March - CI Investments

Signature ReportThere are both positives and negatives to the current marketdynamics. On one side, many of the distressed buyingopportunities that we thought would materialize for publiccompanies appear to be in question. How distressed canprices be if there are so many buyers? On the other side, awell-capitalized real estate market with higher prices is a verygood for the sector and the economy. Banks will be able tounload problem real estate in an orderly manner at pricesthat do not jeopardize their equity. We still feel that much ofthis property will fall into the hands of the public companiesthat we invest in, albeit not at the rock-bottom prices we onceexpected, and over a longer timeframe.Overall, however, it sets the stage for a healthy recovery inproperty over the medium term. The key risk in the sectoris an overheating of asset values – and re-inflating a bubblein order to fix a previous bubble is not an ideal situation. Wefeel that this scenario still has low probability, but much ofthe outcome depends on policymakers and how long they seta stage that encourages huge flows into high-yielding assets.This is something that we at Signature are watching closely.Infrastructureby very manageable amounts. In addition, traffic volumesbottomed out and a solid rebound in share prices followed.So far in 2010, the global cyclical recovery is building instrength and inflationary fears remain subdued. Althoughinfrastructure stocks will benefit from the recovery, lowinflationary expectations will hurt their ability to increaseprices because they are typically linked to inflation. As aresult, the sector has had fairly stable performance year-todate.Airport stocks have outperformed, due to more cyclicalnature of passenger movements, while toll road stocks havelagged, given minimal traffic growth.M&A activity in the sector has been extremely quiet asgovernment privatizations continued to face politicalsetbacks. However, we feel it is only a matter of time beforeasset sales start again, given the large government deficits thathave built up.On a discounted cash flow basis, most of the infrastructurestocks in the fund continue to trade at around 10% expectedreturns, which is reasonable.Last year, the main focus in the infrastructure sector wason balance sheets, as many companies took advantage ofhealing credit markets to successfully refinance any debt thatmatured. The relative stability of cash flows made this a fairlysmooth process and interest rates on the new debt increasedSignature Diversified Yield Fundcombines alternative asset classes, so that investors benefit from:• Enhanced yield compared to traditional income investments.• Tax-efficient 5¢ per unit monthly distributions of capital gains and/or return of capital.• Exposure to a diversified portfolio of high-yielding asset classes, including securities not typically available tonon-institutional investors.• Active asset allocation in response to changing market conditions.• Active currency hedging.• Management expertise of the award-winning Signature Global Advisors.For more information on the fund, contact your CI sales representative or visit www.ci.com.PAGE 5 • SPRING 2010 PERSPECTIVE AS AT MARCH 31, 2010