Standard Life Canadian Equity Class

3. Maximize agility to take advantage
of opportunities
Utilizing Standard Life Investment’s distinctive
Focus on Change investment philosophy
implemented by a global team of investment
professionals, innovative strategies will be
evaluated for application to achieve the fund’s
objectives, for example:
a. Hedging currency risk with U.S. Treasuries:
Although counter-intuitive, as can be seen
below, one of the best ways to hedge an
underlying Canadian equity position is to
buy long U.S. bonds. The diversification
comes from duration, with long rates
typically falling (and prices rising) when
equities fall (and vice-versa). As well, the
U.S. dollar typically has acted as a “flight to
safety” and appreciated during periods of
stress vs. the loonie.
Treasury bonds hedge Canadian equities
170
150
120
90
60 2006 2007 2008 2009 2010 2011
S&P/TSX Composite Index – Tot return ind (~ C$)
BofAML US Treasury 10+y ($) – Tot return ind (~ C$)
DEX Capital Overall Universe – Tot return ind (~ C$)
Source: Thomson Reuters Datastream
b. Supplement equity returns with Corporate
and High Yield Bonds:
In 2008, witnessing the liquidity
meltdown’s effects on corporate bonds as
spreads to governments widened to levels
not seen in decades, we used more
corporate bonds in all of our portfolios to
achieve a better risk-reward trade-off for
our clients. With a Global Credit Team in the
U.S. and U.K., the fund will benefit from a
wide range of Fixed Income options at
opportune times such as this.
Barclays BAA intermediate corp spread over
7-10 yr+ treasury
8
7
6
5
4
3
2
1
0
91 95 00 05 10
(LHI BAAI (RY)-LHT7T10(RY))
Source: Thomson Reuters Datastream
c. Overlay the Standard Life Investments Asset
Mix views onto the fund:
Utilizing the established and successful
approach implemented for Institutional and
Retail clients, the fund will apply Asset Mix
decisions to the strategic weighting, thus
attempting to reduce the impact of the
downturn on your clients. The Tactical Income
Fund will benefit the most from asset
allocation calls as it will implement Asset Mix
decisions without constraint.
Canadian asset classes
160
150
140
130
120
110
100
90
J S D M J S D M J
S&P 500 Composite – Tot return ind
DEX Capital Overall Universe – Tot return ind
S&P/TSX Composite Index – Tot return ind
Source: Thomson Reuters Datastream
The Tactical Income Fund is
designed to take advantage of
the Standard Life Investments
investment process combining
asset allocation, stock selection,
portfolio construction, risk
management and timely trading.
With its distinctive Focus On
Change Investment Philosophy
the fund is designed to:
¬ Focus on absolute returns over
market cycles
¬ Deliver income to support a
steady monthly distribution
¬ Take advantage of the
professional, institutional
management style of
Standard Life Investments
“
Oh, would you like another glass of
Vino Nobile?
The Quarterly Review 13
“