March - CI Investments

Signature ReportResourcesInterest ratesScott ValiVice-President,Portfolio Managementand Portfolio ManagerJames DutkiewiczVice-President,Portfolio Managementand Portfolio ManagerThe global financial shock impacted the ability and desireof companies to finance and hold inventory of both finishedproducts and raw materials. In 2009, as business conditionsimproved, existing inventories were run down and limitednew inventory was built. This was the largest destockingthat the modern world has witnessed and affected the entirebusiness chain from raw materials to finished products.This year, as demand increases for finished products, webelieve that an equally impressive restocking is starting todevelop. This is evident in the rebounding steel sector,which is leading to dramatic price increases for rawmaterial inputs. As steel producers restart blast furnacesand rebuild depleted raw material inventories, iron oreand coking coal prices are being pushed toward previouspeak levels. Raw material producers are being challengedto supply these goods as infrastructure bottlenecks, whichwere never addressed due to credit issues, are again provingto be a major constraint. In addition, many capacityexpansions had been pushed out during the depths of thecrisis and are only now being revisited. This combinationof increased demand and restricted supply are conspiring tohelp producers realize large price increases.Credit markets remain fluid and liquid as the economicrecovery evolves into a true expansion in Canada andthe U.S. In Canada, the 6% annualized growth over thepast five months will prompt the Bank of Canada to raiseinterest rates by 75 to 100 basis points this year, startingthis summer. Our funds have been positioned to takeadvantage of these moves. Government budget deficits arestill too large and the accumulated debt positions of manycountries have become untenable. This will result in afiscal contraction that will act as a headwind to the globalexpansion and mute any near-term inflationary pressures.Signature will be covering our underweight position in theshort end of the yield curve too many rate hikes are pricedin.PAGE 12 • SPRING 2010 PERSPECTIVE AS AT MARCH 31, 2010