Russell Investment Manager Outlook
Russell Investment Manager Outlook Quarterly Survey of Canadian Investment Managers and their Views of the Market Commentary by Timothy Hicks, CFA Chief Investment Officer Russell Investments Canada Limited DECEMBER 2007
GLOBAL LEADERS IN MULTI–MANAGER INVESTING
RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Survey Goals and Summary of Key Findings Key Trends—Dec. 2007 Investment Manager Survey Canadian Dollar vs US Dollar
BEARISH
US Equities
EAFE Equities
Canadian High Yield Bonds
Canadian Equities (Broad Market)
EQUALLY BEARISH & BULLISH
BULLISH
BEARISH
BEARISH
Summary of Key Findings Sub-prime lending woes and troubling economic indicators have triggered a decline in bullishness towards equities among Canadian investment managers. However, bullishness towards Canadian fixed income rose, suggesting that bonds have found a level of support.
emerging markets fell from 52% to 43%. Yet, despite increased pessimism, more than two-thirds of investment managers still expect Canadian equities to post positive returns in 2008.
Bullishness towards Canadian broad market equities dropped from 42% of managers to just 28%, and bears now dominate at 37%. Meanwhile, the outlook for Canadian small cap stocks dropped from 36% bullish to just 19%.
At present, only 23% of managers see the Canadian dollar continuing its ascent. Meanwhile, bullishness towards Canadian bonds increased from only 15% of managers to a full 39% on the heels of a sharp correction earlier this year.
As ground zero of the credit crunch, a minority of investment managers remain bullish towards US equities, and bears have grown in number from 27% to 42%. After a lengthy stint as managers’ most favoured market, bullishness towards EAFE equities plummeted from 67% to 37%, and the number expressing optimism for
In our opinion, the current spate of negative sentiment in the market is fueled at least as much by a sense of uncertainty as by any serious deterioration of economic fundamentals. Time will reveal the true dimensions of the sub-prime credit crunch and pace of growth in the quarters ahead. n
MEDIA CONTACTS Thien Huynh Manager, Communications Russell Investments Canada 1-416-640-2529
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About the Russell Investment Manager Outlook
W
elcome to this year’s final edition of the Russell Investment Manager Outlook, intended to generate a meaningful snapshot of Canadian investment manager sentiment.
As consultants to over $2.0 trillion in assets worldwide, and as a firm that monitors more than 4,000 investment managers, Russell Investments has extraordinary access to senior-level Canadian investment decision-makers. Prior to the end of each quarter, Russell surveys a sample of those investment managers to collect their top-line opinions about the direction of the markets, sectors/styles to watch, and trends on the horizon that could impact investment strategy. The result of this survey is the Russell Investment Manager Outlook. Three of the four questions posed to investment managers will be repeated each quarter, so that results can be measured overtime. The poll also includes one topical question that changes each quarter. In addition to providing quantitative results, Russell reviews the data collected each quarter, and provides a qualitative analysis from a senior investment strategist (see page 2). Russell Investment Manager Outlook is completed and distributed at the end of each quarter. This report includes responses from investment managers with a variety of investment focuses.
The manager research that Russell conducts for investment purposes is done entirely independent of the Russell Investment Manager Outlook, and responses to the survey are on a purely voluntary basis.
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Commentary & Analysis By Timothy Hicks, CFA Chief Investment Officer Russell Investments Canada Limited
Manager Expectations by Asset Class Bearish
Bullish
Canadian Equities (broad market) 37% 28%
S
canadian investment manager sentiment turns bearish
ub-prime lending woes in the US continued to cast a pall over markets in the final quarter of 2007, as Canadian investment managers registered a decline in bullish sentiment across the world’s equity markets. On the Canadian fixed income side, bullish sentiment rose, indicating that many managers believe bonds have found a level of support following the sharp correction of earlier in the year. The investment managers expressed these views in the latest quarterly Russell Investment Manager Outlook poll conducted by Russell in late November and December. The shift to a more bearish stance on equities comes amid not only the credit crunch, but also a string of negative indicators. This includes evidence of a slowing global economy, downward earnings growth revisions in both Canada and the US, and a diminished corporate profit picture. Despite aggressive measures by central banks to cut key lending rates and inject liquidity into the market, investment managers appear to be approaching the market with caution.
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In Canada, bullishness towards broad market equities has dropped from 42% of managers to just 28%. As a result, bears now dominate opinion for the first time in several quarters, at 37% of survey respondents.
Canadian Equities (small cap) 19%
58%
US Equities 42%
42% EAFE Equities 23%
37%
Emerging Market Equities 43%
43% Canadian Bonds 32%
39% Canadian High Yield Bonds 21%
58%
Real Estate 56%
15% Cash
The outlook is a bit more severe for Canadian small cap stocks, with bulls plummeting from 36% to 19%, and bears shooting up from 39% to 58%. This is likely a reflection of smaller companies’ greater vulnerability during a general economic slowdown, combined with the fact that many of Canada’s exporters are smaller companies with heightened sensitivity to the strong Loonie. Examining individual sectors of the Canadian market, bullishness towards Information Technology slipped from 72% to 50%. However, with this sector so heavily dominated by Research In Motion, this outlook may simply be an indication that the stock’s best days are behind it, having already more than doubled in price during 2007. Bullish sentiment towards Industrials dropped from 54% to just 29% amid fears that a general economic
32%
32% $CDN vs $US 23%
34%
80% 60% 40% 20%
0%
20%
40% 60% 80%
Note: Bearish = percent of managers responding with 1-3 on a scale of 1-7. Bullish = percent of managers responding with 5-7 on a scale of 1-7. Scores for neutral (4) are not included. See detailed charts on the following pages.
slowdown would impact the railways, manufacturing and construction companies in this sector. Meanwhile, bearish sentiment towards Materials up-ticked from 36% last quarter to 45% in the latest survey. Bearishness rose nine points in the Telecom sector, from 28% to 37%. One of the most significant issues facing Canadian telecom providers is the spectre of foreign competition in the wireless space. With the Canadian industry already running high costs relative to the global market, the likelihood of lower data and call rates
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Commentary & Analysis (continued)
in a truly competitive domestic market are cause for concern. Energy remains a divisive sector with 43% of managers bullish and 33% bearish. A slight increase in bearishness this quarter may be the result of lower energy demand due to a higher Canadian dollar and higher energy costs due to Alberta’s decision to sharply increase provincial royalties. Despite increased pessimism, more than two-thirds of investment managers still expect Canadian equities to post a positive return in 2008. It seems that many managers are cautiously waiting to see how the subprime credit crunch and rumours of a US recession will unfold, while at the same time betting that the Canadian market will be in a position to move ahead over the next 12 months. In world markets, after a lengthy stint as Canadian investment managers’ most favoured market, EAFE equities have dropped back in line. Bullish sentiment plummeted from 67% to 37%. This probably represents an overall recalibration of risk perceptions by the market, and also the squeeze that a falling US dollar has placed on many Eurozone exporters. In the US, the falling dollar has been a boon to American exporters. Nonetheless, as ground zero of the credit crunch and many of the world’s
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most acute earnings and profitability concerns, most investment managers are no longer bullish on the US. The bulls have been reduced from 52% to 42%, and the bears have grown in number from 27% to 42%. Bullishness towards emerging markets was also knocked back a few points, from 52% to 43%. Emerging markets are home to many basic industries, and are prone to feeling the impact of a broad economic slowdown. Fixed income investors have generally become more positive in the final quarter of 2007. On the heels of a significant correction earlier this year, a full 39% of investors are now bullish on Canadian bonds, compared to only 15% a quarter ago. High-yield bonds, which have been dramatically revalued in recent months, have gone from a highly negative 72% bearish outlook to a more moderate 58%, suggesting that investment managers are now finding attractive valuations on a selective basis. This more bullish stance on bonds comes as sentiment towards the Canadian dollar settles at 23% bullish and 34% bearish—hinting that a number of managers believe the currency has found equilibrium at current levels.
Manager Expectations by Asset Sector Bearish
Bullish
Utilities 30%
35%
Telecommunication Services 47%
37% Financial Services 30%
35% Industrials 34%
29% Materials 38%
45% Energy 33%
43% Consumer Staple 50%
23% 41%
Consumer Discretionary 23% Health Care 35%
50% Information Technology 23%
60% 40% 20%
0%
20%
50%
40% 60%
Note: Bearish = percent of managers responding with 1-3 on a scale of 1-7. Bullish = percent of managers responding with 5-7 on a scale of 1-7. Scores for neutral (4) are not included. See detailed charts on the following pages.
sense of uncertainty as by any serious deterioration of economic fundamentals. Over the coming quarters, the true dimensions of the sub-prime credit crunch will be revealed, and market watchers will have a clearer picture of whether we are indeed facing the possibility of an economic contraction, or merely a slower pace of growth. n
In our opinion, the current spate of negative sentiment in the market is fueled at least as much by a
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 1 Results—Valuation of the Canadian Equity Market Which of these valuation conditions best describes the Canadian equity market? Key Findings: n n n
37% of managers consider the market overvalued 47% of managers believe the Canadian market is fairly valued 16% of managers say the market is undervalued
Which condition best describes the current Canadian equity market? 0%
Overvalued
7% 45%
Fairly Valued
Undervalued
Due to rounding, numbers may not add to 100%.
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47% 24% 6%
Q'07 Q4'07 n
3Q2007
n
4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 2 Results—Asset Class Expectations What are your expectations for the performance of the following asset classes over the next 12 months? Key Findings: n Investment managers grow bearish on global equity markets amidst concerns of economic slowdown n Two-thirds of managers still predict positive Canadian equity returns for 2008 n Fewer than a quarter of managers see the Loonie trending higher sca le i s 1 to 7 :
1
= “ st ro n g ly
bearish”
4
= “ n eutr a l”
Canadian Equities (broad market)
33%
35%
27%
26%
b u lli s h ”
Canadian Equities Canadian Equities(small (small cap)cap)
Canadian Equities (broadmarket)
24%
= “ stro n g ly
7
24% 23%
23% 21%
21%
18%
18%
16%
12%
12% 12%
9%
9%
9%
9%
6% 0%
6% 2%
0%
1
2% 0%
2
3
Bearish
4
3Q 2007
5
6
7
4Q 2007
Neutral
0% 1
Bullish
2
4Q 2007
Bullish
25%
27%
15%
21%
9%
15%
13%
12%
16%
9% 5%
5% 0% 1
2
Bearish
7
33%
21%
18%
6%
Neutral
6
Canadian High Yield 34%
24%
5
Canadian High Yield Bonds
42%
30%
4 3Q 2007
Bearish
Canadian Canadian BondsBonds
12%
3
3
4
5
Neutral 3Q 2007
4Q 2007
Due to rounding, numbers may not add to 100%.
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0% 6
5%
2% 7
Bullish
0% 1
2
Bearish
3
4
5
6
3Q 2007
0% 7
4Q 2007
Neutral n
0%
Bullish
3Q2007
n
4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 2 Results—Asset Class Expectations (continued) sca le i s 1 to 7 :
= “ st ro n g ly
1
bearish”
4
= “ n eutr a l”
Canadian Real Estate 32%
52%
29%
27%
b u lli s h ”
EAFE Equities EAFE Equities
Canadian Real Estate
30%
= “ stro n g ly
7
26%
40%
22%
26% 10%
19%
10% 5%
3% 2%
9%
2
3
4
5%
5
3Q 2007 Neutral
Bearish
9%
9%
3% 0% 0%
1
16%
15%
6
7
4Q 2007
Bullish
US Equities
0%
0%
2%
0%
1
2
3
4
5
6
3Q 2007 Neutral
Bearish
7
4Q 2007
Bullish
Emerging Markets Equities
US Equities
26%
36%
26%
Emerging Markets Equit
25%
22%
28%
26%
19% 17%
21%
21%
13%
16%
14%
14%
13%
14%
12% 9%
3%
2%
3%
5%
3%
3%
3%
2%
0%
1
2
3
4
5
6
3Q 2007 Neutral
Bearish
1
7
4Q 2007
Bullish
2
3
Cash
43%
19% 14%
18%
15%
14%
5%
3%
0% 2
3
4
7 4Q 2007
Bullish
Cash
36%
5%
1
6
44%
34%
16%
5
Neutral 3Q 2007
Bearish
$CDN $CDN vs $U.S. vs $US
21%
4
5
7
3Q 2007 4Q 2007 Bearish Neutral Bullish Due to rounding, numbers may not add to 100%.
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16%
16% 13%
11%
7%
6% 0%
6
19%
16%
3%
3%
3%
1
2
Bearish
3
4
5
6
3Q 2007
7
4Q 2007
Neutral n
0%
Bullish
3Q2007
n
4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 3 Results—Sector Expectations What are your expectations for the performance of the following sectors over the next 12 months? Key Findings: n n n
Bullishness towards Information Technology slipped from 72% to 50% Bullish sentiment towards the Industrials sector dropped amid fears of a general economic slowdown Bearishness rose 30% in the Telecom sector
sca le i s 1 to 7 :
= “ st ro n g ly
1
bearish”
4
= “ n eutr a l”
UtilitiesUtilities 34%
31%
35%
44%
21%
0% 2
3
4
5
6
3Q Neutral 2007
Bearish
0% 0%
0%
7
4Q 2007
3%
16% 5%
0%
1
Bullish
0% 2
3
Bearish
4
17%
8%
37%
21%
10% 7%
Bearish
18%
5
3Q 2007 Neutral
5%
6 4Q 2007
Due to rounding, numbers may not add to 100%.
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14%
11%
0% 4
Bullish
35%
14%
3
7
23%
18%
2
6
0%
29%
27%
0% 1
3%
Industrials Industrials
35%
24%
5
3Q 2007 Neutral 4Q 2007
Services FinancialFinancial Services
24%
42%
24%
13%
10%
3%
1
28%
20%
17% 10%
b u lli s h ”
Telecommunication Services Telecommunication Services
23%
3% 3%
= “ stro n g ly
7
3%
7
Bullish
8% 5%
3% 3%
0% 0% 1
2
Bearish
3
4
5
Neutral 3Q 2007 n
6
7
4Q 2007
3Q2007
n
Bullish 4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 3 Results—Sector Expectations (continued) sca le i s 1 to 7 :
= “ st ro n g ly
1
bearish”
4
= “ n eutr a l”
Materials
Materials 30%
= “ stro n g ly
7
b u lli s h ”
EnergyEnergy 28%
29%
25%
25%
23%
17%
17%
18% 15%
14%
11%
23%
21%
20%
11%
10%
10% 11%
13%
13% 7% 8%
5%
0% 0%
0% 0% 1
2
3
4
Bearish
5
6
Neutral 3Q 2007
7
4Q 2007
1
Bullish
2
Bearish
Staples ConsumerConsumer Staples 48%
3
4
5
6
Neutral
3Q 2007
7
Bullish
4Q 2007
Consumer Consumer Discretionary Discretionary 34%
45%
36%
28% 24% 21%
28% 28%
14% 3%
0%
15%
10%
5%
5% 0% 0%
2
21%
10%
0%
1
21%
3
4
Bearish
5
6
3Q 2007 Neutral
7
4Q 2007 Bullish
3%
0% 1
0% 0% 2
3
4
Bearish
Health Care Health Care
5
6
3Q 2007 Neutral
3%
0% 7
4Q 2007
Bullish
Information Technology Information Technology
31%
41%
28% 24%
25% 28%
17%
15%
15%
20% 14%
10% 8%
7%
7%
3% 0% 0% 1
2
3
4
5
6
7
Bearish Neutral 3Q 2007 4Q 2007Bullish Due to rounding, numbers may not add to 100%. RUSSELL INVESTMENTS
28% 24%
17%
1
7%
5%
3%
0%
15%
2
Bearish
6% 3%
3
4
5
3Q 2007 Neutral
n
6
7
4Q 2007
3Q2007
n
Bullish 4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 4 Results—Canadian Equity Market Expectations for 2008 What are your expectations for the performance of the Canadian equity market for the 12 months ending December 2008? Will it be: 1. Up 10% or more 2. Up less than 10% 3. Flat 4. Down less than 10% 5. Down 10% or more Key Findings: n
More than two-thirds of managers (77%) expect Canadian equities to post positive returns in 2008.
What are your expectations for the performance of the Canadian equity market for the 12 months ending December 2008?
Down 0% or more
5%
Down less than 0%
9%
Flat
9%
Up less than 0%
56%
Up 0% or more
2%
0%
0%
Due to rounding, numbers may not add to 100%.
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20%
0%
40%
50%
n
60%
Respondents
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Supplementary Information The Asset Classes are based on an appropriate, broad-based index applicable to that sector. For example, returns for the broad Canadian equity market represented are based on the S&P/TSX Composite Index.
Chart: Annualized Asset Class Returns to November 2007 35.00 30.00 25.00
Returns (%)
20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 Canadian Equities (Broad Market)
Canadian Equities (Small Cap)
US Equity
1 Yr (%)
EAFE Equities
3 Yrs (%)
Emerging Markets Equities 5 Yrs (%)
Canadian Bonds
Canadian High Yield Bonds
Cash
10 Yrs (%)
Table: Annualized Asset Class Returns to November 2007 Asset Classes
1 Year (%)
3 Years (%)
5 Years (%)
10 Years (%)
Canadian Equities (Broad Market)
10.01
17.43
18.22
9.66
Canadian Equities (Small Cap)
-0.55
7.61
12.72
N/A
US Equities
-6.30
4.19
2.79
2.79
EAFE Equities
3.10
13.17
11.34
5.58
Emerging Markets Equities
27.41
29.85
24.71
10.78
Canadian Bonds
2.25
4.93
5.90
6.22
Canadian High Yield Bonds
4.98
6.29
9.01
7.90
Cash
4.26
3.54
3.15
3.69
Index Sources: MSCI 3 , PC Bond, TSX Group Inc. 4, Russell Investments Canada Limited
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Methodology and Background about Russell Investments Methodology Russell Investments conducted the Russell Investment Manager Outlook survey between November 26th to December 11th, 2007. The survey was sent to investment managers with a variety of investment focuses. Having a financial relationship with Russell Investments was not part of the criteria for being included in the survey.
In total, 34 investment management firms and 44 investment managers from Canada participated in the survey. The large majority of individual respondents to the Russell Investment Manager Outlook have senior-level investment decision responsibilities, and are often portfolio managers. Other participants included investment strategists, research analysts and others. The manager research that Russell Investments conducts for investment purposes is done entirely independent of Russell Investment Manager Outlook, and responses to the survey are on a purely voluntary basis.
About Russell Investments Russell Investments is a global leader in multi-manager investing and one of the world leaders in investment consulting. Russell Investments advises institutional clients with total assets of over C$2.0 trillion and manages approximately C$229 billion in its investment management business. Russell Investments supports its global operations by monitoring more than 4,000 manager firms and their 8,600 products. Russell Investments serves institutional and individual investors with a full range of investment services, including investment consulting, investment funds which include private equity and hedge funds, transition management and stock indexes. Founded in 1936, Russell Investments has its headquarters in Tacoma, Washington, USA and has principal offices in Toronto, New York, London, Paris, Sydney, Singapore, Auckland, and Tokyo. Russell Investments Canada Limited is a wholly-owned subsidiary of Frank Russell Company. For more information, please visit www.russell.com/ca.
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Asset Class Definitions
CANADIAN EQUITY (BROAD CAP)
EAFE EQUITIES
Canadian equities are a growth asset involving the purchase of ownership interests—and the rights to profits and voting that this implies—in a company listed on the S&P/TSX Composite Index. Equities may be purchased from the Global Industry Classification Standard sectors, including financials, energy, materials, industrials, consumer discretionary, consumer staples, health care, information technology, telecommunications, and utilities.
MSCI EAFE is a Morgan Stanley Capital International index that is designed to measure the performance of the overseas developed stock markets of Europe, Australasia, and the Far East. International equities have historically produced higher long-term returns than lower risk investments; however they tend to be relatively less liquid and more volatile than domestic equities.
Index Source: S&P/TSX Composite Index
The risks faced by Canadian equities include liquidity risk, market risk and company-specific risk. The value of investments is subject to changes to management, product distribution, investor confidence, internal operations and the company’s business environment.
CANADIAN EQUITY (SMALL CAP) Index Source: S&P/TSX Small Cap Index
These securities are small capitalization stocks which are represented by the S&P/TSX Small Cap Index. The S&P/ TSX Small Cap Index is a benchmark of smaller Canadian companies that have been included in the S&P/TSX Composite Index, but are not members of the S&P/TSX 60 or the S&P/TSX Midcap Indices.
US EQUITY
Index Source: Russell 3000® Index
US equity is a growth asset involving the purchase of ownership interests—and the rights to profits and voting that this implies—in companies listed on an American equity benchmark, such as the Russell 3000® Index.
The Russell 3000 Index offers investors access to the broad US equity universe representing approximately 98% of the US market. The risks faced by US equity include liquidity risk, market risk and company-specific risk. The value of investments is subject to changes to management, product distribution, investor confidence, internal operations and the company’s business environment.
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Index Source: MSCI EAFE Index
International equities entail different risks than those typically associated with domestic equities, including currency fluctuations, political and economic instability, accounting changes and foreign taxation.
EMERGING MARKETS EQUITIES Index Source: MSCI Emerging Markets
Index Investments in emerging or developing foreign markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which can be expected to have less stability than those of more developed countries. As a result, emerging markets securities may be less liquid and more volatile than domestic and more developed foreign markets.
CANADIAN BONDS
Index Source: DEX Universe Bond Index
Index Canadian bonds (Canadian fixed income) are a defensive asset providing debt capital to organizations in return for coupon payments and return of capital at expiry. Canadian bonds may be sold which finance a variety of sectors including government, corporate, and international fixed income products. The sector chosen will determine, in part, the bond’s level of risk. The primary risks associated with Canadian bonds include interest rate risk, inflation risk and credit risk. In general there is a negative relationship between interest rates and the value of bonds.
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Asset Class Definitions (continued)
CANADIAN HIGH YIELD BONDS
CASH
Index High yield bonds are non-investment grade debt obligations. In general, when interest rates rise, the value of bonds will decline. Bond investors should carefully consider risks such as interest rate risk, credit risk, inflation, securities lending, repurchase and reverse repurchase transaction risk. Portfolios that invest primarily in high yield bonds are subject to additional risks such as limited liquidity and increased volatility.
Index Cash is a defensive, low-risk asset that typically involves instruments such as 90-day government Treasury Bills, high quality short term notes and commercial paper issued by major financial institutions and blue chip companies. Cash provides diversification and liquidity benefits to a portfolio; however cash generally provides lower investment returns than investments such as fixed income, real estate or equities. While highly liquid, cash generally has not kept pace with inflation.
Index Source: DEX High Yield Bond Index
Index Source: DEX 30-day T-Bill Index
Disclaimer We define bearish as on balance, an organization’s or individual’s predominant view based on a belief that general market conditions for the period in question will be negative, and relative valuations of securities in general will trend downward. This view should not be considered investment advice nor does it apply to any specific security. 1
We define bullish as on balance, an organization’s or individual’s predominant view based on a belief that overall market conditions for the period in question will be positive, and relative valuations of securities in general will trend upward. This view should not be considered investment advice nor does it apply to any specific security. 2
MSCI Index Information: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. 3
4
TSX © Copyright 1997 TSX Inc. All rights reserved
This is a publication of Russell Investments Canada Limited. It should not be construed as investment advice. It is not a solicitation or recommendation to purchase any services of any organization unless otherwise noted. The contents are intended for general information purposes only, and you are urged to consult your own investment advisor concerning your own situation and any specific investment questions you may have. For further information about these contents, please contact Russell Investments Canada Limited. The information contained herein has been obtained from sources that we believe to be reliable, but its accuracy and completeness are not guaranteed. Russell Investments Canada Limited reserves the right at anytime and without notice to change, amend, or cease publishing the information. It has been prepared solely for informative purposes. It is made available on an “as is” basis. Russell Investments Canada Limited does not make any warranty or representation regarding the information. Without prior written permission from Russell Investments Canada Limited, it may not be reproduced, in whole or in part, in any form, other than for your own personal, non-commercial use. 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. The Sovereign Investment Program, LifePoints, MULTI ASSET MULTI STYLE MULTI MANAGER®, and the Russell Investments logo are either trademarks or registered trademarks of Frank Russell Company and are used under license by Russell Investments Canada Limited. Copyright © Russell Investments Canada Limited, 2007.
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GLOBAL LEADERS IN MULTI–MANAGER INVESTING
RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Survey Goals and Summary of Key Findings Key Trends—Dec. 2007 Investment Manager Survey Canadian Dollar vs US Dollar
BEARISH
US Equities
EAFE Equities
Canadian High Yield Bonds
Canadian Equities (Broad Market)
EQUALLY BEARISH & BULLISH
BULLISH
BEARISH
BEARISH
Summary of Key Findings Sub-prime lending woes and troubling economic indicators have triggered a decline in bullishness towards equities among Canadian investment managers. However, bullishness towards Canadian fixed income rose, suggesting that bonds have found a level of support.
emerging markets fell from 52% to 43%. Yet, despite increased pessimism, more than two-thirds of investment managers still expect Canadian equities to post positive returns in 2008.
Bullishness towards Canadian broad market equities dropped from 42% of managers to just 28%, and bears now dominate at 37%. Meanwhile, the outlook for Canadian small cap stocks dropped from 36% bullish to just 19%.
At present, only 23% of managers see the Canadian dollar continuing its ascent. Meanwhile, bullishness towards Canadian bonds increased from only 15% of managers to a full 39% on the heels of a sharp correction earlier this year.
As ground zero of the credit crunch, a minority of investment managers remain bullish towards US equities, and bears have grown in number from 27% to 42%. After a lengthy stint as managers’ most favoured market, bullishness towards EAFE equities plummeted from 67% to 37%, and the number expressing optimism for
In our opinion, the current spate of negative sentiment in the market is fueled at least as much by a sense of uncertainty as by any serious deterioration of economic fundamentals. Time will reveal the true dimensions of the sub-prime credit crunch and pace of growth in the quarters ahead. n
MEDIA CONTACTS Thien Huynh Manager, Communications Russell Investments Canada 1-416-640-2529
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About the Russell Investment Manager Outlook
W
elcome to this year’s final edition of the Russell Investment Manager Outlook, intended to generate a meaningful snapshot of Canadian investment manager sentiment.
As consultants to over $2.0 trillion in assets worldwide, and as a firm that monitors more than 4,000 investment managers, Russell Investments has extraordinary access to senior-level Canadian investment decision-makers. Prior to the end of each quarter, Russell surveys a sample of those investment managers to collect their top-line opinions about the direction of the markets, sectors/styles to watch, and trends on the horizon that could impact investment strategy. The result of this survey is the Russell Investment Manager Outlook. Three of the four questions posed to investment managers will be repeated each quarter, so that results can be measured overtime. The poll also includes one topical question that changes each quarter. In addition to providing quantitative results, Russell reviews the data collected each quarter, and provides a qualitative analysis from a senior investment strategist (see page 2). Russell Investment Manager Outlook is completed and distributed at the end of each quarter. This report includes responses from investment managers with a variety of investment focuses.
The manager research that Russell conducts for investment purposes is done entirely independent of the Russell Investment Manager Outlook, and responses to the survey are on a purely voluntary basis.
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Commentary & Analysis By Timothy Hicks, CFA Chief Investment Officer Russell Investments Canada Limited
Manager Expectations by Asset Class Bearish
Bullish
Canadian Equities (broad market) 37% 28%
S
canadian investment manager sentiment turns bearish
ub-prime lending woes in the US continued to cast a pall over markets in the final quarter of 2007, as Canadian investment managers registered a decline in bullish sentiment across the world’s equity markets. On the Canadian fixed income side, bullish sentiment rose, indicating that many managers believe bonds have found a level of support following the sharp correction of earlier in the year. The investment managers expressed these views in the latest quarterly Russell Investment Manager Outlook poll conducted by Russell in late November and December. The shift to a more bearish stance on equities comes amid not only the credit crunch, but also a string of negative indicators. This includes evidence of a slowing global economy, downward earnings growth revisions in both Canada and the US, and a diminished corporate profit picture. Despite aggressive measures by central banks to cut key lending rates and inject liquidity into the market, investment managers appear to be approaching the market with caution.
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In Canada, bullishness towards broad market equities has dropped from 42% of managers to just 28%. As a result, bears now dominate opinion for the first time in several quarters, at 37% of survey respondents.
Canadian Equities (small cap) 19%
58%
US Equities 42%
42% EAFE Equities 23%
37%
Emerging Market Equities 43%
43% Canadian Bonds 32%
39% Canadian High Yield Bonds 21%
58%
Real Estate 56%
15% Cash
The outlook is a bit more severe for Canadian small cap stocks, with bulls plummeting from 36% to 19%, and bears shooting up from 39% to 58%. This is likely a reflection of smaller companies’ greater vulnerability during a general economic slowdown, combined with the fact that many of Canada’s exporters are smaller companies with heightened sensitivity to the strong Loonie. Examining individual sectors of the Canadian market, bullishness towards Information Technology slipped from 72% to 50%. However, with this sector so heavily dominated by Research In Motion, this outlook may simply be an indication that the stock’s best days are behind it, having already more than doubled in price during 2007. Bullish sentiment towards Industrials dropped from 54% to just 29% amid fears that a general economic
32%
32% $CDN vs $US 23%
34%
80% 60% 40% 20%
0%
20%
40% 60% 80%
Note: Bearish = percent of managers responding with 1-3 on a scale of 1-7. Bullish = percent of managers responding with 5-7 on a scale of 1-7. Scores for neutral (4) are not included. See detailed charts on the following pages.
slowdown would impact the railways, manufacturing and construction companies in this sector. Meanwhile, bearish sentiment towards Materials up-ticked from 36% last quarter to 45% in the latest survey. Bearishness rose nine points in the Telecom sector, from 28% to 37%. One of the most significant issues facing Canadian telecom providers is the spectre of foreign competition in the wireless space. With the Canadian industry already running high costs relative to the global market, the likelihood of lower data and call rates
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Commentary & Analysis (continued)
in a truly competitive domestic market are cause for concern. Energy remains a divisive sector with 43% of managers bullish and 33% bearish. A slight increase in bearishness this quarter may be the result of lower energy demand due to a higher Canadian dollar and higher energy costs due to Alberta’s decision to sharply increase provincial royalties. Despite increased pessimism, more than two-thirds of investment managers still expect Canadian equities to post a positive return in 2008. It seems that many managers are cautiously waiting to see how the subprime credit crunch and rumours of a US recession will unfold, while at the same time betting that the Canadian market will be in a position to move ahead over the next 12 months. In world markets, after a lengthy stint as Canadian investment managers’ most favoured market, EAFE equities have dropped back in line. Bullish sentiment plummeted from 67% to 37%. This probably represents an overall recalibration of risk perceptions by the market, and also the squeeze that a falling US dollar has placed on many Eurozone exporters. In the US, the falling dollar has been a boon to American exporters. Nonetheless, as ground zero of the credit crunch and many of the world’s
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most acute earnings and profitability concerns, most investment managers are no longer bullish on the US. The bulls have been reduced from 52% to 42%, and the bears have grown in number from 27% to 42%. Bullishness towards emerging markets was also knocked back a few points, from 52% to 43%. Emerging markets are home to many basic industries, and are prone to feeling the impact of a broad economic slowdown. Fixed income investors have generally become more positive in the final quarter of 2007. On the heels of a significant correction earlier this year, a full 39% of investors are now bullish on Canadian bonds, compared to only 15% a quarter ago. High-yield bonds, which have been dramatically revalued in recent months, have gone from a highly negative 72% bearish outlook to a more moderate 58%, suggesting that investment managers are now finding attractive valuations on a selective basis. This more bullish stance on bonds comes as sentiment towards the Canadian dollar settles at 23% bullish and 34% bearish—hinting that a number of managers believe the currency has found equilibrium at current levels.
Manager Expectations by Asset Sector Bearish
Bullish
Utilities 30%
35%
Telecommunication Services 47%
37% Financial Services 30%
35% Industrials 34%
29% Materials 38%
45% Energy 33%
43% Consumer Staple 50%
23% 41%
Consumer Discretionary 23% Health Care 35%
50% Information Technology 23%
60% 40% 20%
0%
20%
50%
40% 60%
Note: Bearish = percent of managers responding with 1-3 on a scale of 1-7. Bullish = percent of managers responding with 5-7 on a scale of 1-7. Scores for neutral (4) are not included. See detailed charts on the following pages.
sense of uncertainty as by any serious deterioration of economic fundamentals. Over the coming quarters, the true dimensions of the sub-prime credit crunch will be revealed, and market watchers will have a clearer picture of whether we are indeed facing the possibility of an economic contraction, or merely a slower pace of growth. n
In our opinion, the current spate of negative sentiment in the market is fueled at least as much by a
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 1 Results—Valuation of the Canadian Equity Market Which of these valuation conditions best describes the Canadian equity market? Key Findings: n n n
37% of managers consider the market overvalued 47% of managers believe the Canadian market is fairly valued 16% of managers say the market is undervalued
Which condition best describes the current Canadian equity market? 0%
Overvalued
7% 45%
Fairly Valued
Undervalued
Due to rounding, numbers may not add to 100%.
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47% 24% 6%
Q'07 Q4'07 n
3Q2007
n
4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 2 Results—Asset Class Expectations What are your expectations for the performance of the following asset classes over the next 12 months? Key Findings: n Investment managers grow bearish on global equity markets amidst concerns of economic slowdown n Two-thirds of managers still predict positive Canadian equity returns for 2008 n Fewer than a quarter of managers see the Loonie trending higher sca le i s 1 to 7 :
1
= “ st ro n g ly
bearish”
4
= “ n eutr a l”
Canadian Equities (broad market)
33%
35%
27%
26%
b u lli s h ”
Canadian Equities Canadian Equities(small (small cap)cap)
Canadian Equities (broadmarket)
24%
= “ stro n g ly
7
24% 23%
23% 21%
21%
18%
18%
16%
12%
12% 12%
9%
9%
9%
9%
6% 0%
6% 2%
0%
1
2% 0%
2
3
Bearish
4
3Q 2007
5
6
7
4Q 2007
Neutral
0% 1
Bullish
2
4Q 2007
Bullish
25%
27%
15%
21%
9%
15%
13%
12%
16%
9% 5%
5% 0% 1
2
Bearish
7
33%
21%
18%
6%
Neutral
6
Canadian High Yield 34%
24%
5
Canadian High Yield Bonds
42%
30%
4 3Q 2007
Bearish
Canadian Canadian BondsBonds
12%
3
3
4
5
Neutral 3Q 2007
4Q 2007
Due to rounding, numbers may not add to 100%.
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0% 6
5%
2% 7
Bullish
0% 1
2
Bearish
3
4
5
6
3Q 2007
0% 7
4Q 2007
Neutral n
0%
Bullish
3Q2007
n
4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 2 Results—Asset Class Expectations (continued) sca le i s 1 to 7 :
= “ st ro n g ly
1
bearish”
4
= “ n eutr a l”
Canadian Real Estate 32%
52%
29%
27%
b u lli s h ”
EAFE Equities EAFE Equities
Canadian Real Estate
30%
= “ stro n g ly
7
26%
40%
22%
26% 10%
19%
10% 5%
3% 2%
9%
2
3
4
5%
5
3Q 2007 Neutral
Bearish
9%
9%
3% 0% 0%
1
16%
15%
6
7
4Q 2007
Bullish
US Equities
0%
0%
2%
0%
1
2
3
4
5
6
3Q 2007 Neutral
Bearish
7
4Q 2007
Bullish
Emerging Markets Equities
US Equities
26%
36%
26%
Emerging Markets Equit
25%
22%
28%
26%
19% 17%
21%
21%
13%
16%
14%
14%
13%
14%
12% 9%
3%
2%
3%
5%
3%
3%
3%
2%
0%
1
2
3
4
5
6
3Q 2007 Neutral
Bearish
1
7
4Q 2007
Bullish
2
3
Cash
43%
19% 14%
18%
15%
14%
5%
3%
0% 2
3
4
7 4Q 2007
Bullish
Cash
36%
5%
1
6
44%
34%
16%
5
Neutral 3Q 2007
Bearish
$CDN $CDN vs $U.S. vs $US
21%
4
5
7
3Q 2007 4Q 2007 Bearish Neutral Bullish Due to rounding, numbers may not add to 100%.
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16%
16% 13%
11%
7%
6% 0%
6
19%
16%
3%
3%
3%
1
2
Bearish
3
4
5
6
3Q 2007
7
4Q 2007
Neutral n
0%
Bullish
3Q2007
n
4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 3 Results—Sector Expectations What are your expectations for the performance of the following sectors over the next 12 months? Key Findings: n n n
Bullishness towards Information Technology slipped from 72% to 50% Bullish sentiment towards the Industrials sector dropped amid fears of a general economic slowdown Bearishness rose 30% in the Telecom sector
sca le i s 1 to 7 :
= “ st ro n g ly
1
bearish”
4
= “ n eutr a l”
UtilitiesUtilities 34%
31%
35%
44%
21%
0% 2
3
4
5
6
3Q Neutral 2007
Bearish
0% 0%
0%
7
4Q 2007
3%
16% 5%
0%
1
Bullish
0% 2
3
Bearish
4
17%
8%
37%
21%
10% 7%
Bearish
18%
5
3Q 2007 Neutral
5%
6 4Q 2007
Due to rounding, numbers may not add to 100%.
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14%
11%
0% 4
Bullish
35%
14%
3
7
23%
18%
2
6
0%
29%
27%
0% 1
3%
Industrials Industrials
35%
24%
5
3Q 2007 Neutral 4Q 2007
Services FinancialFinancial Services
24%
42%
24%
13%
10%
3%
1
28%
20%
17% 10%
b u lli s h ”
Telecommunication Services Telecommunication Services
23%
3% 3%
= “ stro n g ly
7
3%
7
Bullish
8% 5%
3% 3%
0% 0% 1
2
Bearish
3
4
5
Neutral 3Q 2007 n
6
7
4Q 2007
3Q2007
n
Bullish 4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 3 Results—Sector Expectations (continued) sca le i s 1 to 7 :
= “ st ro n g ly
1
bearish”
4
= “ n eutr a l”
Materials
Materials 30%
= “ stro n g ly
7
b u lli s h ”
EnergyEnergy 28%
29%
25%
25%
23%
17%
17%
18% 15%
14%
11%
23%
21%
20%
11%
10%
10% 11%
13%
13% 7% 8%
5%
0% 0%
0% 0% 1
2
3
4
Bearish
5
6
Neutral 3Q 2007
7
4Q 2007
1
Bullish
2
Bearish
Staples ConsumerConsumer Staples 48%
3
4
5
6
Neutral
3Q 2007
7
Bullish
4Q 2007
Consumer Consumer Discretionary Discretionary 34%
45%
36%
28% 24% 21%
28% 28%
14% 3%
0%
15%
10%
5%
5% 0% 0%
2
21%
10%
0%
1
21%
3
4
Bearish
5
6
3Q 2007 Neutral
7
4Q 2007 Bullish
3%
0% 1
0% 0% 2
3
4
Bearish
Health Care Health Care
5
6
3Q 2007 Neutral
3%
0% 7
4Q 2007
Bullish
Information Technology Information Technology
31%
41%
28% 24%
25% 28%
17%
15%
15%
20% 14%
10% 8%
7%
7%
3% 0% 0% 1
2
3
4
5
6
7
Bearish Neutral 3Q 2007 4Q 2007Bullish Due to rounding, numbers may not add to 100%. RUSSELL INVESTMENTS
28% 24%
17%
1
7%
5%
3%
0%
15%
2
Bearish
6% 3%
3
4
5
3Q 2007 Neutral
n
6
7
4Q 2007
3Q2007
n
Bullish 4Q2007
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Question 4 Results—Canadian Equity Market Expectations for 2008 What are your expectations for the performance of the Canadian equity market for the 12 months ending December 2008? Will it be: 1. Up 10% or more 2. Up less than 10% 3. Flat 4. Down less than 10% 5. Down 10% or more Key Findings: n
More than two-thirds of managers (77%) expect Canadian equities to post positive returns in 2008.
What are your expectations for the performance of the Canadian equity market for the 12 months ending December 2008?
Down 0% or more
5%
Down less than 0%
9%
Flat
9%
Up less than 0%
56%
Up 0% or more
2%
0%
0%
Due to rounding, numbers may not add to 100%.
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20%
0%
40%
50%
n
60%
Respondents
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Supplementary Information The Asset Classes are based on an appropriate, broad-based index applicable to that sector. For example, returns for the broad Canadian equity market represented are based on the S&P/TSX Composite Index.
Chart: Annualized Asset Class Returns to November 2007 35.00 30.00 25.00
Returns (%)
20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 Canadian Equities (Broad Market)
Canadian Equities (Small Cap)
US Equity
1 Yr (%)
EAFE Equities
3 Yrs (%)
Emerging Markets Equities 5 Yrs (%)
Canadian Bonds
Canadian High Yield Bonds
Cash
10 Yrs (%)
Table: Annualized Asset Class Returns to November 2007 Asset Classes
1 Year (%)
3 Years (%)
5 Years (%)
10 Years (%)
Canadian Equities (Broad Market)
10.01
17.43
18.22
9.66
Canadian Equities (Small Cap)
-0.55
7.61
12.72
N/A
US Equities
-6.30
4.19
2.79
2.79
EAFE Equities
3.10
13.17
11.34
5.58
Emerging Markets Equities
27.41
29.85
24.71
10.78
Canadian Bonds
2.25
4.93
5.90
6.22
Canadian High Yield Bonds
4.98
6.29
9.01
7.90
Cash
4.26
3.54
3.15
3.69
Index Sources: MSCI 3 , PC Bond, TSX Group Inc. 4, Russell Investments Canada Limited
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Methodology and Background about Russell Investments Methodology Russell Investments conducted the Russell Investment Manager Outlook survey between November 26th to December 11th, 2007. The survey was sent to investment managers with a variety of investment focuses. Having a financial relationship with Russell Investments was not part of the criteria for being included in the survey.
In total, 34 investment management firms and 44 investment managers from Canada participated in the survey. The large majority of individual respondents to the Russell Investment Manager Outlook have senior-level investment decision responsibilities, and are often portfolio managers. Other participants included investment strategists, research analysts and others. The manager research that Russell Investments conducts for investment purposes is done entirely independent of Russell Investment Manager Outlook, and responses to the survey are on a purely voluntary basis.
About Russell Investments Russell Investments is a global leader in multi-manager investing and one of the world leaders in investment consulting. Russell Investments advises institutional clients with total assets of over C$2.0 trillion and manages approximately C$229 billion in its investment management business. Russell Investments supports its global operations by monitoring more than 4,000 manager firms and their 8,600 products. Russell Investments serves institutional and individual investors with a full range of investment services, including investment consulting, investment funds which include private equity and hedge funds, transition management and stock indexes. Founded in 1936, Russell Investments has its headquarters in Tacoma, Washington, USA and has principal offices in Toronto, New York, London, Paris, Sydney, Singapore, Auckland, and Tokyo. Russell Investments Canada Limited is a wholly-owned subsidiary of Frank Russell Company. For more information, please visit www.russell.com/ca.
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Asset Class Definitions
CANADIAN EQUITY (BROAD CAP)
EAFE EQUITIES
Canadian equities are a growth asset involving the purchase of ownership interests—and the rights to profits and voting that this implies—in a company listed on the S&P/TSX Composite Index. Equities may be purchased from the Global Industry Classification Standard sectors, including financials, energy, materials, industrials, consumer discretionary, consumer staples, health care, information technology, telecommunications, and utilities.
MSCI EAFE is a Morgan Stanley Capital International index that is designed to measure the performance of the overseas developed stock markets of Europe, Australasia, and the Far East. International equities have historically produced higher long-term returns than lower risk investments; however they tend to be relatively less liquid and more volatile than domestic equities.
Index Source: S&P/TSX Composite Index
The risks faced by Canadian equities include liquidity risk, market risk and company-specific risk. The value of investments is subject to changes to management, product distribution, investor confidence, internal operations and the company’s business environment.
CANADIAN EQUITY (SMALL CAP) Index Source: S&P/TSX Small Cap Index
These securities are small capitalization stocks which are represented by the S&P/TSX Small Cap Index. The S&P/ TSX Small Cap Index is a benchmark of smaller Canadian companies that have been included in the S&P/TSX Composite Index, but are not members of the S&P/TSX 60 or the S&P/TSX Midcap Indices.
US EQUITY
Index Source: Russell 3000® Index
US equity is a growth asset involving the purchase of ownership interests—and the rights to profits and voting that this implies—in companies listed on an American equity benchmark, such as the Russell 3000® Index.
The Russell 3000 Index offers investors access to the broad US equity universe representing approximately 98% of the US market. The risks faced by US equity include liquidity risk, market risk and company-specific risk. The value of investments is subject to changes to management, product distribution, investor confidence, internal operations and the company’s business environment.
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Index Source: MSCI EAFE Index
International equities entail different risks than those typically associated with domestic equities, including currency fluctuations, political and economic instability, accounting changes and foreign taxation.
EMERGING MARKETS EQUITIES Index Source: MSCI Emerging Markets
Index Investments in emerging or developing foreign markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which can be expected to have less stability than those of more developed countries. As a result, emerging markets securities may be less liquid and more volatile than domestic and more developed foreign markets.
CANADIAN BONDS
Index Source: DEX Universe Bond Index
Index Canadian bonds (Canadian fixed income) are a defensive asset providing debt capital to organizations in return for coupon payments and return of capital at expiry. Canadian bonds may be sold which finance a variety of sectors including government, corporate, and international fixed income products. The sector chosen will determine, in part, the bond’s level of risk. The primary risks associated with Canadian bonds include interest rate risk, inflation risk and credit risk. In general there is a negative relationship between interest rates and the value of bonds.
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RUSSELL INVESTMENT MANAGER OUTLOOK / DECEMBER 2007
Asset Class Definitions (continued)
CANADIAN HIGH YIELD BONDS
CASH
Index High yield bonds are non-investment grade debt obligations. In general, when interest rates rise, the value of bonds will decline. Bond investors should carefully consider risks such as interest rate risk, credit risk, inflation, securities lending, repurchase and reverse repurchase transaction risk. Portfolios that invest primarily in high yield bonds are subject to additional risks such as limited liquidity and increased volatility.
Index Cash is a defensive, low-risk asset that typically involves instruments such as 90-day government Treasury Bills, high quality short term notes and commercial paper issued by major financial institutions and blue chip companies. Cash provides diversification and liquidity benefits to a portfolio; however cash generally provides lower investment returns than investments such as fixed income, real estate or equities. While highly liquid, cash generally has not kept pace with inflation.
Index Source: DEX High Yield Bond Index
Index Source: DEX 30-day T-Bill Index
Disclaimer We define bearish as on balance, an organization’s or individual’s predominant view based on a belief that general market conditions for the period in question will be negative, and relative valuations of securities in general will trend downward. This view should not be considered investment advice nor does it apply to any specific security. 1
We define bullish as on balance, an organization’s or individual’s predominant view based on a belief that overall market conditions for the period in question will be positive, and relative valuations of securities in general will trend upward. This view should not be considered investment advice nor does it apply to any specific security. 2
MSCI Index Information: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. 3
4
TSX © Copyright 1997 TSX Inc. All rights reserved
This is a publication of Russell Investments Canada Limited. It should not be construed as investment advice. It is not a solicitation or recommendation to purchase any services of any organization unless otherwise noted. The contents are intended for general information purposes only, and you are urged to consult your own investment advisor concerning your own situation and any specific investment questions you may have. For further information about these contents, please contact Russell Investments Canada Limited. The information contained herein has been obtained from sources that we believe to be reliable, but its accuracy and completeness are not guaranteed. Russell Investments Canada Limited reserves the right at anytime and without notice to change, amend, or cease publishing the information. It has been prepared solely for informative purposes. It is made available on an “as is” basis. Russell Investments Canada Limited does not make any warranty or representation regarding the information. Without prior written permission from Russell Investments Canada Limited, it may not be reproduced, in whole or in part, in any form, other than for your own personal, non-commercial use. 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. The Sovereign Investment Program, LifePoints, MULTI ASSET MULTI STYLE MULTI MANAGER®, and the Russell Investments logo are either trademarks or registered trademarks of Frank Russell Company and are used under license by Russell Investments Canada Limited. Copyright © Russell Investments Canada Limited, 2007.
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