Asset Management Global Why Cidel? Our risk approach. At Cidel, our primary focus is managing risk. Our proactive risk approach ensures that as risks in the market change we manage these changes to help protect our clients assets. TRUST Vision
It s all about managing risk! What is risk? Risk has several meanings, we look at risk as the possibility of a loss in capital. Why is risk management important? People don t like to lose money, and it doesn t really matter how or why they lost it. Managing money to a benchmark or peer group does not shield investors from losing money. How do we manage risk? Our primary focus in the management of our clients assets is protecting capital. Rather than just attempting to predict where markets are going, we focus on understanding the ways in which losses may occur in our clients portfolios and ensuring that the risks in those portfolios are consistent with client expectations. We achieve this protection through the continuous process of deciding on a risk tolerance, strategically allocating assets based on this risk tolerance decision, investing with high-quality managers, and proactively managing the portfolio. Our approach: We focus on managing risk. Risk Tolerance Decision Strategic Asset Allocation Investment Managers Portfolio Creation PROACTIVE MANAGEMENT
As s e t M a n ag e m e n t Risk Tolerance Decision We work with our clients to understand their risk tolerance. This discussion covers the client s time horizon, income requirements, currency and tax issues, and any other concerns the client may have. We then seek to maximize return based on each client s risk tolerance. Active LOW VOLATILITY LONG / SHORT EQUITY Active Strategies Majority of returns derived from manager skill (alpha), with some from market exposure (beta) Important criterion: skill Passive FIXED INCOME EQUITY Passive Strategies Majority of returns derived from market exposure (beta), with some from manager skill (alpha) Important criterion: cost, efficiency Lower Risk Higher Risk Strategic Asset Allocation The majority of a portfolio s variation of returns can be explained by asset allocation, rather than the specific securities within the portfolio. Traditional investment managers create portfolios by choosing individual stocks and bonds that they believe will increase in value. In contrast, we establish strategic asset allocations to achieve a client s investment goals, utilizing both active and passive management strategies. We manage risk by diversifying into different traditional and nontraditional asset classes. Specifically, we use long/short equity as a complement to traditional equity, and low volatility strategies as a complement to traditional fixed income.
The charts on the right compare the Cidel Balanced Portfolio to that of a traditional manager. Traditional Our strategic asset allocation allows us to better manage risk for our clients. We include alternative strategies in our portfolios because they offer: 50% 50% Lower correlation to stock and bond markets, the core of most portfolios. Protection of investor capital during bear markets through the use of flexible financial instruments. The potential to increase returns and reduce risk. Cidel 25% 25% 25% 25% Equities Fixed Income Market Neutral / Low Volatility Long / Short Equity Investment Managers Once the asset allocation has been determined, we choose the best managers to fulfill the designated roles in the portfolio. We conduct extensive due diligence on potential new managers to ensure that we have a thorough understanding of their performance drivers and risk profiles (including investment and operational risk), and to ensure they integrate well into our asset allocation models. We continuously review existing managers to ensure that they meet the original criteria for their inclusion in the portfolio. We provide investors with the benefits of being part of a larger, institutional pool of capital. This includes: Access to a variety of managers, including global managers and those who are closed to retail investors. Institutional pricing and investor rights. Long-term relationships with managers, allowing for open, transparent communication.
Proactive Management We proactively manage and rebalance out client portfolios to ensure that the risks in the portfolio are consistent throughout the market cycle, and that they are at appropriate levels for our clients. Our investment committee meets at least quarterly to review our clients portfolios and make any tactical changes to our strategic asset allocation. We proactively manage the following aspects of our clients portfolios: Clients Financial Markets Investment Managers Ensure portfolio continues to meet all client objectives Tactically shift asset allocation based on macro trends, market conditions and currency effects on the portfolio Ensure each manager is continuing to fulfil their specific role in the portfolio Detailed checks of each manager s underlying investments Continuous review of any changes in strategy, personnel or assets under management REBALANCE REVIEW Adjust The Result: Return-Maximization Over The Long Term Protecting capital in down markets has a powerful long term effect, enhancing the compounding effect by minimizing losses from the client capital base. Cidel s focus on managing risk in order to generate long term growth of capital has enabled our portfolios to consistently outperform in bear markets as well as over full market cycles.
To Summarize We manage money quite differently from traditional investment managers: Cidel Investment Advisors Traditional Investment Managers Focus on risk Focus on return Allocate asset classes to achieve investment objectives Pick stocks to achieve investment objectives Manage risk through use of traditional and alternative strategies Manage risk through use of traditional strategies Proactive, continuous and detailed portfolio management Portfolio reviews and rebalancing conducted at specific intervals Less correlated (asymmetric) returns helps to provide capital preservation Highly correlated to ups and downs Cidel Cidel is a leading independent global financial services company with offices in Canada, Barbados, South Africa, and maintains a presence in Bermuda and Latin America. Our clients include private investors, regional and international businesses and global-scale institutional investors. www.cidel.com Canada Barbados south africa Latin America bermuda Cidel Financial Group The Rowanwood Centre 1067 Yonge Street Toronto, ON M4W 2L2 invest@cidel.com Tel: +1 416 928 4341 Risks and Other Considerations Past performance is not an indication of future results. The material contained in this document is for information purposes only. It is not intended as an offer or solicitation for purchase or sale of any security or financial instrument, nor is it advice or a recommendation to enter into any transaction. The information contained herein should not be construed as financial or investment advice on any subject matter. CIDEL and its related entities do not warrant the accuracy of the information provided herein, either expressed or implied, for any particular purpose.