms and 6 Universal Life Platforms Over 100 mandates to choose from on our Platform Partners $2.8 Billion in Segregated Fund assets under management Segregated Fund Partners Universal Life Partners For Broker/Dealer Use Only. Not for Distribution to the Public.

6 Expected Return 6 Choose from Four Bissett Mandates on the Segregated Fund Platforms Fixed Income Equity Bissett Small Cap Fund 100 Bissett Canadian Equity Fund Bissett Dividend Income Fund Bissett Canadian Balanced Fund Expected Risk*. For Broker/Dealer Use Only. Not for Distribution to the Public.

7 Expected Return 7 Choose from Six Quotential Mandates on the Segregated Fund Platforms Fixed Income Equity Balanced Growth Portfolio Maximum Growth Portfolio Global Growth Portfolio Growth Portfolio Managed by an experienced, global investment management team Fully leverages Franklin Templeton s global platform Applies high net worth expertise Actively managed using a proactive investment process Multi-level diversification Balanced Income Portfolio Diversified Income Portfolio Expected Risk* *In relation to other Quotential Portfolios. **Dalbar: 2006, 2007, 2008.

8 Bissett Investment Management A Legacy of Expertise in the Canadian Capital Markets For Broker/Dealer Use Only. Not for Distribution to the Public.

9 Bissett Investment Management Founded in 1982 and joined Franklin Templeton Investments in 2000 CAD $15.8 billion in assets under management as of September 30, 2012 Fundamental equity, quantitative equity, fixed income and balanced mandates Diverse equity strategies to meet different client investment goals 9

10 A Cohesive, Well-Defined Team* Garey Aitken Chief Investment Officer Thomas O Gorman SVP/Director Fixed Income Tim Caulfield VP/Director Equity Research Leslie Lundquist SVP/Portfolio Manager High Dividend Les Stelmach VP/Portfolio Manager High Dividend Ralph Lindenblatt SVP/Portfolio Manager Small / Microcap Richard Fortin VP/Portfolio Manager Small/ Microcap Ryan Crowther VP/Portfolio Manager Dividend & SMA Programs Jason Hornett VP/Portfolio Manager Quant. Programs Andrew Buntain VP/Institutional Portfolio Manager Darcy Briggs VP/Portfolio Manager Jeff Johnson VP/Portfolio Manager Heather McOuatt VP/Portfolio Manager Brian Calder Bond Trader Izabel Flis Research Analyst Farahana Jobanputra Director Investment Administration Chris Lankester Investment Operations Analyst Shelly Wilson Executive Assistant Sevrika Fisher Trading Assistant Jayson Moss Research Analyst Mitchell McCartney Portfolio Assistant Celine Baumgarten Admin Clerk *For additional information on specific responsibilities and professional biographies, please see the Appendices. 10

11 Equity Investing at Bissett A Distinctive Approach to the GARP Style Growth at a Reasonable Price discipline across all fundamental equity investment strategies An exacting definition of the G in GARP Growth defined as sustainable profits Looking for strong, consistent earnings and cash flow growth Focused on financially stable companies Portfolio companies often are engaged in shareholder-friendly actions such as share buybacks and well-executed dividend plans Bottom-up security selection process Estimated intrinsic values exceed current share prices 11

12 Our Investment Philosophy Three Guiding Principles 1.Sustained profitability drives long-term share prices 2.Market volatility offers significant opportunities to buy profitable businesses at attractive valuations 3.Achieving client return objectives consistently requires a high-conviction approach to portfolio construction combined with vigilant risk management 12

13 Investment Process Building a Fundamental Bissett Canadian Equity Portfolio 1 Identify Profitable 2 Assess Valuation 3 Companies High full-cycle Estimated profitability intrinsic Secular earnings value based on and cash flow present value of growth future cash flows Durable business model Appropriate capital structure Effective capital allocation Determine Portfolio Suitability Portfolio concentration and diversification considerations Strategy requirements (market cap/dividend constraints) INVESTABLE UNIVERSE BISSETT PORTFOLIO Risk Monitoring, Portfolio Rebalancing and Sell Discipline The above chart is for illustrative and discussion purposes only. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. 13

14 Risk Monitoring, Portfolio Rebalancing and Sell Discipline Aligning Risk with Conviction Risk management is tightly integrated with portfolio management through security selection, portfolio construction and the sell discipline, with ongoing support from Franklin Templeton s Portfolio Analysis and Investment Risk team (PAIR) Risks must be recognized, rational and rewarded Recognized or clearly understood Rational or consistent with our intent and convictions Rewarded with the potential for commensurate returns We sell when the risks are no longer clear and/or when we do not believe the rewards are worth the associated risks 14

15 Absolute, Relative and Risk-Adjusted Return Objectives Absolute Return Objective Target long-term absolute returns that compensate for the related risks Relative Return Objective Target excess returns relative to the benchmark Risk Objectives Primary risk objective: To ensure that the absolute return objective is achieved Secondary risk objective: To maintain less return volatility than the benchmark Risk-Adjusted Return Objective Target a below market beta and positive alpha 15

16 Risk Management RISK MANAGEMENT Our approach to risk management aligns with our objective to deliver both strong long-term absolute and risk-adjusted returns. INVESTMENT SECURITY SELECTION Invest where expected return potential exceeds our estimate of the associated cost of equity Return potential assessed based on long term fundamentals, valuation analysis and consideration of inherently uncertain future fundamentals Focus on high quality businesses with appropriate capital structures and long term dividend stability PORTFOLIO CONSTRUCTION Target portfolio diversification on an inter and intra sector basis Recognize correlations among holdings Individual weights strike a balance between minimizing non-systematic risk and allowing for our best ideas to have a meaningful impact Variability of security weights in the portfolio is generally less than in the benchmark PORTFOLIO RISK EVALUATION Risks are continually reviewed to confirm that exposures are Understood and consistent with our Intent and Convictions Portfolio Risk Evaluation is supported by Franklin Templeton Investments independent Global Investment Performance Services, Portfolio Analysis and Investment Risk Group 16

17 Bissett Fixed Income Investment Style and Process Generate above average yield-to-maturity and stable income - Overweight corporate issues - Rigorous macro research and analysis - Invest at inflection point of yield curve Manage investment risk through: - Laddered maturity schedule - Diversify corporate holdings; investment grade credits only - Thorough credit analysis 17

18 Overview of our four Key Bissett Mandates 18

19 Bissett Canadian Balanced Fund Asset Mix As of September 30, % 5.4% 38.0% 24.3% 23.8% Asset Mix Parameters The Fund will maintain a range of 45% - 70% equities and a range of 30% - 55% fixed income Typical allocation for equities will be 55% - 65% Typical allocation for fixed income will be 35% - 45% Allocation Parameters The Fund will maintain a 70% - 80% allocation to underlying Bissett Funds and cash The Fund will maintain a 70% - 80% allocation to Canadian equities, Canadian fixed income, and cash 19

20 Bissett Dividend Income Fund Asset Mix As of September 30, % 4.7% 15.4% 16.3% 60.3% Asset Mix Parameters The Fund will maintain a range of 50% - 70% Canadian equities and a range of 10% - 30% U.S. and foreign equities Typical allocation for fixed income will be 10% - 30% Portfolio Construction The Fund will invest in at least 6 of 10 S&P/TSX sectors Set target weights, not target prices, for individual securities 20

21 Bissett Canadian Equity Fund As of September 30, % Canadian securities Concentrated yet diversified Holdings typically range between 40 and 50 Positions often are concentrated in the top holdings Individual positions typically do not exceed 5% Fully invested Cash balances are normally between 1% and 5% Current cash level is 4.6% Large- and mid-cap coverage Typical large-cap/mid-cap split is 65% 85%/15% 35% Current large-cap/mid-cap split is 83%/17% (current large/mid-cap cut-off is $3.22 billion) Annual turnover of 15% 25% Dividend-payer bias Currently 44 dividend/distribution paying holdings (44 out of 47) Approximate yield of 3.2% vs. S&P/TSX Composite Index yield of 3.0% 1 Source: Franklin Templeton Investments. 1. Based on weighted average calculation of expected yields of holdings within the Bissett Canadian Equity Fund and S&P/TSX Composite Index as of September 30,

22 Bissett Small Cap Fund As of September 30, 2012 Minimum 5 out of 10 S&P TSX GIC Sectors Provides adequate diversification Currently invested in 7 sectors Holdings Currently hold 38 equities 2% 5% weight in any security Position size determined by risk adjusted return expectations at the security level Typical turnover of 15 30% Eligible Universe of 100+ Securities Market capitalization currently between $300 million and $1.6 billion at time of purchase Business Attributes: Proven track record, growth potential, high full cycle returns on capital and financial strength Valuation Criteria: Below average valuation based on normalized earnings potential and discounted cash flow analysis Definition of Small Cap and Mid/Large Cap Small cap is defined as any security that is less than 0.1% of the S&P TSX Composite value Mid/Large Cap is defined as any security greater than 0.1% of the S&P TSX Composite value Source: CPMS holdings do not include short-term and cash positions. 22

23 Bissett Mandates Historical Performance (Series O) As of December 31, 2012 Inception Date 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year SI* Bissett Canadian Balanced Fund n/a 6.38 Custom Bissett Canadian Balanced Fund Benchmark n/a 4.49 Difference n/a 1.89 Inception Date 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year SI* Bissett Dividend Income Fund n/a 8.28 Custom Bissett Dividend Income Fund Benchmark n/a 4.37 Difference n/a 3.91 Inception Date 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year SI* Bissett Canadian Equity Fund n/a 8.17 S&P/TSX (TR) Index n/a 5.14 Difference n/a 3.03 Inception Date 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year SI* Bissett Small Cap Fund n/a BMO NB Small Cap / S&P/TSX Small Cap (TR) Blend n/a 8.68 Difference n/a 3.39 All performance is based on monthly gross of fees returns. 23

24 Investment Outlook Canadian equity benchmarks are now lagging their U.S. counterparts after more than a decade of outperformance due to the greater resources exposure in our benchmarks Evidence of slower economic growth as well as continued volatility in capital markets may limit the potential for further valuation expansion Defensive investments may be positioned for decent relative performance if the current environment persists Corporate earnings have been supported by aggressive cost cutting but opportunities to reduce expenses are declining; revenues have not recovered sufficiently to maintain the pace of earnings growth in the absence of more expense reduction Investors should continue to expect a period of more modest capital appreciation; more meaningful contribution to total return from dividends than from capital gains is likely in the near term We expect that our defensive GARP investment style with an emphasis on yield should continue to deliver attractive returns with low volatility over the long-term 24

25 Summary of Competitive Advantages The True Meaning of Growth High-conviction portfolios with the right balance of concentration and diversification Clearly understood risks with well-defined potential for reward Expertise across the cap and yield spectrum GARP investing consistent with the true meaning of growth: long-term profits Long-term performance results based on style consistency 25

26 Appendix - Biographies 26

27 Biography Andrew Buntain, CFA Vice President, Institutional Portfolio Manager Bissett Investment Management Andrew Buntain is the vice president and institutional portfolio manager for Bissett Investment Management. Mr. Buntain is an integrated member of the portfolio management team. He provides perspective and understanding regarding Bissett's equity, fixed income and balanced strategies to a broad range of internal and external constituencies. Mr. Buntain joined Franklin Templeton Investments in June 2007 as a director, Separately Managed Accounts. Prior to joining Franklin Templeton Investments, Mr. Buntain spent 11 years at another money management firm where he was responsible for their institutional accounts, fund-of-funds, and sub-advisory relationships. His particular focus there was on meeting the needs of investment consulting firms with regard to investment manager search, evaluation, selection and monitoring. Mr. Buntain holds a B.A. (Honours) degree from McGill University, and became a Chartered Financial Analyst (CFA) Charterholder in

28 Important Disclosures 2012 Franklin Templeton Investments Corp. All rights reserved. Indexes are unmanaged and one cannot invest directly in an index. Additional Information for Investment Platform Overview Slide: FTI AUM includes AUM for Rensburg Fund Management Limited, a wholly-owned subsidiary of Franklin Resources, Inc. Franklin Equity Group (formerly Franklin Global Advisers), a unit of Franklin, combines the expertise of the Franklin Advisers, Inc., and Fiduciary Global Advisors equity teams (with origin dating back to 1947 and 1931, respectively). Franklin Templeton Fixed Income Group, a unit of Franklin, combines the expertise of the Franklin Advisers, Inc., and Fiduciary Trust Company International fixed income teams (originating in 1970 and 1973, respectively). Franklin Templeton Real Asset Advisors originated in 1984 as the global real estate team of Fiduciary Trust Company International. FTMAS is a global investment management group dedicated to multi-strategy solutions and is comprised of individuals from various registered entities within Franklin Resources, Inc. Certain individuals based in Canada that advise FTMAS mandates are part of the Fiduciary Trust Company of Canada, a wholly-owned subsidiary of Franklin Resources, Inc., that originated in FTMAS was formed in 2007 to combine the research and oversight of all multi-strategy investment solutions offered by Franklin Resources, Inc. General: The information presented herein is considered reliable at the present time, however, we do not represent that it is accurate or complete, or that it should be relied upon as such. Speculation or stated beliefs about future events, such as market or economic conditions, company or security performance, upcoming product offerings or other projections represent the beliefs of the speaker and do not necessarily represent the views of Franklin Templeton Investments. General business, market, economic and political conditions could cause actual results to differ materially. The information presented is not a recommendation or solicitation to buy or sell any securities. Series O investors do not pay any of the management fees within the Fund but instead pay a separate management and administration fee that they negotiate directly with Franklin Templeton Investments Corp. (FTIC). To qualify to purchase or hold Series O units an investor must meet minimum investment requirements as set out in the Fund s current prospectus and must enter into a Series O Agreement with FTIC. Please read the prospectus before investing. Additional information about the Funds and Portfolios is available in the Funds' and Portfolios' annual information form, management reports of fund performance and financial statements. You can get a free copy of any or all of these documents, from your dealer, by calling toll-free or by contacting us at service@franklintempleton.ca. Commissions, trailing commissions, management fees and expenses all may associated with mutual fund investments. The indicated rates of return are historical annual compounded total returns including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes or Series O management and administration fees, payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance does not guarantee future results. 28