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Recommended Asset Mix ...Continued from previous page (i.e.: 7.5% above its benchmark of 55% and part way toward its upper limit of 70% for equities), that would imply a tactical shift of + 5.02% to 25.02% for the Very Conservative profile (i.e.: a proportionate adjustment above the benchmark equity setting of 20% within the allowed range of +/- 15%). The value-added of tactical strategies are, of course, dependent on the Very conservative Asset Class Range Last Current quarter recommendation Cash & Cash Equivalents 5% 0-15% 7.5% 5.5% Fixed Income 75% 55-95% 71.4% 71.7% Total Cash & Fixed Income 80% 65-95% 78.9% 77.2% Canadian Equities 10% 5-20% 10.6% 10.4% U.S. Equities 5% 0-10% 7.0% 7.7% International Equities 5% 0-10% 3.5% 4.7% Emerging markets 0% 0% 0.0% 0.0% Total Equities 20% 5-35% 21.1% 22.8% Conservative Asset Class Benchmark Benchmark Range Return Last Current quarter recommendation Cash & Cash Equivalents 5% 0-15% 7.5% 5.5% Fixed Income 60% 40-80% 55.5% 55.5% Total Cash & Fixed Income 65% 50-80% 63.0% 61.0% Canadian Equities 15% 5-25% 16.0% 15.5% U.S. Equities 10% 0-15% 12.9% 13.7% International Equities 10% 0-15% 8.1% 9.8% emerging markets 0% 0% 0.0% 0.0% Total Equities 35% 20-50% 37.0% 39.0% degree to which the expected scenario unfolds. Regular review of portfolio weights is an essential part of the ultimate success of an investment plan as it ensures that current exposures are aligned with the level of long-term returns and risk tolerances best suited to individual investors. 1. Average Return: The average total return produced by the asset class over the period 1977 – 2012, based on monthly results. 2. Volatility: The standard deviation of returns. Standard deviation is a statistical measure that indicates the range around the average return within which 2/3 of results will fall into, assuming a normal distribution around the long-term average. Volatility 35-year average 9.4% 6.2% Last 12 months 5.2% 1.9% Anchoring portfolios with a suitable strategic asset mix, and placing boundaries defining the allowed range for tactical positioning, imposes a discipline that can limit the damage caused by swings in emotion that inevitably accompany both bull and bear markets. Very Conservative investors will seek income with maximum capital preservation and the potential for modest capital growth, and be comfortable with small fluctuations in the value of their investments. This portfolio will invest primarily in fixed-income securities, and a small amount of equities, to generate income while providing some protection against inflation. Investors who fit this profile generally plan to hold their investment for the short to medium term (minimum one to five years). SAMPLE Return Volatility 35-year average 9.7% 7.5% Last 12 months 2.5% 3.0% Conservative investors will pursue modest income and capital growth with reasonable capital preservation, and be comfortable with moderate fluctuations in the value of their investments. The portfolio will invest primarily in fixed-income securities, with some equities, to achieve more consistent performance and provide a reasonable amount of safety. The profile is suitable for investors who plan to hold their investment over the medium to long term (minimum five to seven years). 6 I The global investment outlook <strong>RBC</strong> INVESTMENT Strategy coMMITTEE Summer 2012
Recommended Asset Mix Balanced Asset Class RANGE Last Current quarter recommendation Cash & Cash Equivalents 5% 0-15% 7.5% 5.5% Fixed Income 40% 20-60% 35.0% 35.0% Total Cash & Fixed Income 45% 30-60% 42.5% 40.5% Canadian Equities 20% 10-30% 21.1% 20.5% U.S. Equities 20% 10-30% 23.2% 24.0% International Equities 12% 5-25% 9.7% 11.5% Emerging markets 3% 0-10% 3.5% 3.5% Total Equities 55% 40-70% 57.5% 59.5% Growth Asset Class Range Last Current quarter recommendation Cash & Cash Equivalents 5% 0-15% 7.5% 5.5% Fixed Income 25% 5-40% 19.7% 19.6% Total Cash & Fixed Income 30% 15-45% 27.2% 25.1% Canadian Equities 25% 15-35% 26.2% 25.5% U.S. Equities 25% 15-35% 28.5% 29.3% International Equities 16% 10-30% 13.1% 15.0% Emerging markets 4% 0-10% 5.0% 5.1% Total Equities 70% 55-85% 72.8% 74.9% Aggressive Growth Asset Class Benchmark Benchmark Benchmark Range Return Volatility 35-year average 9.7% 8.9% Last 12 months -0.2% 5.5% Return Volatility 35-year average 9.9% 11.1% Last 12 months -2.8% 7.3% Last Current quarter recommendation Cash & Cash Equivalents 5% 0-15% 5.0% 3.0% Fixed Income 0% 0-10% 0.0% 0.0% Total Cash & Fixed Income 5% 0-20% 5.0% 3.0% Canadian Equities 35% 20-50% 35.5% 35.4% U.S. Equities 30% 15-45% 33.1% 34.4% International Equities 22.5% 10-35% 19.4% 19.9% EMERGING MARKETS 7.5% 0-15% 7.0% 7.3% Total Equities 95% 80-100% 95.0% 97.0% The Balanced portfolio is appropriate for investors seeking balance between long-term capital growth and capital preservation, with a secondary focus on modest income, and who are comfortable with moderate fluctuations in the value of their investments. More than half the portfolio will usually be invested in a diversified mix of Canadian, U.S. and global equities. This profile is suitable for investors who plan to hold their investment for the medium to long term (minimum five to seven years). Investors who fit the Growth profile will seek long-term growth over capital preservation and regular income, and be comfortable with considerable fluctuations in the value of their investments. This portfolio primarily holds a diversified mix of Canadian, U.S. and global equities and is suitable for investors who plan to invest for the long term (minimum seven to ten years). SAMPLE Return Volatility 35-year average 9.9% 13.7% Last 12 months -7.8% 10.5% Aggressive Growth investors seek maximum longterm growth over capital preservation and regular income, and are comfortable with significant fluctuations in the value of their investments. The portfolio is almost entirely invested in stocks and emphasizes exposure to global equities. This investment profile is suitable only for investors with a high risk tolerance and who plan to hold their investments for the long term (minimum seven to ten years). The global investment outlook <strong>RBC</strong> INVESTMENT Strategy coMMITTEE Summer 2012 I 7
Page 1 and 2: The Global Investment Outlook RBC I
Page 3 and 4: Contents Executive Summary 2 The Gl
Page 5 and 6: Executive summary • Sarah Riopell
Page 7: Recommended Asset Mix Asset mix - t
Page 11 and 12: Capital markets performance • Mil
Page 13 and 14: Global Investment Outlook Eric Lasc
Page 15 and 16: Global Investment Outlook • Eric
Page 37 and 38: Global Fixed income markets • Soo
Page 45 and 46: Currency Markets Dagmara Fijalkowsk
Page 47 and 48: Currency markets • Dagmara Fijalk
Page 57 and 58: Regional outlook - U.S. • Ray Maw
Page 59 and 60:
Regional outlook - CANADA • Stuar
Page 61 and 62:
Regional outlook - Europe • Domin
Page 63 and 64:
Regional outlook - Asia • Yoji Ta
Page 65 and 66:
Regional outlook - emerging markets
Page 67 and 68:
Eric Lascelles Chief Economist RBC
Page 69 and 70:
This report has been provided by RB
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