The Renaissance QUARTERLY FUND PROFILES / PRACTICE MANAGEMENT / OUTLOOK / OPINION
*
Q3 – SEPT. 30, 2013
Missing a Big Part of the Income Picture? Why it’s Time to Make The Income Move. ALSO INSIDE:
Year-end Tax Tips Address the Black Hole of Wealth Transfer
For Advisor Use Only
A CLEAR VISION ISN’T CREATED BY THOSE WHO STOP HALFWAY.
®
TAX & ESTATE INSIGHT If you’re spending all your time sifting through information, how do you expect to focus on what matters to your business? We chip away the complexity from tax and estate issues to uncover clear and practical insights – so you can spend more time defining your success.
2013-2014 Tax Toolkit Now Available Renaissance can help you complete a clear tax picture for your clients. Download your toolkit today at:
renaissanceinvestments.ca
Renaissance Investments is offered by and is a registered trademark of CIBC Asset Management Inc.
PAGE
In this issue
8
Tax and Estate Act Now to Realize Tax Savings for 2013
3
Economic Outlook Global Recovery on Track
4
Back of the Napkin The Black Hole of Wealth Transfer
6
Why it’s Time to Make The Income Move
8
Yield and Growth with Downside Protection
12
Thanks to Our Supporters Under Promise, Over Return!
6 14
Renaissance Investments
13
The Amazing World of Superfoods
14
Brain Calisthenics
17
Letter from the National Sales Manager
Colder Temperatures and Rising Rates – Opportunities Abound! Welcome to the fall edition of The Renaissance Advisor magazine. The weather is turning, promising us the return of winter and all the good things that come with it. I am saying that a little tongue in cheek as most people that I speak to are not as keen on ice, snow and cold temperatures as my son seems to be. However, if we look at the opportunities that winter brings, there are many positives to be derived. Hockey, skiing, snowmobiling, vacations in the south and the holiday seasons, to name a few. For this audience, maybe even the RRSP season can be a positive associated with winter. If we take that same logic and apply it to investing, perhaps we can extend it to finding positives in the impending rise of interest rates and the changing economic backdrops that we are facing. Most feel that interest rates will rise, but are not so sure when, and we need to prepare our clients for that move. Just as with winter, there are many opportunities that can be applied. Within this magazine, numerous investment choices are illustrated that will prepare you for the changing environment. There are options for income that will protect your clients and even help them prosper during a rising interest rate environment. A story that I believe will resonate with your clientele centers around a floating rate solution that we have recently launched. The Renaissance Floating Rate Income Fund offers that protection that many are looking for when rates rise, and has been well received by clients and advisors alike. Please speak to your Renaissance partner about this and any other ideas that you want to discuss. I would also draw your attention to Grant Shorten’s article regarding wealth transfer (see page 6). This was the topic of his presentation during our recent roadshow and caused many to put an action plan in place to protect their business. A must read for all. We will always strive to earn your business and work to becoming your most trusted business partner. I thank you for your support and look forward to hearing your comments. Please contact me anytime. For all the holidays that are upcoming, I wish each and every one of you all the best and hope that you enjoy that time with family and friends.
Sincerely,
Dave Wahl National Sales Manager Renaissance Investments 416-943-6959
Act Now to Realize Tax Savings for 2013 TAX AND ESTATE
Convert an RRSP to a RRIF at Age 71 To realize tax savings in 2013, certain activities must be completed by December 31. Here are a few ideas that clients may want to discuss with their tax advisors.
Make Charitable Gifts – An Extra 25% Credit May be Available December 31 is the last day to make a donation and get a tax receipt for the current year. This is the first year that the Federal First-Time Donor's Super Credit (FDSC) will be available. A client can claim this credit if neither the client nor his or her spouse or common-law partner has claimed the charitable donations tax credit in any of the five preceding tax years, from 2008 to 2012. The FDSC, which can be claimed once from the 2013 to 2017 taxation years, provides an additional 25% tax credit on total donations up to $1,000 made after March 20, 2013. When added to the regular federal charitable donations tax credit, tax savings would be 40% for total donations up to $200, and 54% for total donations between $200 and $1,000. Provincial charitable donations credits are also available to increase the tax savings.
Clients who turned age 71 in 2013 have until December 31 to make any final contributions to a Registered Retirement Savings Plan (RRSP) before converting it to a Registered Retirement Income Fund (RRIF) or registered annuity. If clients have earned income in 2013, they may want to consider overcontributing to an RRSP in December before conversion. While they will pay a penalty tax of 1% on the overcontribution for December, new RRSP room will open up on January 1, 2014, so they can deduct the overcontribution on next year’s tax return. As always, clients should discuss all tax-planning strategies with a tax professional to see how they might fit into their overall financial plans.
“If clients have earned income in 2013, they may want to consider over-contributing to an RRSP in December before conversion.”
Trigger Capital Losses If clients have securities or fund units with accrued losses, they may want to consider selling them before year-end, so they can offset their capital gains from the year. Publicly-traded securities must be sold by December 24 for settlement by December 31, 2013. If clients plan to repurchase the security, they should be sure to wait at least 30 days or the “superficial loss” rules will prevent them from claiming a capital loss until the property is sold again.
Jamie Golombek is Managing Director, Tax and 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.
Pay Investment Expenses
Follow @JamieGolombek
Clients can deduct investment-related expenses (such as interest on money borrowed for investment purposes and investment counselling fees) on their 2013 tax returns, if the expenses are paid by December 31. Note that 2013 is the last year a deduction can be claimed for safety deposit box fees. As of 2014, they will no longer be tax deductible.
www.advisor.ca/togo Podcast > 2013 Maximize Budget: Benefits Not of RESPs Muchand Good RDSPs Tax News www.renaissanceinvestments.ca/en/jamie_golombek/
Renaissance Investments 3
Global Recovery on Track
ECONOMIC OUTLOOK
Despite – or maybe because of – the Washington saga, it is important to focus on the big picture. And here as expected, 2013 is emerging to be the bridge between a recovery mode and a more mature stage of the economic cycle. A year ago, investors were still questioning the very existence of the euro. Today it is very clear that the euro is here to stay. The only debate is how fast the eurozone will grow over the next year or two. A year ago, the market was still operating under the risk that China would experience a hard landing. Today it is fair to assume that the country has indeed achieved the soft landing we hoped for. A year ago, investors were still questioning the sustainability of the U.S. recovery in general and the housing market in particular. Today it is clear that we are in the midst of a sustainable recovery.
And in Canada, what is desperately needed is a global economic recovery, given that our own economy will not be able to provide any meaningful lift. In Europe, with the German elections out of the way, it is very likely that Germany will be more flexible regarding fiscal policy in the highly indebted members of the eurozone. Already, spending targets in countries like Spain Portugal, Italy and the Netherlands have been raised – a factor that is starting to help the eurozone’s economy. While we believe that the easy money in European stocks has already been made, we see some further upside in valuations as easier fiscal policy leads to some better-thanexpected short-term performance. In China, there are clear signs that the economy has turned a corner. Most indicators, including manufacturing and commodities demand, are seeing a nice rebound. We expect China to register GDP growth of close to 8% in 2014. However, the China of tomorrow will be a different economy. Come 2015 its labour force will start shrinking – a clear derivative of the one-child policy. As well, the government is more determined than ever to shift more
4 Renaissance Investments
growth power towards the consumer, with some success. The new China will become slowly less commodity intensive due to a lower speed of growth (down from 10% to about 7.5%-8%), and increased reliance on consumer, versus infrastructure, spending as a source of growth. The biggest implication of this trend is that China’s impact on the commodity market will be, at the margin, smaller. Along with supply factors such as the shale oil revelation in the U.S., this suggests that while commodity prices will remain high relative to long-term levels, it is difficult to predict the next leg of the mega cycle in commodities. In other words, it is very possible that we are very close to the mega cycle’s end. This does not mean that commodity prices will fall (in fact they might rise in 2014 due to normal cyclical forces), but it is unlikely that the coming years will see the continuation of the past decade’s trend. In the U.S., the housing market’s strong recovery was not a big surprise since it was led by investment money that took advantage of increased demand for rental units. However, with the recent increase in mortgage rates, there are early signs that this leg of the recovery has been exhausted. The next leg will probably be driven by increased demand from households, and a higher propensity to lend by financial institutions. While we are already seeing some positive signals from both fronts, it is likely that we are entering a transition zone where activity will probably soften in the coming months, before resuming its upward trend. Turning to interest rates, as Janet Yellen has been a fixture at the Fed, investors may believe she is a known quantity whose actions will bring few surprises when she takes the helm in February. But those expectations are based on a reading of her policy stance during the global financial crisis and a shallow recovery that left massive economic slack. A deeper look at her longer-term record, and other upcoming changes on the Federal Open Market Committee, suggest that there may be more uncertainty than expected as to where the Fed is headed in the next two years. It’s notable that Yellen has not always been single-mindedly focused on the full employment side of the Fed’s mandate. That’s been a function of the times. Prior to the housing collapse and subsequent recession, Yellen was
Europe: Giving up on Deep Austerity 7%
China: Growing Again Where it Counts Previous New Budget Targets (as of Spring 2013)
2013 Deficit-to-GDP Target
6% 5%
30
Import Volume y/y % change
20 10 0
4%
-10
3%
-20 2%
-30
1%
-40
0%
-50 France
Spain
Portugal
Netherlands
Copper Crude Jul. 2012
Oct. 2012
Jan. 2013
Apr. 2013
Jul. 2013
Source: European Central Bank
Source: UBS, Bloomberg, CIBC
equally determined to cap inflation pressures. Should Washington get government back in full operation and eschew deep spending cuts, a lighter fiscal drag would set 2014 up for accelerating growth, and put tapering back on the agenda as early as December. Outright rate hikes could easily follow by early 2015, as lower unemployment brings back the less dovish Yellen seen in the past.
index (health care, information technology, consumer discretionary and consumer staples).
As for Canada, it is difficult to get too excited about the prospects for our economy in the near term. The consumer is clearly not in the mood to accelerate activity; corporations are unwilling to increase capital spending until the fog clears; and the government continues to act as a net negative for economic growth. The Bank of Canada (BoC) has finally joined the crowd and reduced its Q3 forecast of 3.8% by more than a full percent 1, in part because the dip in Q2 growth was not as severe as it had expected (1.7% outcome vs. 1.0% BoC forecast). The reality is that when it comes to the TSX, we clearly need the support of the global economy. In fact, what we need is the reverse of 2013. Yearto-date, the Canadian equity market has underperformed the U.S. market by a wide margin (2% vs. 18%) 2. But a closer look suggests that Canada outperformed the U.S. in four out of the 10 sectors in the S&P/TSX Composite Index. The problem is that those four sectors account for only 13.3% of the
1
Source: Bank of Canada, Monetary Policy Report, July 2013. 2 Source: Bloomberg, CIBC. As at Sept. 30, 2013.
So in order to see the index regaining ground, we need to see the big guns such as industrials and energy performing well. And for that we need a better global macroeconomic picture, which, if everything goes according to plan, should be the story of 2014.
Benjamin Tal is Deputy Chief Economist for CIBC. Described as one of Canada’s leading experts on the real estate market by the International Monetary Fund, he is responsible for analyzing economic developments and their implications for North American fixed income, equity, foreign exchange and commodities markets. www.advisor.ca/togo Podcast > Where to Look in Emerging Markets www.renaissanceinvestments.ca/en/economy/
Renaissance Investments 5
The Black Hole of Wealth Transfer Growing your business in a changing world
BACK OF THE NAPKIN
A tidal wave is coming for everyone engaged in the business of managing money for aging clients. According to Investor Economics, we are going to see a whopping $895 billion of money-in-motion over the 10-year period between 2012 and 2022.1
This massive shift of wealth will unfold very quickly as our oldest living generation passes on, leaving their financial legacies to their adult children and other beneficiaries. The sheer number of individual transfer events during this time is expected to top a staggering 1.3 million, with the vast majority of those coming from households aged 75 years and over. Canadians are becoming increasingly affluent and, as a result, the size of their inheritance packages continues to grow. Over the next decade, the average estate transfer value from the 75 years and over group is expected to test the $700,000 mark. We can safely assume that the majority of the recipients will be the adult children (and other family members) of the deceased. But we Have a Problem…
relationship with their adult children or their grandchildren. When our client’s wealth transfers out upon their death, it does so because there is no justifiable reason for that money to remain under our care. When it comes to securing existing assets-at-risk, the solution is no mystery. Let me introduce a simple procedure to gain rapid exposure to the family members and beneficiaries of this money-in-motion. “The Family Matrix” – Asset Gathering Strategy You will be happy to know that this strategy requires no cold calling, no mailings, no advertising, and no dedicated marketing dollars. But it will act as a powerful prospecting, differentiating, asset protection and asset gathering campaign. STEP 1 Analyze Your Clients
STEP 6 Make a Connection
STEP 2 Use an Estate Planning Checklist
STEP 5 Invite Them to a Family Meeting
STEP 3 Confirm They Have a Will
STEP 4 Establish the Executors
A recent PricewaterhouseCoopers wealth management survey2 confirmed a harsh reality that many of us already suspected, based on personal experience: Step 1: Analyze Your Clients
“…only 2% of adult children keep their inheritance with their parents’ advisor…” As many advisors are beginning to discover, when an elderly client passes away, the money they were entrusted to manage on behalf of that client... simply disappears. The reason we have this problematic “black hole” of wealth transfer is fairly self-evident. All too often, we, as an industry, are simply failing to “own” the family matrix. We may have formed a solid working relationship with the patriarch or matriarch of the family, but we chronically maintain little or no
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1
Simply determine your clients-at-risk (your oldest clients) and make a list of the best candidates for the strategy. Your best candidates are those aging clients who have substantial assets invested with you, or who have a substantial personal net worth. Step 2: Use an Estate Planning Checklist Meet with your clients-at-risk and walk them through a standard Estate Planning checklist. Keep in mind that this is just a checklist – it is not a full estate or financial plan. Your checklist should include simple questions like: “Do you have an updated will? Do you have a power of attorney for personal care? Do you have a safety deposit box?”, etc.
Source: Investor Economics. Household Balance Sheet Report - 2013. 2 Source: PricewaterhouseCoopers – Global Private Banking / Wealth Management Survey.
Step 3: Confirm They Have a Will In the course of walking through the checklist, you will quickly discover if your client has an updated will and power of attorney. If they do not have a will, you will offer your guidance around the process and strongly recommend that they get a valid will prepared as soon as possible. Step 4: Establish the Executors Once you’ve confirmed that a proper will has been prepared, simply ask your client who they have named as the executor(s) of their estate. The executor will almost always be an adult child or other family member. Ask them about the experience and financial sophistication of their named executor. Stress to your client, the importance of the role of executor and the level of complexity and responsibility that comes with the appointment. (This will prepare your client, psychologically, for the next step.) Step 5: Invite Them to a Family Meeting In this important step, invite your client to attend a “family meeting” along with their chosen guests. Recommended guests would include: named executors, alternates, power of attorney agents, guardians, etc. Your verbal invitation will need to be compelling in the mind of your client, because this strategy fully depends on generating a “yes” response. In your invitation, be sure to highlight the importance of ensuring that their family members get prepared now for the future, explain the purpose of the meeting, and showcase the payoff for attending. In this step, you will be offering an important educational service to the family members of your trusted clients, and they will be walking away from the session with greater clarity and comfort around these critical issues. Step 6: Make a Connection This is the final and most crucial step of the strategy, which will take place at the family meeting itself. This is your chance to make a lasting impression and create enduring rapport with your attendees. To accomplish that objective, your meeting will require three essential ingredients: Address Emotional Needs Simplify the Complex Position Yourself as the Family Advisor The attendees of your family meeting will arrive at the session with a set of “logical” reasons for attending, but they will also be carrying a list of deeper emotional issues and concerns, that can be summed up as follows: “I have a parent who is going to die in the not-too-distant future, and I really don’t want to deal with that right now …because it’s far too upsetting.” “I’ve been named an executor of this will, and I don’t have a clue around where to start or what’s even expected of me.” “I really wish there was someone who could help me navigate through all of this.”
Be sure to address these emotional issues right up front. This should be done with a strategic introduction to the family meeting in your opening comments. Convey the clear message that they are not alone, and that you are here to help. Next, move immediately into simplifying the complex with your educational component. Discuss simple topics like “What is Estate Planning?,” “The 8 Duties of an Executor,”or “Acting on Power of Attorney.” Close the meeting by expertly positioning yourself as the “family advisor.” Do this by showcasing the benefits of family consolidation – which places you in a very strong position to be able to assist the entire family with things like: inter-generational wealth transfer, elder care, education planning, investing and preparing for retirement. Clearly articulate how much you value your relationship with their parents and calmly ask your guests for the opportunity to “earn the right” to become their trusted advisor, too. In the days and weeks after the meeting, employ a systematic follow-up process incorporating multiple layers of contact using a variety of methods. Consider mailing out thank you cards and collateral materials; place a phone call to answer any questions; send an email with summary notes and a link to your website; and offer to provide them with a complimentary wealth management review. The coming tidal wave of money-in-motion is very real, and the black hole of wealth transfer will challenge even the most experienced of investment professionals. But those who strike early and proactively will turn the black hole into an opportunity to secure existing assets, and gather new assets in the process!
Grant Shorten is Director of Strategic Insights at Renaissance Investments. He offers insights and approaches that will work with your clients and have an immediate impact on your practice. www.advisor.ca/togo Podcast > How to Captivate Clients www.renaissanceinvestments.ca/en/practicemanagement/
Renaissance Investments 7
Why it’s time to make the Income Move Investing used to be more black-and-white. A balanced portfolio would have a mix of traditional fixed income like government bonds and riskier assets such as stocks. But times have changed, and the old model no longer works. Ongoing financial uncertainty has driven investors to safer assets, with net flows pouring into fixed income as well as balanced categories over the past decade. But following an extended period of historically low yields, clients are now struggling to generate sufficient income for retirement from traditional approaches. continued on next page >>
Renaissance provides additional strategies that can generate the income, stability and growth that clients need today:
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*
*
FLOATING RATE
CORPORATE BONDS
HIGH YIELD
ALL-IN-ONE INCOME
EQUITY INCOME
INFRASTRUCTURE
Traditional bond yields are near historical lows, which makes the search for income increasingly complicated.The chart below shows why, in today’s economy, government bonds are no longer considered by many to be a risk-free asset. As well as a lack of income generation, lower yields have stretched bond durations, meaning investors are more exposed to interest rate risk. Lower Yields = Higher Risk
Falling Government of Canada 10-Year Bond Yields Means Greater Sensitivity to Interest Rates (i.e. greater duration)
9%
Yield to Maturity
8%
Duration of 10 yr Bond Trading at Par
8%
2%
7.07 yrs
9.11 yrs
7% 29% Increase
6% 5% 4% 3% 2%
2010
2005
2000
1995
1%
for core portfolios in the U.S., Europe and the rest of the world.1 It can provide investors with specific benefits: 1. Boost potential returns vs. traditional fixed income 2. Enhance yield vs. traditional fixed income 3. Recapture diversity in core portfolios
Specialized Management Mitigates Risk These strategies require specialized management to access the best opportunities and generate additional income, while managing risk. That’s why O’Toole is wary of retail investors buying corporate bonds individually. “If any one of those companies has trouble, you could lose a lot of your principal. You want to make sure you’re in a very well diversified portfolio of corporate bonds.” Jeffrey Waldman, First Vice-President, Fixed Income, CIBC Global Asset Management adds, “By combining investment-grade bonds with high-yield bonds, you can achieve diversification of industries, companies, default and interest-rate risk.”
Duration calculation courtesy of Investopedia
Video > Renaissance Optimal Portfolios: All-in-one income solutions with Patrick O’Toole, Stephen Carlin and Nick Langley
Leverage the Grey Zone “You should be looking for an opportunity to diversify and boost your income in what is going to continue to be a low-interest-rate environment,” says Patrick O’Toole, Vice-President, Global Fixed Income, CIBC Global Asset Management. To do this, Renaissance experts recommend a strategic move to investments that fall between the “old world” black-and-white categories of traditional fixed income and equities – an area we call the “Grey Zone.” A variety of asset classes and strategies make up the Grey Zone: • Corporate bonds • Floating-rate loans • High-yield bonds
• REITs • Dividend-paying stocks • Listed infrastructure
According to global fund analyst firm Strategic Insight, allocation to this mix of ”multi-asset income strategies” is starting to become a major theme
Looking beyond North America can add another layer of diversification, but risk-averse clients appreciate a lower-volatility method. “Listed infrastructure is a lower-risk approach to achieving global equity exposure in client portfolios,” says Nick Langley, Senior Portfolio Manager, RARE Infrastructure. “With steady income and low correlation to global equities, it provides better capital protection in falling markets and a reasonable share of the upside in rising markets.” And there are always blue-chip, dividend-paying companies that can boost equity returns. American Century Investments seeks sustainable returns by diversifying sources of income across the broad U.S. dividend landscape. “We go out and look at each industry, and look for companies with the highest return on capital,” says Peter Hardy, Vice President, Client Portfolio Manager.
See how to make the right Income Move for your clients…
NEXT PAGE
Grey Zone Spotlight: Floating-Rate Loans Floating-rate loans offer investors, “embedded interest rate protection that a lot of your clients are not getting through their fixed income high-yield or high-grade portfolios,” says John Eanes, Portfolio Manager, Ares Management, sub-advisor of the new Renaissance Floating Rate Income Fund. Floating-rate loans are senior secured loans made by banks to non-investment-grade companies where the coupon payment is determined based on a specified interest rate – typically the London Interbank Offered Rate (LIBOR) – plus a spread. LIBOR is the rate at which many banks from around the world offer to lend money to one another. As a floating-rate loan’s coupon rate resets or “floats” with the prevailing rate of interest, these loans typically have virtually no duration risk, unlike traditional bonds. This unique asset class provides investors with:
Protection Against Rising Interest Rates
Additional Portfolio Diversification
Attractive Yields
Secured by Hard Assets – Another highly attractive feature of floating-rate loans is that they are secured by hard assets and rank higher in the capital structure in the event of company default. “A lot of these loans do have hard covenant packages that the issuers have to maintain certain EBITDA metrics, leveraged metrics, interest coverage metrics in order to keep the engine going, and if they don’t, the lenders can come back to the table and negotiate more attractive economics,” says Eanes. He explains there is an extremely low default environment today with corporate cash levels at historical high levels. “We view the current low-growth environment to be the sweet spot for credit and in particular for leveraged loans.”
1
Source: Trends in International Product Development. Strategic Insight Simfund GL.
Renaissance Investments 9
Three steps to leverage the full income spectrum
Make the Income Move STEP ONE | CHOOSE THE INCOME INVESTOR TYPE
The Growth Seeker An investor seeking growth potential. Willing to assume risk associated with a more aggressive approach; moderates risk through a well-diversified portfolio of global equity investments.
The Income Grower An investor seeking growth and income from a well-diversified solution, as well as the potential for superior yield; willing to assume additional risk to meet their objectives.
The Income Earner
The Income Preserver
An investor seeking somewhat higher income and returns than the Income Preserver, willing to take on some additional risk to meet their objectives.
An investor seeking income from a well-diversified solution that delivers more than fixed income; most comfortable with an all-inone income generation solution.
STEP TWO | CHOOSE A CORE SOLUTION BASED ON INVESTOR TYPE • Optimal Conservative Income Portfolio
Core Investment Solutions Inflation Mitigation: Optimal Inflation Opportunities Portfolio
• Optimal Income Portfolio
Return
• Optimal Growth & Income Portfolio
Optimal Global Equity Portfolio
• Optimal Global Equity Portfolio Optimal Growth & Income Portfolio
Add Inflation Mitigation With: • Optimal Inflation Opportunities Portfolio
Renaissance Optimal Portfolios provide all-in-one core solutions across the risk, return and income spectrum. The portfolios are tailored to investor risk, return and income preference and offer customizable cash flows using T-Class options.
NEW
Optimal Portfolios
10 Renaissance Investments
Optimal Income Portfolio
Risk
Optimal Conservative Income Portfolio
Renaissance Optimal Conservative Income Portfolio prioritizes steady income.
Renaissance Optimal Growth & Income Portfolio offers additional long-term growth potential alongside income.
INVESTOR TYPE
CORE SOLUTION
PORTFOLIO ENHANCEMENTS
STEP THREE | CUSTOMIZE PORTFOLIO EXPOSURE USING A RANGE OF ENHANCEMENTS Seek to enhance specific characteristics of Renaissance Optimal Portfolios with a wide range of funds
Renaissance Global Infrastructure Fund Renaissance Optimal Inflation Opportunities Portfolio Renaissance Floating Rate Income Fund Renaissance Millennium High Income Fund Renaissance U.S. Equity Income Fund Renaissance Corporate Bond Fund
Yield
Renaissance U.S. Dollar Corporate Bond Fund Renaissance Canadian Bond Fund Renaissance Short-Term Income Fund Renaissance U.S. Dollar Diversified Income Fund Renaissance High-Yield Bond Fund
NEW
Interest Rate and Inflation Mitigation
Dividend and Equity Income
Fixed Income
Diversified Income
Renaissance Funds
Rising Rate Protection and Income Enhancement Renaissance Floating Rate Income Fund aims to provide investors with a high level of current income and mitigate the impact of rising interest rates. Renaissance U.S. Equity Income Fund seeks to provide current income and long-term capital growth. U.S. Dollar Investment Solutions (for those with U.S. dollars to invest) Renaissance U.S. Dollar Corporate Bond Fund seeks to generate income by investing primarily in bonds, debentures, notes and other debt instruments of U.S. issuers. Renaissance U.S. Dollar Diversified Income Fund aims to generate a high level of income and some potential for capital appreciation.
For more, visit incomemove.ca and speak to your Renaissance Investments representative.
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 fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer, nor are they guaranteed. The values of many mutual funds change frequently. Past performance may not be repeated.
Renaissance Investments 11
Yield and Growth with Downside Protection SOLUTION HIGHLIGHT: RENAISSANCE U.S. EQUITY INCOME FUND
Long-term Total Return Driver: Dividends have been a major contributor to equity returns on a historical basis, making them a significant source of income and total investment return. Downside Protection: Dividends provide the opportunity to capture the upside potential of bull markets and much needed downside protection in bear markets.*
Key features: Access American Century's expertise in an exclusive mandate. Tactical use of convertible securities to enhance the risk/return profile can: Enhance yield Dampen volatility Provide downside protection *Note: During the decades of the 2000s and 1930s (not pictured) – periods when the markets were under extreme pressure – dividend income made up more than 100% of total return.
The U.S. economy is the largest and most diversified in the world. The Canadian market is narrow with dividend funds concentrated in a few sectors, namely financials and energy. By investing in the U.S., investors can mitigate concentration risk by accessing investments across a wider range of sectors. Access U.S. dividends using the Renaissance U.S. Equity Income Fund managed by American Century Investments, which has a proven track record of managing a similar U.S. mandate with over US$10 billion in assets under management. Tech Bubble Burst 3/27/00-10/24/02
Credit Crisis 10/9/07-3/9/09 -30%
30% 20%
25.62%
-35%
10% 0% -10% -20% -30%
-40.20%
-40%
Total Return (USD)
Appealing Yield: Currently, dividend-based strategies are appealing to investors on a return and yield basis, especially relative to the traditional fixed income option such as treasuries.
A history of successful U.S. dividend investing.
Total Return (USD)
Importance of investing in dividend-paying stocks:
-40%
-40.12%
-45% -50%
-55.25%
-55% -60%
-50% American Century Equity Income Fund Class C
S&P 500
Source: Morningstar Direct as at September 30, 2013
American Century Equity Income Fund Class C
S&P 500
Source: Morningstar Direct as at September 30, 2013
A history of strong performance** and downside protection**
**Source: Morningstar Direct as at September 30, 2013, American Century Equity Income Fund Class C Track record, Standard Performance 1yr: 12.1%, 3yr: 10.8%, 5yr: 7.0%, 10yr: 6.5%, Since Inception (July 13, 2001): 6.1%, Performance are presented in USD based on the American Century Equity Income Fund – Class C with a MER of 1.94% and an embedded trailer of 1%. This fund is only available in the United States. Performance information presented herein is for the American Century Equity Income Fund Class C and does not reflect expected performance of the Renaissance U.S Equity Income Fund. ©2013 Morningstar Research Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. The information presented is accurate at the time of first printing, and is subject to change without notice. Management fees for Class A, Class F and Premium Class units are outlined in the Simplified Prospectus. This material is for informational purposes only and is not intended to convey investment, legal or tax advice.
12 Renaissance Investments
Under Promise, Over Return! THANKS TO OUR SUPPORTERS
Without the support of advisors like you, Renaissance Investments would not enjoy the privilege of helping so many Canadians realize their investment goals. Here is one of the outstanding professionals we are so very proud to work with. What do you love about the business? I love the fact that I have helped numerous clients reach their retirement goals. I also love that I can continue to do what I have done for the past 29 years as long as I want. If you love what you do, you will never have to work again in your life. Does the potential for rising interest rates factor into your planning with clients?
Best tip for gaining new clients: Be honest. Be honourable. Have integrity. Look after your clients or someone else will look after them for you! If you do that, you will get referrals. Favourite hobbies: Golf and travel. The real beauty is when you can combine both at the same time – what more could you ask for? One item I can’t be without: While technology has made my life easier, the one constant throughout the years has been my spouse, Barb. She has been my rock and sounding board. This is a difficult business at times. Without a supportive spouse, it is even more difficult.
Not any more than falling interest rates factor into my planning. I try to design a portfolio where the products have little correlation to each other so that over the long term, the portfolio is moving forward whether interest rates are rising or falling. Unfortunately, we cannot plan for a black swan event because we have no idea what that event will be. Are there any asset classes or investment themes that are particularly attractive to you right now? Most investors have a home country bias, and this is sometimes difficult to overcome. However, going forward I believe that my clients will be better off with less Canadian content. With Canada representing only three percent of the global market, you will miss opportunities by keeping this bias. What are the most common client concerns you hear currently, and how do you address them?
Gary Tripps Firm: FundEX Investments Location: Comox, BC Years in Business: 29
“When can I retire, and how much will I have to retire on?” Planning pays – if you use a conservative rate of return over the long term. Under promise, over return! No one has ever fired me because I told them they could retire earlier or with more than I originally said.
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THE AMAZING WORLD OF
SUPERFOODS They contain multiple nutrients Boost your immunity Reduce your risk for disease Increase your energy Protect you from the winter blues
SF 14 Renaissance Investments
Throughout the ages, food has been enjoyed not only for the simple pleasure of eating, but also consumed for its medicinal and healing properties.
“The effect that diet can have on how you feel today and in the future is astounding,” Elizabeth Somer – The Essential Guide to Vitamins and Minerals.1
What’s on Your Plate? As a nation, we are increasingly eating more processed foods. Given the pace of our frenzied lives, grabbing a take-out burger on the way home or picking up a packaged meal at the grocery store is quick and easy. But despite the convenience of fast or processed foods, they aren’t very good for our bodies. Here’s the lowdown on our diets today:
• Our supermarkets are full of convenient packaged foods that compromise our nutrition. • Our food variety is limited. Two-thirds of our calories come from just four foods: corn, soy, wheat and rice. • Our food is not the same as 20 years ago. Nutrients in the soil have been depleted, so food grown in that soil is less nutritious, and chemicals are increasingly used in raising both plants and animals.2
With our Canadian winter (and flu season) fast approaching, we need to pay more attention to what we eat, and incorporating superfoods into our diet may help ward off a host of unwelcome health ailments.
Boost Your Immunity Coating yourself in antibacterial hand cleanser whenever you get the chance is one form of protection, but consuming certain drinks and foods can also provide an immunity boost. For one, drinking chamomile tea can help prevent sickness. A study by researchers from London’s Imperial College found that people who drank five cups a day for two weeks had increased blood levels of plant-based compounds called polyphenols, some of which have been associated with increased antibacterial activity.3
Also, keep eating your salad but the next time you reach for the fat-free dressing, think again. A recent study from Iowa State University found that without dietary fat, your body doesn’t absorb some of the disease-fighting nutrients in vegetables. Fat-free dressing prevents absorption of carotenoids, antioxidants that have been linked to improved immunity. “Fat is necessary for the carotenoids to reach the absorptive intestinal cells,” says lead researcher Wendy White. Best choices for your salad are dressings with healthy fats from olive or nut oils.3
Increase Your Energy Living at today’s hectic pace means not only that we stave off sickness, but we also need to keep our energy up from morning to night. Many people believe the answer to low energy is to use stimulants, like caffeine and sugar. But the boost they provide is short and abrupt – we’re likely all familiar with the quick sugar “high” and subsequent “crash.” To avoid the high/crash feeling, reach for energy food by eating a healthy snack containing a complex carbohydrate and a protein; for example, whole-grain crackers with low-fat cheese, or a peanut butter sandwich with whole-grain bread. “That combination of protein and a complex carbohydrate (digested more slowly than simple carbs) increases your blood glucose in a sustained way,” says Christine Gerbstadt, a weight control researcher at Drexel University in Philadelphia.4 You can also start the day off right by eating a high-fibre, carbohydrate-rich breakfast that can set you up with both short- and long-term energy boosts. A study published in the International Journal of Food Sciences and Nutrition found that a high-fibre, high-carb meal led to the highest level of alertness between breakfast and lunch. To maintain your edge throughout the day, select foods like whole-wheat toast or high-fibre cereal and aim for 25 to 30 grams of total fibre daily.4
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Improve Your Mood
Top Superfoods to Add to Your Diet
Not only can superfoods increase both our immunity and energy levels, but did you know that the food we eat can change our brain structure, which can lead to altered behaviour?
You’ve heard about the power of pomegranates and blueberries. But what other superfoods should you add to your diet?
Many of us are cutting carbs these days. To improve your mood, don’t avoid carbs, just choose the “smart” ones. The connection between carbohydrates and mood is all about tryptophan, a nonessential amino acid. While tryptophan is found in almost all protein-rich foods, carbs can also boost tryptophan levels. Go ahead and eat more carbs, but make smart choices like whole grains, fruits, vegetables and legumes, which also contribute important nutrients and fibre.5 In addition to the right carbs, a study by the University of Pittsburgh School of Medicine found that omega-3 fatty acids can also benefit our mood. Study participants with lower levels of omega-3 fatty acids in their blood were more likely to be moderately depressed and have a negative outlook.6 “We know that the omega-3s you get in fish lower heart disease risk, help arthritis, and may possibly help with memory loss and Alzheimer’s,” Somer says. “There is some evidence to show that it reduces depression as well.” 1 Sardines, salmon, flax seeds and walnuts are excellent food sources of omega-3 fatty acids. Finally, if you find yourself feeling down, you could be low on selenium. A study from Texas Tech University suggests that selenium supplements were helpful in treating depression and lack of selenium was associated with a bad mood. Beat the winter blahs by eating seafood, nuts and seeds, lean meat, whole grains, beans and legumes – foods rich in selenium.7
Açaí Açaí is a Brazilian berry known to help boost energy levels, improve digestion, promote sleep, promote healthier and younger-looking skin and cleanse the body of toxins. Add some to your smoothies in the morning or throw them into your fruit salad.8
Cocoa Cocoa contains complex molecules that are potent antidepressant compounds. Cocoa also contains antioxidant compounds called polyphenols, which are believed to be responsible for the cardiovascular and metabolic health benefits of chocolate. All the health benefits of chocolate come from dark chocolate, which is closest to the pure source of cacao beans.8
Kefir Kefir, a yogurt-like food, is a cultured milk product made by adding grains to partially skimmed cow’s milk and allowing it to ferment for 24 hours. Kefir is packed with probiotics that re-establish a healthy balance of bacteria, which aids digestion.8
Goji Berries Goji berries are thought to be the most nutritionally dense fruit on the planet and also contain natural anti-inflammatory, anti-bacterial and anti-fungal compounds. Gojis are most commonly available in dried form, and make a great snack eaten as is, added to trail mix, muesli or oatmeal.9
Sources http://www.webmd.com/diet/features/superfoods-everyone-needs 2 http://www.takingcharge.csh.umn.edu/explore-healing-practices/food-medicine 3 http://www.womenshealthmag.com/nutrition/foods-that-help-you-avoid-colds 4 http://www.webmd.com/diet/fiber-health-benefits-11/fatigue-fighters-six-quick-ways-boost-energy?page=1 5 http://www.webmd.com/food-recipes/features/how-food-affects-your-moods?page=3 6 http://www.huffingtonpost.co.uk/2013/08/30/best-superfoods-reduce-depression_n_3841726.html 7 http://www.webmd.com/food-recipes/features/how-food-affects-your-moods?page=3 8 http://www.readersdigest.ca/food/diet-nutrition/5-super-foods-you-should-eat 9 http://thehealthyeatingsite.com/the-health-benefits-of-goji-berries/ 1
brain calisthenics Word scramble – Unscramble the following letters to spell words from the article on pages 8-11:
Sudoku – Complete the Sudoku puzzle so that each and every row, column and 3x3 box contains the numbers one through nine only once.
6
1. kirisre
3
4
2. asttyilib
3
1
6
7
3. poersexu
6
4
4. lnfitaog
1
6
4
9
7
3
2
6
5
9
1 7
2
5. onttgiiami 6. eovaersitvnc
5
6
7. leinlumnmi 8. imtacp
8 6
9. ndeeteubrs 10. aeicarptiopn
5
3 8
9 Source: 4puz.com
Spot the difference – Can you spot the five differences between the pictures below?
Check your answers at www.renaissanceinvestments.ca/magazine/answers/
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To learn more about how Renaissance Investments can help you and your clients,visit renaissanceinvestments.ca or call 1-888-888-FUND (3863).
FOR ADVISOR 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. 速 Axiom, Axiom Portfolios and Renaissance Investments are registered trademarks of CIBC Asset Management Inc.
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ÂŽRenaissance Investments is offered by and is a registered trademark of CIBC Asset Management Inc. 1 For Renaissance Premium Class funds. Based on target MER, where applicable: while Renaissance Investments intends to meet the stated MER and will waive management fees or absorb certain expenses to do so, we may discontinue this practice at any time. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.