The Renaissance Advisor by renaissancemag

The Renaissance QUARTERLY FUND PROFILES / PRACTICE MANAGEMENT / OUTLOOK / OPINION

Q1 – MAR. 31, 2014

Shifting theThinking of Canadian Investors Five Top Tips to Boost Client Portfolios ALSO INSIDE:

Fee Transparency and You Preparing the Perfect Lawn

For Advisor Use Only

HISTORY ISNâ&#x20AC;&#x2122;T MADE BY THOSE WHO GO HALFWAY.

PREMIUM PRICING Clients with more to invest deserve more than half efforts. Renaissance offers a suite of enhanced pricing options on fixed income and all-in-one income products to promote long-term portfolio growth.

Average fee advantage of 60bps

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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.

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In this issue

6 14

Tax and Estate Avoid Costly Tax Errors

Economic Outlook Canadian Manufacturing â&#x20AC;&#x201C; Survival of the Fittest

Back of the Napkin Fee Transparency and You

Shifting The Thinking of Canadian Investors

Solution Highlight Renaissance Optimal Income Portfolio

Thanks to Our Supporters Staying True to Goals

Preparing the Perfect Lawn

Brain Calisthenics

Letter from the National Sales Manager

Perception is Reality I can say with confidence that the winter season is over. And while most people will emphatically say that it was one of the coldest ever and produced the most snow that they can remember, the reality is that in most parts of Canada it was very close to the way it always is. There were more “cold” days as measured by a certain temperature not being reached each day, but essentially it was a standard Canadian winter. This isn’t discounting the fact that perception is reality and if we believed it was colder, then it was colder. Similar to when Jerry Seinfeld went to George to get advice on “beating” a lie detector test (figuring he was the expert). George’s sage advice to Jerry was that “it was not a lie, if you believe it.” Something to think about. I can also say with confidence that over the summer season, you and your clients will be at a social event where people will start talking about a great stock tip that they received or how they made a bundle on a tip that they got through a friend. Perhaps the tip did work in their favour, but experience says that the one that was discussed was only one of many, and most did not work out as planned (or even worse, lost money). In most cases, the net of all tips received is usually negative (if you don’t apply George’s advice above). The next time you are in that setting, why not give your own investment tips that include pieces that make up a well-diversified portfolio? Why not make those tips part of a core strategy that doesn’t deviate based on the short term and will be the same tips you give next year and the year after and the year after? Why not give them core mutual funds as the tip and back that up with known managers who employ a disciplined strategy that will perform well over three, five and 10 years? Make sure you do it with confidence and pride around the recommendation. That is the theme of this magazine that I hope you will take the time to consider. My hope is that the tips you give at that pool party this summer not only garner you more respect as an advisor, but also gain you more clients that appreciate those kind of tips. Because like the winter we just endured, the market is not “different this time.” Problem is, people believe that to be true. At Renaissance, we will continue to strive to earn your business and work to be your most trusted business advisor. I welcome your comments and insight and hope we all have a sensational summer.

Sincerely,

Dave Wahl National Sales Manager Renaissance Investments 416-943-6959

Avoid Costly Tax Errors TAX AND ESTATE

Each year the Canada Revenue Agency (CRA) identifies common errors in personal tax returns, which can be costly for taxpayers. For example, in recent years the CRA disallowed almost one of every five claims that were made for key tax credits and deductions and assessed over $1 billion in additional tax, primarily by comparing information on tax returns to other information. In addition to collecting additional taxes, the CRA charges interest, currently at a rate of 5%, on any overdue tax amounts. And, if tax returns are not filed by the deadline or income is repeatedly underreported, penalties may also apply.

4. Be Careful with Exchange Rates Foreign income, such as dividends or capital gains on shares of foreign corporations, should be converted to Canadian dollars for tax purposes at the proper exchange rates. For example, if dividends are earned evenly throughout the year, using the average exchange rate would be acceptable. For capital gains, actual exchange rates at time of purchase and sale of property would be more appropriate. 5. Act in a Timely Manner

Here are five tips for your clients to avoid some of the most common tax return errors, along with potential additional taxes, interest and penalties that may result. 1. Verify that all Income is Reported Taxpayers should compare information on tax slips to investment statements or other supporting documents to ensure completeness and accuracy. It also helps to compare the current year’s tax slips to slips received in the past, to see if any might be missing. If any information has not been received, taxpayers should follow up with the issuer in a timely manner. Any information that can’t be obtained by the filing deadline should be estimated on the tax return. 2. Report all RRSP Contributions All RRSP contributions made from March 2, 2013 to March 3, 2014 should be reported on the 2013 tax return. Taxpayers who have not yet reported RRSP contributions made prior to March 2, 2013 should separately file Schedule 7 – RRSP Unused Contributions, Transfers and HBP or LLP Activities before claiming a deduction for the prior contribution. 3. Confirm Deductions and Credits It’s important to check whether an expense is deductible or a credit is allowed before making a claim on a tax return; otherwise, CRA could deny the claim. The CRA offers information on requirements for claiming various deductions and credits on their website at www.cra-arc.gc.ca.

Taxpayers should always file their tax returns on time to avoid late-filing penalties. It is common for the CRA to request additional supporting documentation after a tax return is filed. Taxpayers should respond to such requests within the required time frame (generally 30 days); otherwise, the CRA will assess the return based on the available information.

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. Follow @JamieGolombek www.advisor.ca/togo Podcast > Not a tax expert? No problem. www.renaissanceinvestments.ca/en/jamie_golombek/

Renaissance Investments 3

Canadian Manufacturing – Survival of the Fittest Co-authored by Benjamin Tal and Nick Exarhos

ECONOMIC OUTLOOK

Decreasing manufacturing production and shipments and an overvalued currency have many questioning the future for manufacturing in Canada. But evidence suggests that a stronger, leaner and more productive manufacturing sector is rising from the ashes. Here, we look at the evidence and identify the industries that are poised to outperform in the coming years.

Despite having given up the cushion it had built, a more stable, or even weaker, Canadian dollar may leave fundamentals to determine the next chapter in Canadian manufacturing. This will depend on Canada’s competitive position. Chart 1 – Manufacturing Share of GDP 3%

1.8

The (Not So) Short-Term Pain

1.6

Six years after the recession, Canadian manufacturing is still 10% below its pre-slump level. Since reaching bottom in mid-2009, industrial production has risen by only 10% – half the advance seen in the U.S., reflecting Canadian manufacturing’s reduced ability to capitalize on the tailwind coming from the south.

1.4

1.2

-1%

1.0

This decoupling is largely due to a reduced manufacturing production capacity in Canada. During the past decade, the share of manufacturing in GDP fell to 12% from 16%. Also, the number of manufacturing firms fell by 20%, while the number of firms in the rest of the economy rose by 10%. The unfavourable regional alignment of Canadian exports to the U.S. was also detrimental. During the recession and in the early stages of the recovery, more than 70% of Canadian manufacturing exports went to underperforming U.S. states. Perspective De-industrialization is a common reality in the developed world. U.S. manufacturing accounted for 16% of the economy in the 1970s, whereas today it accounts for 13%. However, most of that adjustment took place in the 1970s and 1980s, with the share of manufacturing becoming relatively stable in the past two decades. In contrast, Canada’s manufacturing share of GDP rose dramatically in the 1990s – an advance that was powered by a tumbling Canadian dollar. The correlation between U.S.-Canada relative manufacturing performance and the value of the loonie is unmistakable. (See Chart 1) The adjustment arrived in Canada when the loonie started regaining value around the turn of the millennium. Canadian manufacturing nose-dived from the relatively elevated levels it had seen in the previous two decades, and a weak exchange rate forestalled, and even counteracted, the effects of de-industrialization.

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Mfg share of GDP, CAN minus US (L) C$/US$ (R)

-2%

0.8

-3%

0.6 70

Source: United Nations National Accounts, Statistics Canada, CIBC

Competitive Forces At first glance, Canadian manufacturing compensation costs appear relatively attractive with rates averaging below most of its counterparts – average hourly compensation in Canadian manufacturing was US$37 in 2012, only US$1 greater than wages paid in the United States. Furthermore, Canada’s tax regime is less punitive on corporations than all of its G7 peers. It is tied with Germany for the lowest national rate at 15%, and has the lowest average effective tax rate for firms at just over 24% according to PricewaterhouseCoopers. These rates are especially attractive for firms when compared to the U.S., which imposes a federal rate of 35% that swells further to 46% on an all-in basis for the average firm. However, when translating hourly compensation costs into unit labour costs, the trend is more alarming. Increasing unit labour costs mean that hourly compensation in Canadian manufacturing has outpaced its productivity gains, while compensation and productivity have increased at a more stable rate in the United States. Indeed, productivity in Canada struggled in the 2000s, increasing only 7%, while U.S. manufacturing productivity rose by 25%. However, recession and an overvalued dollar in the U.S. jolted many Canadian manufacturers awake.

While the U.S. is experiencing still-lagging gains in manufacturing productivity, output per worker in Canada has advanced by more than 9% since 2009. This suggests that the shrunken but improved Canadian manufacturing sector has never been better at using the workers it has left. Identifying Opportunities We filtered the manufacturing industry by characteristics to uncover the subsectors that have best adapted to the macro environment. Our forward-looking indicators were: (a) productivity growth since 2009; (b) industry sensitivity to changes in Canadian net exports (i.e., the coefficient of net export); (c) foreigners’ share of the Canadian market (import penetration); (d) Canadian market share of U.S. imports (export penetration); (e) capacity constraints; and (f) the labour share of total production costs. The resulting rankings are illustrated below. Industries Ranked By Brightest Prospects

Leading the way in productivity growth since 2009, primary metals is well positioned to take advantage of the decline in the value of the dollar thanks to its favourable net exports position. Also helping is the fact that over half of the domestic market is supplied by foreign sources, suggesting a weaker currency will – at the margin – benefit domestic suppliers. The industry is also well positioned to take advantage of a stronger U.S. economy, accounting for more than 25% of total U.S. imports. At only 2% below its long-term average, however, growth might be limited by capacity constraints, a fact that also suggests a stronger path of capital spending in the coming years. Machinery manufacturing has the strongest net export position in all of the manufacturing sub-industry groups, and with the majority of the current market belonging to foreign imports of machinery, it is best positioned to capitalize on a swooning loonie driving up the price of imported competition. Capacity constraints, here too, may mean more capital investment in the near future. Moving Ahead

WOOD PRODUCTS PRIMARY METALS MACHINERY AEROSPACE COMPUTER & ELECTRONIC MISCELLANEOUS PLASTICS & RUBBER PAPER MANUFACTURING FABRICATED METAL ELECTRICAL EQUIPMENT FURNITURE TRANSPORTATION PRINTING CLOTHING FOOD CHEMICAL NON-METALLIC MINERAL BEVERAGE & TOBACCO PETROLEUM & COAL

-0.6

There is no denying that the post-recession leaner and smarter North American manufacturing sector is better positioned to stop the bleeding of the last few years. U.S. manufacturers can utilize their improved competitive position and brand advantage to continue their advance into the emerging market consumer space. Many Canadian industries are better positioned to take advantage of the weaker dollar to regain positions in U.S. markets and to better integrate into global supply chain opportunities.

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-0.2

0.0

0.2

0.4

0.6

0.8

Index 1.0

Note: Expressed as a share of highest ranked industry Source: Statistics Canada, CIBC

At the top, wood products has seen strong growth in productivity and the net export coefficient is above average. While the import penetration rate is relatively low, the industry is the leader in export penetration to U.S. markets at close to 50%. A negative is a relatively high level of capacity utilization, suggesting that we should expect a strong pace of investment if things improve.

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 > Equities to Outshine Gold in 2014 www.renaissanceinvestments.ca/en/economy/ www.renaissanceinvestments.ca/en/economy/

Renaissance Investments 5

Fee Transparency and You Validating Your Trailer

BACK OF THE NAPKIN

By popular demand, we are re-printing Grant’s article from the 2013 Renaissance Advisor Live & Interactive Roadshow. Affluent investors tell us that “transparency of fees” is one of the most important factors in determining their degree of loyalty to an investment professional. Yet, despite these findings, many advisors would still prefer to avoid the fee discussion at all costs. Until recently, the decision to operate with “full transparency” was largely optional, but it would appear that the Canadian regulators are about to change all that by legislating the unbundling of investment fees and making them visible to our clients. Since most advisors generate at least some of their revenue from mutual fund trailer fees, we will likely see a growing number of client objections as these charges are laid out in plain view. When confronted with a client’s challenge to a visible fee, you essentially have two options: 1. Discount your fee 2. Increase your client’s awareness of your value Veteran advisors will often agree that the discounting of fees can be fraught with disaster. A knee-jerk reduction of a client’s fee can set a “bargain hunting” precedent in your relationship, and quickly begin to undermine your “worth” in the eyes of your client. And, when it comes to trailer fees (which are normally set by the fund company) a discounting mechanism may not even be available. Given these realities, a more resourceful strategy as an advisor is to mindfully increase the perception of your value, so that your fees are openly received as completely fair and justified. Most investors understand that “cost is only an issue in the absence of value,” but it will be the advisor’s responsibility to articulate that value in clear and specific terms. 1. Explain why there is a fee in the first place 2. Explain what they are getting for that fee 3. Explain the benefits of a percentage fee on assets

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Below are three typical client questions around advisory fees. Please note, the responses below are specifically geared around addressing a mutual fund MER and/or trailer fee (front-end load charged at zero), but they can be easily tailored to address other fee structures, too.

“Why am I Paying an Ongoing Trailer Fee to my Advisor?”

“That’s a fair question…and it’s important to understand why these fees exist. When it comes to a managed product (like a mutual fund), a total fee is charged to the investor in the form of an annual Management Expense Ratio (MER). The MER covers all of the many expenses incurred by the mutual fund in the course of managing the assets invested in the product. This charge also includes a sub-advisory fee paid to the fund’s portfolio manager (and their team) to make daily investment decisions on behalf of the investor. Only a portion of that MER is paid to us (the investment advisor) in the form of a trailer fee – to compensate us fairly for our continued service to our clients who own units in the fund.”

“What am I Getting for that Fee?”

“The list of expenses incurred by a mutual fund is a long one, but let me give you a sampling of what they look like. Here are just a few examples of the many expenses, benefits, and services that are incorporated into your all-inclusive fee:

* Initial Client Discovery Process / Due Diligence * Quantifying of Risk Tolerance

* Asset Allocation Determination * Investment Search & Selection * Ongoing Portfolio Monitoring

* Changes to Investments as Required

* Portfolio Manager Sub-advisory Fees * Advisor Compensation

* Account Statements & Ongoing Reporting * Trade Confirmations * Transaction Fees * Accounting Fees

* Custodial Services * Safekeeping

* Portfolio Rebalancing

* Client Servicing from Fund Companies * Ongoing Economic Research

* Ongoing Equity & Fixed Income Analysis * Creation of Personalized Financial Plans * Creation of Personalized Estate Plans

* Creation of Investment Policy Statements

* Ongoing Performance Reviews & Meetings

* Access to Advice by Telephone, Email, Appointments * Online Access to Accounts & Other Resources * Early Warning Calls * Other

Note to advisor: Customize your own checklist by including only the items that apply to your specific business model, selection of investments and fee structure. Ultimately, the greatest benefit we bring to our client relationships is our ability to manage their emotional states. We operate from a fundamental belief that human nature is the greatest enemy to successful investing. Our highest calling is often to keep our clients invested when they are tempted to run, and to make important asset allocation shifts along the way. We can’t begin to quantify the amount of money we save our clients as we coach them to avoid the most common investor mistakes, while capitalizing on key opportunities when they arise. Our fee is earned when we help our clients maintain discipline in a market so often guided by emotion.

“Why am I Charged a Fee When my Investment is Underperforming?”

“Investment advisors and portfolio managers are paid to manage money during good times and bad times. They are not paid to eliminate drawdowns over all periods, because that simply can’t be done. The capital markets move in a series of rallies and corrections and it requires qualified expertise to navigate those movements over several market cycles. The fee you pay as an investor is for the full list of services provided by an investment professional, not just for positive rates of return when they can be achieved. In the same light, a standard mutual fund does not charge a higher percentage fee to their clients when the portfolio is performing very well and does not charge a lower percentage fee when markets are performing poorly. But, if the value of the portfolio decreases, the dollar amount of the fee decreases in tandem. As you can see, a flat percentage fee for all services places the client on the same side of the table as the investment advisor as well as the portfolio managers working on their behalf. All of the parties involved maintain a powerful vested interest in protecting and growing the investor’s assets. We expect our chosen managers to apply a disciplined approach in defending our client’s wealth within the context of their style, while positioning themselves to participate with each renewed bull market. A portfolio manager really earns their fee during the “bad times” because this is precisely when their philosophy is truly tested. When it comes to fees, we proudly operate with full transparency so that our clients know exactly how much they’re paying for the full suite of services we deliver.”

The proposed regulatory changes around transparency provides the perfect opportunity to sharpen your skills at showcasing the tremendous value you bring to the table. Highlight your successes during your client meetings, remind them of the long list of services you provide, and then confidently expect fair compensation for a job well done.

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 Keep Second-Generation Clients www.renaissanceinvestments.ca/en/practicemanagement/

Renaissance Investments 7

SHIFTING the thinking of Canadian investors A recent survey revealed a troubling disconnect between what Canadian investors expect from their portfolios and what their portfolio can actually deliver.

8 Renaissance Investments

While 44% of Canadians say “growth” is their main investment objective, the majority are invested mainly in low-returning government bonds and GICs.1 When asked if they would consider shifting some investments for the potential to earn higher yield, 48 percent said “No” – not even in a low-rate environment. But an even bigger problem might be on the horizon. Almost 60 percent of Canadian investors are unaware that rising rates may cause some investments to lose value. For Baby Boomers, those investors closest to retirement, this rises to 65 percent. What about Canadians’ appetite to diversify outside of these borders to capture global investment potential? Well, of all the Canadian investors who are prepared to invest in equities, 68 percent say they will mainly invest in Canadian stocks, which make up just three percent of the global market. The findings reveal some flaws in current investment thinking, but also some opportunities to better align clients with the new investment reality. Here are our five top tips for client discussions and solutions to help them find the income, stability and growth required in today’s investment environment.

5 TOP TIPS TO BOOST CLIENT PORTFOLIOS Add Exposure to Floating-Rate Loans With interest rates so low for so long, most experts agree there is really only one way to go from here. Floating-rate loans can substitute for some traditional bond holdings to provide clients with additional diversification and protection from rising interest rates. The interest paid on floating-rate loans adjusts to changes in an underlying market rate (typically an inter-bank lending rate called “LIBOR”). When rates rise, so does the interest paid to investors. As a result, these loans have outperformed traditional fixed income investments in rising-rate environments. Outperformance During Rising-Rate Periods – Cumulative Returns (USD) 20% 17.52% 16%

15.90% Floating-Rate Loans* Traditional Bonds**

12%

10.29% 7.90%

8% 4%

3.97%

4.07%

0% Dec. 1993 – Apr. 1995 (U.S. federal funds rate rose 309 bps)

Jan. 1999 – Jun. 2000 (U.S. federal funds rate rose 190 bps)

Dec. 2003 – Aug. 2006 (U.S. federal funds rate rose 427 bps)

*Credit Suisse Leveraged Loan Index **Barclays US Aggregate Bond Index: An index of U.S. dollar-denominated, investment-grade U.S. corporate, government and mortgage-backed securities. Source: Morningstar Direct

Renaissance has partnered with Ares Management to offer the Renaissance Floating Rate Income Fund, which invests in senior floating-rate loans and other floating-rate debt of companies from around the world. “You get a bond-like experience without having to worry about duration risk and other details, especially if you hire an experienced manager,” says David Wong, Executive Director, Investment Management Research, CIBC Asset Management. “Ares is a very experienced loan manager. They’ve been in the market since virtually the inception of the bank-loan market.” With an option to hold up to 20 percent of the fund in high-yield bonds, the fund seeks to generate a high level of income. “This product is perfect for the current market environment because it gives clients a chance to diversify their fixed-income holdings without having to get out of fixed income,” says Steve Geist, President, CIBC Asset Management.

Renaissance Investments 9

Invest in High-quality American Companies

Access Global Infrastructure

Adding exposure to listed infrastructure is one way to increase diversification in a client’s portfolio while maintaining a lower-risk profile. Infrastructure stocks have a low correlation to major asset classes and offer downside protection versus traditional global stock indices. It’s an asset class that offers regular income to investors and can also be used as a hedge against inflation and defend against rising interest rates. Nick Langley, Senior Portfolio Manager and Investment Director, RARE Infrastructure says, “Rising interest rates are ultimately a result of increasing economic growth. Assets such as ports, airports and rail will generally increase in value as the expectations of economic growth increase, offsetting the impact from rising rates.” The Renaissance Global Infrastructure Fund, managed by RARE, invests in companies around the world that are involved in or benefit from the development, maintenance and management of infrastructure. Adding global infrastructure stocks to a portfolio can both decrease risk and boost returns over investing purely in the S&P/TSX Composite Index. (See Chart 1) “Listed infrastructure provides you lower risk and lower volatility than global equities, and your return is made up principally of dividends and capital. So for a Canadian investor who’s more risk-averse, but wants to venture outside of Canada, you get diversification with a lower risk-return profile,” says Richard Elmslie, Investment Director, Senior Portfolio Manager, RARE Infrastructure.

Despite major indices like the S&P 500 reaching record highs over the past year, there are still opportunities to boost yield with high-quality, dividend-paying U.S. companies. These stocks are often considered low risk due to their competitive advantages, with iconic brands that give them a large market share. Think global brands like Johnson & Johnson, makers of Band-Aids and Tylenol – the world’s sixth-largest consumer health company and the eighth-largest pharmaceuticals company. Or Procter & Gamble, which sells its products in more than 180 countries, with 60 percent of its sales coming from outside of North America. They’re also both among the largest holdings in the Renaissance U.S. Equity Income Fund. Sub-advisor American Century Investments uses a bottom-up approach to identify high-quality companies that are overlooked or undervalued, and reduces volatility with dividend-paying stocks and convertible bonds. American Century’s investment philosophy has proven itself in market downturns, including the 2008 global financial crisis. High-quality stocks can also help protect your clients’ portfolios when interest rates rise. As Phillip Davidson, Senior Vice President and Chief Investment Officer, U.S. Value Equity, American Century, explains, “In a rising interest rate environment, we wouldn’t expect the recent outperformance of lower-quality stocks over higherquality stocks to continue. The reduced availability and higher cost of capital in a rising-rate environment makes it increasingly difficult for these companies to borrow money without really feeling the impact.”

Chart 1 – Reduce Risk and Enhance Returns by Adding Infrastructure 6.5%

3-yr Total Return

6.0%

+30% Infrastructure / 70% S&P/TSX Composite Index

5.5% +20% Infrastructure / 80% S&P/TSX Composite Index

5.0%

More Return

4.5% 4.0%

Less Risk

100% S&P/TSX Composite Index

3.5%

Source: Morningstar Direct as at December 31, 2013.

3.0% 8.0%

8.5%

9.0%

9.5% 3-yr Standard Deviation

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10.0%

10.5%

11.0%

Generate Income from an All-in-one Balanced Solution

Offer Clients Built-in Diversification Asset allocation is key to creating a diversified client portfolio, but choosing, monitoring and maintaining investments and investment managers can be time-consuming. Instead, offer your clients a ready-made diversified solution in Axiom Portfolios.

Many Canadian investors surveyed said they wouldn’t consider shifting investments to earn more yield, likely because they’re concerned about switching from fixed income to stocks. But a diversified balanced solution could be a logical step for many.

The Axiom program includes eight portfolios with varying degrees of risk. Portfolios are diversified by asset class, region, investment style and market capitalization. These solutions are automatically rebalanced to keep clients’ portfolios on track to maintain their desired asset mix.

Renaissance Optimal Portfolios are a family of core solutions with varying allocation to a range of fixed income assets (including high-yield bonds and floating rate loans) and equities (including listed infrastructure stocks).

With Axiom, you don’t need to focus on fund selection, monitoring the investment managers or rebalancing client portfolios – Axiom does it all for you, giving you more time to take care of the client relationship. Their portfolios will be in good hands, managed by investment experts from around the world, including PIMCO, Brandywine Global and INTECH. With Select and Elite class pricing options to keep costs down for your most valued clients, as well as T-Class for additional tax-efficient monthly cash flow options, Axiom gives you both flexibility and peace of mind.

Your client doesn’t have to drop bonds and pile into stocks; instead, they can step into the market with the Renaissance Optimal Conservative Income Portfolio, which has an allocation of 80 percent diversified fixed income and 20 percent equities. Other portfolios range from 40 to 100 percent equity exposure, with the Renaissance Optimal Global Equity Portfolio offering a balanced mix of global stocks. Patrick O’Toole, Vice-President, Global Fixed Income, CIBC Asset Management, sees the Renaissance Optimal Portfolios as a good way to generate additional yield for clients. “You have equities as well as fixed income in a lot of those solutions, so there is an opportunity for dividends and capital gains,” he says.

Find out more about the Renaissance Optimal Income Portfolio in the Solution Highlight on page 12.

ADVISOR ToGo

Listen to short podcasts from these experts and others.

Access to the experts when you need them

www.advisor.ca/togo

Patrick O'Toole – CIBC Asset Management

Podcast > 4 Obstacles to High-Yield Returns

Phillip Davidson – American Century Investments

Podcast > When to Prioritize Risk Management

Nick Langley – RARE Infrastructure

Podcast > Cash In on Climate Trends

The results presented in this article were gathered through a web survey conducted by Leger in December 2013 among a representative sample of 1,503 English- or French-speaking Canadians, 18 years of age or older, who have an investment portfolio for retirement. Using data from Statistics Canada, the results were weighted according to gender, age, region, language spoken at home, education and whether or not children are present in the household to ensure a sample representative of the entire population under review.

Renaissance Investments 11

Your All-in-One Investment Solution SOLUTION HIGHLIGHT: RENAISSANCE OPTIMAL INCOME PORTFOLIO

With a combination of asset classes resembling those used by pension funds, Renaissance Optimal Income Portfolio incorporates an asset mix not typically held by retail investors, creating an investment solution conceived and designed to provide: Opportunity for Stable Growth The portfolio’s optimal asset blend has provided a stable and consistent investment experience.

Proven Protection in Volatile Markets Lower volatility through broad asset class diversification – tested in two major down markets.

Steady Flow of Monthly Income The portfolio has delivered consistent monthly distributions and yield since inception. See Fig. 1

Fig. 1 – Monthly Distribution Left-hand Side (Dollars per unit)

Right-hand Side (Yield*) 5.0%

$0.045 $0.040 $0.035 $0.030 $0.025 $0.020 $0.015 $0.010 $0.005 $0.000

4.0% 3.0% 2.0% 1.0%

Mar. 14

Nov. 13

Jul. 13

Mar. 13

Jul. 12

Nov. 12

Mar. 12

Nov. 11

Jul. 11

Nov. 10

Mar. 11

Jul. 10

Mar. 10

Nov. 09

Jul. 09

Mar. 09

Nov. 08

Jul. 08

Mar. 08

Nov. 07

0.0%

*The monthly distribution yield is the most current monthly distribution multiplied by 12 and divided by the current market value.

Returns % as at March 31, 2014

1 yr

2 yr

3 yr

5 yr

Since Inception1

Renaissance Optimal Income Portfolio

7.9

8.0

6.6

9.1

4.8

Canadian Fixed Income Balanced Category

6.2

5.9

5.2

7.5

n/a

©2014 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. 1 Inception date November 13, 2007. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Distributions are not guaranteed and may fluctuate and should not be confused with a fund’s performance, rate of return, or yield. Distributions paid as a result of capital gains realized by a fund and income and dividends earned by a fund are taxable in the year they are paid.

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TAKE AN INTERACTIVE JOURNEY THROUGH THE MAKING OF RENAISSANCE OPTIMAL INCOME PORTFOLIO AT advisor.ca/microsite/the-making-of

Staying True to Goals 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? The challenge of trying to deal with different clients, while at the same time keeping my practice simple. What is your personal formula for building strong client relationships? Being straightforward with clients – keeping things uncomplicated and transparent. Also, providing consistently great service. Are there areas or themes of financial or investment planning that you plan to focus more on this year?

How do you address the potential for rising interest rates with clients? By recommending managers that address this concern through proper duration and credit strategies. Best tips for gaining new clients: I have found that the service that we provide to our clients is our best form of advertising. The referrals that we get this way are the best compliment to us. It’s also important to network and keep in touch with any leads that you may have. Keep offering them new ideas – you never know what may pique their interest. Favourite hobbies: I enjoy coaching minor hockey, golfing, boating and fishing, to name a few. One item I can’t be without: My assistant, Andrea. She is an invaluable asset to my team and is involved in all of my business decisions. Having the right team member has made all the difference in the growth of my practice.

We are planning to introduce more insurance strategies to the services that we currently offer. What are the most common client concerns you hear currently and how do you address them? When clients see markets going up, they consistently want me to be more aggressive with their portfolios and they often resist my recommendations to rebalance to maintain their allocation. Although clients may worry about missing out, it’s my job to make sure that they are invested in a way that is appropriate for them. In 2008-09 I recommended a rebalance to the equity side and I met resistance there too. We have to remind clients what their goals are and what their tolerance for risk is, and to respect that.

Bruce Rossy Firm: CIBC Wood Gundy Montreal, QC Years in Business: 16 Team Members: 1

Clients are also concerned about taxation and how to reduce the tax burden on their heirs. We address this with our Estate Planning Specialists using various strategies to meet the their needs.

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P R E P A R I N G

T H E

PERFECT LAWN A SEASON-BY-SEASON GUIDE Whether beginners or lawn aficionados, the warm days of spring call to us all to get outside and spend some time with our grass.

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Cultivating gorgeous home lawns requires us to be good lawn managers, says Pamela Charbonneau, turf grass specialist with the Ontario Ministry of Agriculture and Food. Consequently, understanding what happens to our lawns every season and performing the basic tasks are the easiest, cheapest and most environmentally friendly ways to help our lawns be picture perfect.

Winter There’s not much to do in the winter except sit back and watch the snow fly. However, there are things happening beneath the snow you should be aware of so you can take action when the snow melts.

cross section of soil and grass, you see an intermingled layer of dead stems and roots – that’s the thatch,” explains Charbonneau. If that gets too thick, it should be removed.

“This winter, many parts of Canada, excluding coastal B.C., had record days (about 100 days) of snow cover, and this has implications for home lawns,” says Charbonneau.

Another spring task is fertilization – at the right time. “We recommend that you wait until that first flush of new growth in mid or end of May,” says Charbonneau. “One of the first things people want to do in the spring is fertilize. Agronomically, that isn’t the best time,” she explains.

The first is that the diseases that attack grass under snow, called snow moulds, may have damaged your grass (the damage appears as circles of dead grass). There are two types of snow moulds to be aware of: pink, which grows when there are 30 days of snow cover, and grey, which grows when there are 90 days or more of snow cover. After most winters, it’s the leaf blade that shows damage; but once the new leaf blades shoot up in the spring, the circles of damaged areas disappear. “This year, we had a long period of snow cover, so grey mould may have caused damage further down at the growing part of the plant, and your grass won’t come back,” says Charbonneau. Another problem was the high number of days below -10° C. This may cause dead areas on your lawn where it was simply too cold for the grass. Finally, mouse-like animals called voles eat grass under the cover of snow. “When the snow melts, you might see ‘runways’ – irregular patterns of chewed grass. This damage is superficial because the voles have only eaten the blades and the growing part of the plant is still there. Once the nice weather hits, those will fill in,” she advises.

When it is time to fertilize, researchers have found the best use of nutrients is in a ratio of 4:1:2 of nitrogen to phosphorus to potash. In a garden centre, that translates into a 20-5-10 fertilizer – the only one you need for all seasons. Despite common belief, you do not need to switch fertilizer depending on the time of year. And of course, once the grass starts growing, you will mow. The first tip for mowing is to use sharp mower blades that optimize the health and look of your lawn. “Those who work on golf courses pay a lot of attention to that and I think homeowners should, too,” says Charbonneau. The second thing to keep in mind is the one-third rule: Don’t take off more than one-third of the leaf blade. For example, if your grass is three inches long, cut off only one inch. Any more than that will stress the plant.

Spring If you see damage to your lawn when the snow recedes, put some grass seed down. The timing doesn’t really matter because “if you put it down and the conditions are not right, it won’t deteriorate; once conditions are right, the seed will germinate,” says Charbonneau. Raking is also important to get rid of ice, snow and everything that’s matted. Every couple of years, you may also need to dethatch. “When looking at a

Renaissance Investments 15

COOL TOOLS of home lawn care

Summer As spring transitions into summer, start the season by fertilizing again toward the end of June.

Here are some innovations in lawn care technology that will save time, effort and the planet.

During this season, there might be limited water and extra heat, which slows down grass growth. “There’s no need to add more fertilizer – the grass slows down naturally,” says Charbonneau. If there isn’t enough rain, you have a choice of irrigating your lawn. Charbonneau recommends one inch or 2.5 mm of water through rain or irrigation every week during the summer. However, not irrigating is also fine because grasses can go four to six weeks without any water and still survive, says Charbonneau.

Fall Once the summer heat and drought are finished, grass will grow in the optimum window of mid-August to mid-September. This is the time to fertilize again. “This is also the best time to overseed because the cooling and frequent rain give the seed more opportunity to germinate and fill in the bare spots,” says Charbonneau. Of course, this is also the season when trees shed their leaves onto your lawn. “Studies have shown that mulching tree leaves adds some nutrients to the grass,” says Charbonneau. The best way to deal with leaves is to let them fall and then run over them several times with your mulching mower. This ensures they don’t suffocate the lawn. If you choose not to do that, rake them up and get them off the grass. Going into the winter, Charbonneau recommends not fertilizing after mid-September, as studies have found that the negative environmental impacts outweigh any agronomic benefits.

Back to Basics Keeping up the basics will help your lawn look great and outcompete weeds. This is important because some provinces have banned cosmetic pesticides and other provinces are in the process of evaluating pesticide practices. “We can’t go back to the products that we had,” says Charbonneau. “Reducing pesticides forces us to go back to the basics and do things right in the first place. The basics have never let us down.”

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Mowers Auto-Mowers – These battery-powered, programmable mowers automatically mow your lawn while you nap.1 They are bounded to your lawn by wires you install around the edges (a one-time setup). These mowers have built-in rain sensors so they don’t go out when the grass is wet, can mow up and down slopes, and have anti-theft guard and alarm systems, so they never leave home.3 Solar Hybrid Mowers – These mowers use a battery and the sun’s rays as a power source to help you really go green.1 In addition to a charging station, these mowers have large integrated solar panels. When there is daylight available, the solar cells enable the mower to extend its cutting periods before it needs recharging. That means a cut lawn in a shorter time, lower power consumption and an extended battery life. Hover-Mowers – These mowers create an air cushion between the mower and the ground, making it easy to move the mower over your grass.2 They follow the contour of the land and can reach awkward angles allowing them to easily cut grass on areas such as steep slopes, lake banks, and sand traps.4

Weed Removers Upright Weed Remover – Get off your knees! These pole-mounted serrated claws grab the weed by the root and allow you to stand upright.1 Simply position the weeder’s jaws over the centre of the weed and step on the foot pedal. The jaws grab the root under the ground. Then rock the weeder back toward you, slipping the weed out of the ground. Press the ejector handle and the weed falls harmlessly where you want it.5 Propane Torches – These torches hook up to any propane tank to fry weeds all the way down to the root. Slip the metal cup over top of the weed and let the flames fly.1 They kill weeds by heating up the water inside the plants’ cells, causing the cells’ membranes to break apart. Weeds that have been “flamed” will wilt within a few hours. Torches work best on hard, nonflammable surfaces like driveways, sidewalks, pathways and patios. Always follow the safety precautions and avoid using torches around dry, flammable material like mulched garden beds or dormant grass. 6

Sources http://www.foxnews.com/leisure/2012/03/28/best-tools-for-lovely-lawn/ 2 http://en.wikipedia.org/wiki/Lawn_mower 3 http://www.latestgadgets.co.uk/home-garden/6123-robomow-rm510 4 http://www.ask.com/question/hover-mower 5 http://gardening.yardener.com/Hand-Tools-Weeding-Lawns 6 http://www.ehow.com/how_2167905_use-flame-weeder.html 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.

1. roznoih

2. tsboo

3. elmtuytlai

4. fievdisyr

5. eottnffgsi

6. ervunet

7. onicic 8. carynlieigsn

9. ergetnea

8 1

10. ondntrusw

3 7

8 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/

Renaissance Investments 17

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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