Core Portfolios

So our guest today is Nick Griffin from Australia, as you can tell from his accent. And Nick, if you weren't on earlier, is getting up early for us. So in our pension-like portfolio, we focus more on dividend stocks. So Nick, we run a pension-like portfolio. We've got some pretty good pensions in Canada. They've been good custodians of wealth, and our clients tend to like the cash flow from dividends.

The challenge is dividend stocks are not the solution. So we need to have some other expertise helping us with our portfolio for the growth stocks, the stocks that traditionally, I don't think we do a great job of valuing, but that's what Nick specializes in. So what we've lowered in the last year are fixed incomes.

We've lowered our fixed income net down. We haven't increased our bonds. We've increased our alternative investments, and I think this is a trend that we're seeing in Canada and elsewhere that where fixed income is negative in many countries around the world and certainly in the North America, the very small returns after the cost of managing the money, there may not be a lot of return there.

So what we've been introducing for the last couple of years are alternative investments, and Nick runs one of the best alternative funds in the world out of Australia. Nick is going to own-- he's going to talk about this today-- some just rough technologies, some exciting new businesses that don't pay dividends yet because they're growing so rapidly, and we want to participate in those companies as well.

So we're happy to have Nick's expertise inside our portfolio, and we're seeing that with the Canada Pension Plan that uses 250 external managers as well. It's very common for conservative managers to use specialty managers to help them with their performance in risk management Nick's fund is approved through a very rigorous RBC selection process.

So we take a lot of time to do our due diligence to add other managers to our platform, so they're on that through CI in Canada. So I'm going to let Nick take over, but hopefully, that helps you, Nick, a little bit too just understand how it all fits together for us. Your performance has been outstanding, which excites us even more the original risk management because that's important to our clients.

So Andrew, you can put me on mute, or I'll put myself on mute. We're on a Listen mode. We don't have the capability of taking questions, but if people do have questions, send them to Andrew and I, and then we can get Nick, or we can answer those questions later.

But I'm going to pass it over to Nick to take us through his presentation. Again, we own Munro in our portfolio. We're happy to have them here, and it's a great privilege for us to be able to reach out to best in class managers globally and have them talk directly to our clients, see if that's what we're doing today. So thanks, Nick. I'll let you take over.

Yeah, thanks Jim, and thanks, everyone, for dialing in. It's very nice to be talking to you this morning or your evening there in Canada. So maybe just by way of introduction, who is Munro Partners, and what do we do. Hopefully, you can all see the screen. I'm going to show you a couple of quick pictures of what we do and how we do it.

But essentially, the best way to think about us is we are your global growth manager, and our job is global equities, and our job is growth. And so we set the business up a number of years ago when really, to try and solve problems for clients like yourselves or people like Jim, which is that it's the same problem you have here in Australia. It's the same problem you have in Canada.

You have a market that's essentially full of resources and banks, but you can see that the world is changing around you, but you can't invest in it. So you want to invest in maybe in semiconductor companies or health care companies or battery technology or technology companies, and they're just not well represented in your current market.

And so that's what we set the business up to do. The best way to think about it is you seem to go home and watch Netflix every night, but you didn't own the stock, and so that's the problem we solve for you. The business is actually Australian based mainly because of the last thing that Jim talked about is because these absolute return or these liquid old type managers are very popular down here in Australia, and they've been around for about 15 years.

The law has changed in Canada about two years ago to allow us to run the product in Canada. And so CI financial asked us to come and run this product because we had a strong 15-year track record of running absolute return global growth equities. And so that's why you're seeing me on your screen today. So yeah, just the facts. We are a global investment manager looking at equities only, focusing on growth equities.

So growth equities, permanently, glass half full is what we like to say. Our business established in July 2016. We've achieved an 18% per annum return for our fund in the last five years, but we have a 10-year track record previous to that where we've actually achieved over a 15% return per annum for 10 years. So we have a 15-year track record of over 15% returns per annum.

Unfortunately, it's not a straight line. I wish it was. We are taking risks to do that, but over the journey, we do feel that we can achieve that number. And so what we say to clients with our product is we're looking for a double-digit return on a three to five-year view. We run about $4 billion or just over $4 billion in assets under management.

So that's who we are. That's what we do. A couple more introductions. We are all based here in Melbourne, Australia. Once this is over, we'd love you to come down and visit us. We are running a partnership so the business is effectively owned and controlled by the key individuals that you see on the screen here. All of us are involved in some form of profit share, and profit share, basically, means we have to produce good outcomes for our clients, otherwise, there are no profits.

And so from that point of view, we're all very much aligned on the outcome in the partnership that we run, and yet, we always also, as you can see on the right, like to have a good time while we do it. We run two products for CI. The main one we're going to be talking about here is the one on the left, which is the CI Munro Global Growth Liquid Alternative Fund.

So this is the fund that invests in growth equities, but has downside protections. So some things we can do on the downside to protect the downside, and I'm sure we'll talk a bit about this today. But on the right, we also run a standard mutual fund, a [? loan-only ?] fund, one where you're fully invested all the time and one you probably be a little bit more used to.

So what do we mean by growth equities? What are we trying to do as a growth equity manager? What do we mean by global growth equity? So when we look at the equity market globally, we have a fairly simple philosophy, and that philosophy is that earnings growth drives stock prices. So we generally fund companies or businesses that make more money every single year. We generally find their share price goes up.

That's not meant to be a controversial statement. Sustained earnings growth is actually worth more than cyclical earnings growth, and the market is the last point will always misprice growth and its sustainability. So what we're showing you here is two examples on the bottom here, one or two companies both listed in America or the United States, one is Mastercard, the other one is Bank of America.

And what you're going to see in the black line is their share price, and on the blue line, you can see is a 12-month forward blended earnings expectations, so their earnings expectations over time. On the left here is Mastercard. That's the share price. That's its 12-month forward blending earnings expectations.

And so what we're saying as growth managers is we don't have a lot of strong view as to where the share price of Bank of America is going. We don't have a strong view where the share price of Toronto-Dominion is going or have a say for that matter, I'm afraid.

Because ultimately, what happens is these companies are macroeconomic companies. They're driven by GDP. They're driven by interest rates. They're driven by a whole bunch of things that we have a view on, but we don't have an edge. We don't have a specific insight as to what's going to happen. We have the same view that every other fund manager you talk to has.

On the left here, you have Mastercard. This is spinning from the standard shift from physical to digital cash, so lots of issues to carry cash in our wallet. Now, none of us carry cash in our wallet. That shift has been occurring over the last decade. It's a structural change, And that's been driving the earnings growth of the company. And what's fascinating is everybody knows this. Everyone has known this for some time, but the market will always misprice growth and sustainability by a count precedent.

And so our job as your global growth manager is really to find this situation over and over again, these structural winners because they're the things that will make us our money because they're the ideas that we're looking for and really, to ignore all this stuff because it's just, quite frankly, not relevant. The reason why we don't think it's relevant is because if you go back and look at the equity market over a long period of time, a lot of investment managers will talk about maybe going overweight, certain sectors like, so I want to be overweight energy or I want to be underweight banks. But in reality, what's actually happening is the equity market is actually made up of just a few minutes.

This is a good study that appeared in the Journal of Financial Economics a couple of years ago done by a guy called Hendrik Bessembinder, and it really just drives this point home as to what are you actually trying to achieve when you're investing in equities. And so what he did, he said, what would happen if we bought and held every company that ever listed in the last 90 years in the United States, so 90 years of markets, 25,300 companies were actually listed over that time frame.

And he said, what would happen if you bought and held every single one? And so statistically, what happens is 14,000 of those 25,000 companies go to zero. So 60% of all companies that ever list go to zero, so more than half of all equities don't create any value at all.

The next 8,000 companies only make enough to offset what the other 14,000 lose, and you're left with just 1,000 companies, so less than 5% of statistical observations create the entire value of the US equity market over 90 years. And the top 50 of those 1,000 companies make up nearly 50% of that value. So that's 50 companies out of 25,000 when we started, make up nearly 50% of the entire value generated over the last 90 years.

So this is a game when you invest in equities, very few winners and lots of losers. We plotted these 50 companies for you here. This is their life and months and their annualized returns. So of course, we now know who these companies are. They're all household names, but the reality is they weren't when they started and they were all, actually can see, driven by structural change. So any one of these companies had you found it early enough was a home run.

And it was always the structural change that created them, whether it was digitalization with Amazon, Facebook, and Google; software, with Microsoft and Oracle; big box retailing with Home Depot and Walmart; quick service restaurants with McDonald's; entertainment, with Disney. You can go all the way back to Boeing, Pepsi, Coke. It's always the same. There's a strong structural change towards let's say air travel. Many companies try to build airplanes. Two companies can now build one that you will knowingly get on being Boeing and Airbus, and to the victor goes the spoils.

That's what happens. It happens over and over and over again. There were search engines search. Engines were great. There used to be 11. All of them tried to create a search in, one won. It created Google, trillion dollars in market cap. And so this is the same pattern happening year after year, decade after decade across equity markets.

And so our job, as your equity manager is not to go over an underweight certain stocks or countries. Our job is to occupy this top left-hand corner and try and work out what's going to come along next. And so that's the fun bit about our job is to try and think about how the world could change and what's coming along, and that's a bit of what we're going to talk about today.

The last thing we have to do is just downside protection. So as Jim was saying at the start, we are a little bit different as a growth manager. We're not here to say everything is going to go up all the time and everything is going to be amazing. We've been around long enough to know that that's not how it often works out.

And so what we do do is we have these bits in yellow. So like most fund managers, we have the bits in white, which is we have an investment team that I just introduced you to that follows an investment process that I just showed you the short version of, that does active research in peak stocks with high conviction. We have to be a growth equity manager. Some people value managers. Some people buy bonds.

But in the yellow is the stuff that we can do on the side, so this is our ability to short sell. So we can short sell, say, futures over the top of our portfolio. This is our ability to hold more than 5% cash. We can actually hold 100% cash. It may surprise you, but most equity funds are only allowed to hold up to 10% cash.

We can buy things like a put option. Put options come in very handy, particularly handy last year through the COVID crisis. We had a couple in the fund at the time, and they and they worked out very well. And we didn't expect COVID to come along, by the way. We were just buying them as insurance.

We can manage the currency. We can move US dollar exposure around, and this all really revolves around this capital preservation mindset. And so I'll go back to what I said at the start. The goal of our product or the reason why our products have done well is because we're not actually trying to beat an index. We're not trying to outperform some index that you're not, quite frankly, that interested in. We're just trying to make you a little money and not lose money.

And so our goal is not to be the index. Our goal is to get you double-digit returns per annum on a three-to-five-year view, and the best way to do that is to not lose 30% in any one year. If you do lose 30% in any one year, you mathematically can't reach that goal. And so we really do think about the downside quite a lot, and we use these tools quite a lot to protect the downside and then ultimately, try and capture the upside with the stocks we're investing in.

I'm going to skip a few of these. These are the investment process, and please take them. Have a look on the website. If you want to go through it, it's all available. What I thought I'd do now is talk-- sorry, one more-- a little bit about where we are in the market. So that's a quick introduction to us and what we do. The investment process is there if you want to look at it, but ultimately, our job is to find great equities, but we need to do that within a market environment.

When we look at the market environment today, it is probably a little bit more difficult than it was a year ago. What we're showing you here is the equity risk premium of the market over the last 20 years. And what you can see with the equity risk premium over the last 20 years is it's remarkably stable.

And so the equity risk premium is just the carry you get from owning equities, so the earnings yield of the market minus the 10-year bond rate, so minus the interest rate. And so what you're going to see over time is equities roughly give you a 4% carry for owning equities. Some people think it's a bit of a bubble at the moment. It's definitely not. That's the bubble.

So normally you're getting a 0% carry when you're in a bubble. That's what it was in 2000. We're definitely not in a bubble in the broad equity market. But on the far right here, you'll see where we are today, pretty much at the bottom of a range, we've been at for some time.

And so from that point of view for the market to go for this, what we're going to see now is the market eventually grind its way higher. It's probably a bit slower than it did last year. So from here to here, it was a very good opportunity, which, obviously, we took advantage of last year.

As we go forward now, we've got interest rates going up again, so the denominator in this equation is starting to come up or the thing we're taking away is coming up. And at the same time, the bid earnings growth should stay ahead of that. And so while the market looks fine here and looks OK, it definitely doesn't look as good as it did 12 months ago, and we've got to go through this period of rates normalizing.

Once rates have normalized, it will get much easier, and so as interest rates back up and you're seeing a little bit of this at the moment, things will get much easier because the earnings growth will clearly always go faster than the interest rates can. We just think it's highly unlikely that long-term interest rates are going to get much above 2% in this environment.

And so once they've got there, then the earnings growth will go past them again, this equation will start to look better again, and markets will be fine. So a little bit of a difficult time at the moment, but definitely nothing like we saw last year, and it will get easier as the year goes on.

The other thing to remember about the equity market that a lot of people miss is they often think about the equity market like it's the economy. And so when COVID hit, a lot of people thought, jeez, the equity market is in big trouble here. But the answer is, unfortunately, or fortunately, it wasn't. The terrible thing about COVID is it affected lots of small businesses, lots of family-run businesses, lots of people you probably know.

But if you're a big-listed corporate in the world, you're actually better off. And the reason why is because even if you look at the S&P 500, the top 10 of 31% of them, most of them were actually net better off because of COVID, mainly because they had better balance sheets to deal with it or because they'd spent money on technology like Microsoft and Amazon and Google had that actually solved the COVID problems.

And even on the far right over here, the companies that were in trouble were really supported by the Fed. They can borrow money quite easily. And even if you think about a Starbucks, they can still borrow money at 2% today, yet all their competitors are going broke. And so what they can do is they can effectively buy out their competitors.

And so the equity market has been advantageous by COVID for two reasons. One, because their competition has been weakened, and two, because interest rates have got lower, which has allowed them to grow. And so from that point of view, the equity market, as I said, while it's going through this short term, difficult period, it's still very well set up to grow in this environment. So I'll just go back one.

There are things that can go wrong here, and we're not going to say there isn't. The things that could go wrong this year is the virus could come back. China could be difficult. You're going to hear a lot of people talking about inflation, and most importantly, you're going to hear a lot of people talk about inequality and taxes. Because there is no doubt that parts of the community did much better through COVID than others did, and they should probably pay their taxes. And so all of those things are definitely out there.

But on the right-hand side, we would flag that there is some offsetting effects. The vaccine does look [? efficant ?] at this point, so hopefully, we'll be in an economic recovery. Politics is probably getting better than what it was 12 months ago. It's at least getting less volatile. I know your views could be different, but without even taking a view on which side of Parliament or the Republican or Democratic, et cetera, which side of the aisle you are, it is less volatile on the political side than it was a year ago.

Inflation has been low for a very long time. I know people think it will come back. I personally find it hard to believe in any sustained basis. And lastly, most importantly, we do see this huge push towards corporate social responsibility. These corporates that are doing well recognize they need to give back, recognize they need to pay taxes, recognize the need to apply ESG principles across their businesses.

And so we do get this sort of self-correcting nature of the world that we're seeing at the moment, and it does feel like we're in a self-correcting phase rather than going down the barrel phase at the moment. And so from our point of view, it is a reasonably positive environment. So I'll just go back one I skipped over.

Last thing, just to flag and most importantly, what happens if something does go wrong. And so this is where these capital protection tools that I talked about before come in. And so this just shows the fund returns in the first quarter of 2020 and the fund returns in Q4 of 2018.

And so what you can see, on both these periods, these are both quarters where things go wrong right, and this is what happens all the time. And so obviously, this was the COVID crisis, and this was the Fed over tightening back in 2018. And so if we look at these periods, our portfolio does go down. So our long equities will go down. We are an equity manager. We are not impervious to the market falling.

But some of our capital projection tools can often help out, things like the ability to short sell, things like the ability to buy put options, things like the ability to manage that US dollar return. And so in that COVID crisis, these tools really worked well because the market fell very aggressively. And the returns we got on our shorts and puts worked very well to the point where we actually made money through the COVID crisis. And so this was a very good period for the capital protection tools.

If you go back to 2018, much more of an interest rate hike, so more of a rotation, a bit more like the sell off we're having at the moment. The stocks fell a lot, and the capital protection tools help out significantly to the point that they actually managed to minimize the drawdown to 10%. And that's just two examples in how the capital protection tools can work.

The key point to flag here is going to be different every time, and the other key point flag is that we have them, and everyone else doesn't have them. And so we have processes around how we use them, and so most of the time, they do add value during these times of difficulty and do at least smooth the ride for you, and I'll show you a little bit of that in our performance at the end.

So that's our outlook on the market, and it's a short idea of what we would do if things go wrong. But more importantly, let's talk about what will happen if things go right. But how we actually position the fund for the future, so in this last bit of my presentation, I'll just talk about how we're positioning it for the future and maybe talk about some of those great stock ideas.

So what are we doing when we're trying to invest for you globally? We're trying to find these S-curve-type situations. We're trying to find this period where what you can see here with the global mobile phone market. So this is a great S-curve example because it's one that everybody knows.

This is the mobile phone market in 2008. It used to sell $1.6 billion phones per annum. This is the mobile phone market in 2018. You still sell $1.6, $1.7 billion phones per annum. So phones don't grow. They're build like the economy. The economy is not probably going to grow much in the last 10 years. It's probably not going to grow much in the next 10 years. And so your job is to find these structural situations.

This is smartphones in 2008, roughly 10% share. This is smartphones in 2018. So it went from 10% share to 80% share. Effectively, along came the mobile, the smartphone. It took away from the feature phone, and Apple was a $50 billion company here, and it's a $2 trillion company today.

And so from that point of view, what you see is this huge shift where, as I said at the start, a structural change comes along, a winner is created, and there are many losers, i.e. Nokia, Samsung, Ericsson, Accenture, and [INAUDIBLE]. And on top of that, Apple actually then went through the top of its S-curve by expanding its TAM into all these other areas like payments, et cetera. These are the things you're looking for. These are the things we're trying to invest in.

So from our point of view around the world today as a global growth investor, there's lots of big S-curves in the world, and they're really exciting. The first one at the bottom here is e-commerce. So e-commerce has gone from effectively 0% of retail sales in the year 2000 to nearly 20% of retail sales today and accelerated through the COVID crisis.

The public cloud, so cloud computing has gone from nothing in 2011 to nearly 40% of all workloads today. Digital advertising has gone from nothing in 2005 to nearly 50% of all advertising today. Digital payments, as I said from the start, has gone from 30% of all payments in 2005 to 60% today.

So in all of these S-curves, they all actually accelerated during COVID, and on top of that, most of the money, about halfway through. And so if you think of them from the Apple example, they still actually have a long way to go. And so these are some of the companies that are exposed to these trends, and they're definitely some of the companies that fit into our portfolio.

The other thing to remember quite clearly is these trends are all being driven by digitization. They're all being driven by Moore's law. And so what we see quite often or what a lot of people miss is that the computers are constantly getting faster here, and they're constantly getting faster because of Moore's law. It basically extends the opportunity to the next generation.

And so what everybody in this call knows this computer is getting faster, but there is actually, a law to it. So back in '71, there was 2,000 transistors on a CPU or a CPU chip. And then every year, it doubled. So the 2,000 goes to 4,000, the 4,000 goes to 8,000. The 8,000 goes to 16,000 goes to 32,000. And last year Nvidia built the chip with 54 billion transistors on.

And so what that means is as computers get faster, disruption accelerates. So everybody on this call can probably remember when the internet was just in an internet cafe, and all you could do was send an email. As computers get faster, it gets on your phone, creates Apple. That's a trillion dollars.

As they get faster again, you can send pictures that creates Facebook. As it gets faster again, you can do e-commerce. It creates Amazon. As it gets faster, again, you can stream video that creates Netflix. As it gets faster again, you can do video games and then eventually software.

And then finally, the peer-to-peer economies appeared. Mainly because if you think about Uber, you can now order a car. You can see it arrive. You can go down can get it. You can drive someone, you can get out, and the payment goes to the cloud and back without you touching a single dollar of cash.

Now, all of that is possible because computers get faster. And so what we know now is that Moore's law extends for at least another 15 years of extension of Moore's law, so either shrink will continue. And so we know that every computer in the world will actually get 60 times more powerful over that time frame.

And so then what we know is that this disruption is actually going to accelerate. It's not going to slow down. It's not going to remain revert, and so there are many more exciting companies here to look at, and that's what we're trying to do for you every day at Munro.

And so the last way to think about is just very briefly is a [? nice ?] analogy we use here because it was the Australian Open here recently in Australia. The tennis players came down and behaved very badly, so I'm going to get rid of this slide pretty soon. But the best way to think about it is technology for a long time has been the big four, the big four tennis players-- Federer and Nadal, Djokovic, and I've got Murray there. And I know he's not a big four, but I needed four.

And so from that point of view, you can think about them as the big technology companies. They've been around for a while. You keep thinking they're going to go away, but they never do. But inevitably, there will be a next generation coming through. As you see on the right, there'll be a next generation of technology companies coming along who will also disrupt huge opportunities. Uber is a classic example here, as is a company like HelloFresh or even a bigger company like PayPal, and it still has most of its disruption in front of it, and that's what we spend a lot of time looking at in the fund.

Last thing I'll just flag is on valuations. Look, a lot of people get scared of what we do because of the valuations, and I understand that. It is hard to work out sometimes, but it is important to remember that if you're buying a company, if you know there's only going to be a few winners and it gets harder to be that winner, then most of these companies have to invest to win. And when they're investing to win they're probably not making a lot of money.

It's important for them to do that, otherwise, they won't win. Netflix is a classic example of this, where the company had to invest for many years to make sure it became the main streaming service on your screen, and they succeeded. And so what you had to do is you had to take a view through that. This is just a good example of why you should do this and why we do it.

It just shows you the number of companies that went up 10 times in value from the peak of 2007 to the peak of 2020, so on the bottom of '20, the bottom market in 2007, the top of the market in 2007 to the top of the market in 2020. And so what you'll see is that during that time, there was actually down at the bottom here, 66 companies in the S&P 500 that went up 10 times in value.

The other things we're looking for, they are the exceptional few. And what you'll also see is their revenue growth for the 10 baggers versus the market, they all grow revenue of more than 10% per annum. In fact, 80% of them do. Yet the market is the mediocre [? many ?] that is growing revenue at less than 10%.

And on the right here, in many cases, you had to pay PE multiples over 20 times for them. And many times, you had to pay [? loss ?] making. And so the point is you have to be prepared to do this if you're going to go find these exceptional view. The history suggests you have to do it, and it will give you worse in the future. And that's our job for you is to basically find your way through that in a risk-adjusted manner to find these great winners.

Last slide I'm going to present, and then I'll check if Jim has got any questions. So at the end of the day, what are we trying to do here? We're trying to find these areas of interest that we want to focus on, so areas of the world where we think there is strong structural growth companies or tailwinds and then find the companies that win it from that.

This is how the portfolio is positioned at the end of February. We update this every month in our monthlys, and you can see it on the website. And so what you can see here is we think the digital enterprise or digital transformation is still the largest tailwind in the world today. It makes up 15% of the fund, and it includes six holdings including Atlassian, or Microsoft, or Adobe, or ServiceNow are in that group.

The second big structural change in the world is actually not a technology area. It's around climate. Climate is very much at the forefront of how we are shifting the energy mix globally. The push towards zero carbon is now here, and it's going to create these huge winners. Some of them are technology winners like Tesla, but some of them are just people who make wind turbines like Vestas in Denmark or people who build offshore wind farms like-- oh, sorry, who develop offshore wind farms like Orsted or NL.

So this can be anything from a utility, to an industrial, to an air conditioning company. They all are going to benefit me from the shift to clean energy or to a carbon-free world in the future. And we do think this is one of the biggest S-curves in the world today, and it's really only just getting going.

The third area we're looking at the moment quite closely is semiconductors. Semiconductors are just, as I showed you on that Moore's law side, they are just the weapons manufacturers in the world. High-end semiconductors, in particular, like ASML that makes lithography or TSMC and Foundry, they are the companies that will build all the technology we need to solve all of these problems, not just across tape, but across health care and everywhere. So we do like those companies a lot. A lot of them are outside North America.

E-commerce is a great area. Obviously, Amazon is still a big winner, but we always find these new ones coming along, and the one we like at the moment is HelloFresh. Internet disruption. Been around for a long time. Created Facebook. Created Google. There's always a gang, new ones coming along. One of the ones we like at the moment is Spotify, but we do still like Google and some of the other companies in this area.

Digital payments is really, as we shift now to 100% digital, what can these fintechs do? We really like PayPal here. It's the biggest fintech in the world. And lastly, health care is an important area for us because the innovation in health care ultimately drives this virtuous circle of growth. These are the companies that are going to get us out of this mess, and it's really hard to see how we're not going to invest a lot more of this in the future. And here we really like Danaher and Abbott Labs.

Other areas we often look at are things like emerging consumers, so aerospace. We're doing some aerospace in the fund or things like luxury goods, automation, you just can't see them on this page. But the goal here, really, is what I said right back at the start, so I'm going to try to bring this back to the start.

The goal here is we know there's only going to be a few winners. We want to identify the areas of strong structural change. These are the ones we've identified today. We want to identify some potential winners here, and then we want to hold those companies for long periods of time.

And along the way, we will make mistakes. We recognize that. We will eradicate those mistakes, but ultimately, continue to move this process to work our way towards finding these few winners, and these few winners will ultimately drive the absolute returns of the fund. That's what's worked for 15 years, and that's what we think will work for the next 15 years. And so that's essentially what we're trying to provide to you when we bar your global growth investor.

So I'm going to stop there and check if Jim has got any questions, or I can conclude.

No that's great, Nick. Can you hear me OK?

I can.

Thanks, Nick. I've had the privilege and the opportunity to listen to this presentation, and every time I listen to it, there's always something more and very clear. Investing is not simple. It's complicated, and Nick and his team at Munro have done a really good job about managing a very different way of looking at stocks, and we really need them on our team to help participate in this space.

Your 15-year number, Nick, I think it's over 15% a year. Your downside capture like what you dropped, is close to 30%, so you only lose maybe 30% of the downside. You made good money last year, even in March. The puts that you purchased, my background is in derivatives, so I get what you're doing.

It's not easy. It's a complicated portfolio, but I think you've explained it well to us. So this is a little bit of a deeper dive that we don't have an opportunity to talk about Munro in this kind of debt with the actual founder of the company. So we appreciate you doing this for us, Nick, and we're going to post it for those that couldn't participate tonight.

All my clients do own the Munro fund, and it's something that if we want more of it, we can buy it outside of our core pension-like portfolio. But thank you, Nick, for taking time early in your morning in Australia to be with us. I know the clients participating are appreciating getting exposure directly from the source to talk about this great part of our portfolio.

So enjoy the rest of your day. Are you into Thursday now? Is this Thursday?

Yeah, so we're on Thursday. We are on Thursday today. And yes, as I said maybe just to highlight Jim's point there and I didn't get to show it, but that is the performance of the fund there in Canada. The thing he's referring to is the fund that we have here in Australia, which has the longer track record.

And as I said and Jim said, the goal is really to try and hit that 10% per annum or better number and do it with low volatility in the market. That's what we're trying to do, and that's what you can see. On the website, I do want to be clear, it's not a straight line. I wish it was 15% per annum every year.

It does wane and flow, but the goal is to stay there three to five years and generally, we hit it. That's how we do it.

Yeah, you did a great job in conveying that 17% plus return, but it's the risk management that interests us the most. Because if we own some of these higher volatility stocks individually, it can be very stressful for clients. So owning them inside a professionally managed portfolio is really the best way for us to go.

And we can monitor Munro, and we can stay in contact with Nick. I noticed, Nick, you also have some very good YouTube videos that are two minutes long, and I think you're showing us some there. I've been watching a lot of those, so I would encourage our clients just to Google or just search, I should say, on YouTube for Munro Partners. You'll see Nick talking quite frequently, and I think those little micro videos that you put out are really excellent. They're a great way to keep connected with your clients.

Yeah, thank you. And so that's really the last thing to say is, look, obviously, we just touched the surface today. If you do want to discover more, the website is there, and we do try to do what we want our companies to do, which is communicate digitally as often as possible and to really just help people understand what we're trying to achieve, and that just makes them understand what we're trying to do when things are good and also understand what things to do when things are bad. Because it is a journey you're on, and you need to stay on the journey, and you'll end up at the end.

And that's what the videos are for, really, to help you bring you along that journey of what we're trying to achieve for you

Thanks, Nick. And thank you, everyone, for listening. Andrew will post at our website. We will send it out to everyone. There's lots of people that couldn't make it for this exact time period, but we'll send it out. Right, Andrew? But again, thank you, Nick, for participating. You've been a great partner for us, and we'll continue to build this relationship and have success together.

So having said that, I guess we'll sign off, if that's OK. If people have questions, please email them to Andrew or myself. We should be able to answer them, but if not, CI in Canada or Nick can help us with that, but we do welcome questions. We'd be happy to answer them and, and we'll continue to learn more about some of the investments we've got.

So I'll say goodbye with Nick. Thank you, Nick. Thank you, everyone, for participating.

Thank you, Jim.

Have a great rest of the week. Thanks, Nick.

Take care.

Thank you. Bye.

Hello everyone, and thank you for taking the time to listen to another investment webcast from the shared wealth management group. I'm Jim Sheridan, director of human securities in Oakville and head of the team. In these uncertain times, we're looking for unique investments that can weather the storm and we believe we have an investment, which we will review today that provides strong returns and up and down markets.

I'd like to and welcome Anthony Burgman from NewGen. A company we've been adding money to for the past year. And we will discuss an alternative investment called NewGen alternative income fund, which we think is important for our clients to own in their portfolio. Anthony, when was your firm started and give us some history on why the firm was created?

Sure. Thanks for having me, Jim and Andrew. And happy to chat about NewGen and our two funds. The equity long short funds, and our alternative income funds. So NewGen is a Toronto based alternative manager. We totally manage an excess of about $600 million for institutions, advisors and high net worth individuals.

Our firm has two mandates that are currently available to the investment advisor community. The NewGen equity long short fund LP, which was launched in 2012 and our NewGen alternative income fund which was launched in 2019. The firm's investment philosophy can really be summarized into three key goals. One, provide very strong returns for our clients since inception or equity long short fund LP has generated over 12% annualized compared to 3% for the TSX as of our last valuation date. Two, protect capital at all costs. With over $20 million of internal capital invested from employees and family members of employees, we're very heavily aligned with our client base and very much so focused on protecting capital during periods of market volatility.

As seen in 2020 we've encountered a tremendous amount of market turmoil. And I'm very pleased to announce that our NewGen equity long short fund is plus 12% this year, our NewGen alternative income fund is plus 5% this year and that's with both the TSX composite and the TSX total return indexes both being negative to the end of August 2020. And third, we're really focused on being very uncorrelated and to provide meaningful diversification benefits within a larger portfolio. Jim I recall your core portfolio closely follows the Canada Pension Plan model. And for context one of our portfolio managers in NewGen [INAUDIBLE] and comes from CPP as well.

Thanks Anthony. You'd mentioned you manage over $600 million. What kind of a client would invest in your funds?

Yes, the firm currently manages a bit more than $600 million for a number of clients. They could be institutions, endowments, advisors. The ideal client would be one with a focus on generating strong returns in up markets, but also focused on protecting capital in down markets. say that would really be the perfect fit for a NewGen client. While both of our funds have exceeded the returns of their respective benchmarks a year to date and since inception, I think our most salient feature is really our ability to protect capital during periods of market instability like 2020.

Andrew if you could actually please pull up slide 1, I can illustrate this for our listeners. So on this chart, you'll notice the green boxes which are NewGen, and gold boxes which are the TSX composite. So the left side of this chart depicts NewGen's ability to generate strong returns on average during months when the TSX is increasing. Now by design, these returns are not meant to keep up or exceed the benchmark because the firm is always focused on capital protection and uses short positions to protect on the downside.

Now, most importantly the right side of this chart illustrates NewGen's ability to still generate positive returns on average during months when the market is negative. So one of the keys to our success and our long term ability to outperform markets, has really been our ability to win by not losing i.e. to protect capital. To summarize, I believe our NewGen funds could really complement the core pin portfolio by providing diversification benefits and strong returns in up and down markets.

Yes, thanks Anthony. NewGen has done an excellent job protecting our client's assets. Anthony, can you explain what an alternative investment is?

Yeah, of course. So traditional investments are stocks, bonds, and cash very much like your [INAUDIBLE] pension like portfolio that you manage with your team, Jim. Alternative investments are assets like real estate, commodities, private equity hedge funds. Alternative investments have typically been used by institutional investors to provide a unique return stream, to protect her financial downturn, and largely to provide diversification.

Over the last number of years alternative investments have grown significantly in popularity because of their ability to protect capital during market downturns, not to mention the ability to generate an uncorrelated return streams and to help diversify a portfolio. For these reasons, I think they really serve a vital part of a larger portfolio, especially in today's market.

Yeah, agreed Antony. What is the goal of the NewGen alternative income fund we use.

Yes so the NewGen alternative income funds has three goals. One, is to provide investors with 8% to 10% targeted annualized returns. Two, to protect capital during times of market hardship. And three, to provide a very unique return stream and meaningful diversification benefits. Additionally for clients with a focus on generating steady cash flow alongside of strong returns, the NewGen alternative income fund also targets 4% in annual yield via smooth monthly distributions. Jim, your clients also have the ability to decide whether they would like to reinvest the yield payment or to take them in cash through their account with you.

Yes, good point. How has it performed?

Yeah, the funds have both performed incredibly well. Andrew, if you could pull up our second slide, I can illustrate that with our listeners. So this slide reflects our F class returns, net of all fees to the end of August 2020. The second column reflects our year to date return. So you'll notice year to date, the NewGen equity long short fund LP has been North of 12% year to date, versus its benchmark, which is the TSX composite which is still down 3.22% to the end of August.

For the NewGen and alternative income fund, you'll notice we've generated a plus 5% return year to date to the end of August, which is a negative 1.15% for its comparative benchmark TSX total return index. I'm really pleased to comment that if you notice overall time periods here, that both mutual funds have not only outperformed their respective indexes but have also done a good job of protecting capital.

Yeah, to be positive, this year during this crisis is really outstanding, Anthony. Good work. Our clients really appreciate the hard work that you guys are doing. What can we expect from this security going forward?

So going forward, the alternative income targets 8% to 10% annualized returns. The smooth monthly income distribution the focus on protection during periods of market turbulence. And I think one of the big benefits as well as to really complement and diversify the larger portfolio that you currently use through your approach.

Yes, that's exactly how we're using it for sure Anthony who should buy this fund and what is the minimum investor can buy in the fund?

That's a great question. So investors are comfortable with a focus on strong returns regardless of market conditions, capital preservation during volatility, and monthly income distributions would be the ideal client. From a purchase perspective, the minimum purchase for our fund is $500.

Anthony, is there a cost to buy or sell the fund?

No, there's no cost to buy or sell the fund.

Can you explain this well? The cost of purchasing the fund, I know there's a man there are management fees and performance fees and this is a little different than some other funds that we might own.

Yeah, from a cost perspective. So mutual funds, exchange traded funds, and alternative funds are similar in the sense that they all have management fees. So NewGen offers advisors F class and G class shares. The F class class management fee is for your fee based clients, and is 1%. And understanding your client base Jim, this is where I believe the majority of your assets are.

Yes, you are correct, Anthony.

Okay. Separately, we also offer a G Class which is a management fee for trailor based accounts or commission based accounts. Under this program we charge a 2% management fee, this is for non fee based accounts. So this fee structure is standard across the industry and in line or in some cases our numbers are below some of our competitors. Where alternative funds are a little different, is they can have performances. And so a performance fee arises when an alternative investment generates a return. The manager typically takes a portion of that return. So historically it's been about 20%. However, the performance fee in the NewGen alternative income fund is 15%. Now, I would say most importantly to all of this, all the numbers that we quote are always net of all fees inclusive of the management fee and the performance fee.

Great. Thank you for that, Anthony. That's helpful for our listeners. What is the risk of owning this Fund?

Yeah, so alternative investments typically force investors to lock up their money for long periods of time. So this could mean months, it could also mean years. One of the benefits of owning the NewGen alternative income fund, is that it actually provides daily liquidity. So if your clients are unhappy with the returns or simply they just need their capital for other purposes, you have the ability to buy and sell the fund every single business day with money returned to your GF account within two days.

We follow the Canada Pension Plan closely and that's what our pin portfolio is built on we follow a similar asset mix and geography as the Canada Pension Plan. While the CPP has a top notch team of investment professionals inside CPP, they use specialty managers to help the manager manage Canadians money. In fact, they have about 258 external managers. We use the same approach and NewGen is one of our external managers we use to help protect and grow our client's assets.

You and your team, Anthony at NewGen done a great job and we thank you for that. Do you have any final comments?

Thanks for the kind words and the support. And for your listeners, if they happen to have any follow up questions Jim manager you have my contact info we're always happy to provide the info for you guys. You've been a great supporter of us so very much appreciate the time and the consideration.

Thanks Anthony for sharing all this information. And educating us on an investment, which many investments have not had exposure to and one we believe should be in our client's portfolio. We look forward to sharing this idea. Thank you. And thank you everyone for listening.

Hello everyone, and thank you for taking the time to listen to another investment webcast from the shared wealth management group. I'm Jim Sheridan, director of human securities in Oakville and head of the team. In these uncertain times, we're looking for unique investments that can weather the storm and we believe we have an investment, which we will review today that provides strong returns and up and down markets.

I'd like to and welcome Anthony Burgman from NewGen. A company we've been adding money to for the past year. And we will discuss an alternative investment called NewGen alternative income fund, which we think is important for our clients to own in their portfolio. Anthony, when was your firm started and give us some history on why the firm was created?

Sure. Thanks for having me, Jim and Andrew. And happy to chat about NewGen and our two funds. The equity long short funds, and our alternative income funds. So NewGen is a Toronto based alternative manager. We totally manage an excess of about $600 million for institutions, advisors and high net worth individuals.

Our firm has two mandates that are currently available to the investment advisor community. The NewGen equity long short fund LP, which was launched in 2012 and our NewGen alternative income fund which was launched in 2019. The firm's investment philosophy can really be summarized into three key goals. One, provide very strong returns for our clients since inception or equity long short fund LP has generated over 12% annualized compared to 3% for the TSX as of our last valuation date. Two, protect capital at all costs. With over $20 million of internal capital invested from employees and family members of employees, we're very heavily aligned with our client base and very much so focused on protecting capital during periods of market volatility.

As seen in 2020 we've encountered a tremendous amount of market turmoil. And I'm very pleased to announce that our NewGen equity long short fund is plus 12% this year, our NewGen alternative income fund is plus 5% this year and that's with both the TSX composite and the TSX total return indexes both being negative to the end of August 2020. And third, we're really focused on being very uncorrelated and to provide meaningful diversification benefits within a larger portfolio. Jim I recall your core portfolio closely follows the Canada Pension Plan model. And for context one of our portfolio managers in NewGen [INAUDIBLE] and comes from CPP as well.

Thanks Anthony. You'd mentioned you manage over $600 million. What kind of a client would invest in your funds?

Yes, the firm currently manages a bit more than $600 million for a number of clients. They could be institutions, endowments, advisors. The ideal client would be one with a focus on generating strong returns in up markets, but also focused on protecting capital in down markets. say that would really be the perfect fit for a NewGen client. While both of our funds have exceeded the returns of their respective benchmarks a year to date and since inception, I think our most salient feature is really our ability to protect capital during periods of market instability like 2020.

Andrew if you could actually please pull up slide 1, I can illustrate this for our listeners. So on this chart, you'll notice the green boxes which are NewGen, and gold boxes which are the TSX composite. So the left side of this chart depicts NewGen's ability to generate strong returns on average during months when the TSX is increasing. Now by design, these returns are not meant to keep up or exceed the benchmark because the firm is always focused on capital protection and uses short positions to protect on the downside.

Now, most importantly the right side of this chart illustrates NewGen's ability to still generate positive returns on average during months when the market is negative. So one of the keys to our success and our long term ability to outperform markets, has really been our ability to win by not losing i.e. to protect capital. To summarize, I believe our NewGen funds could really complement the core pin portfolio by providing diversification benefits and strong returns in up and down markets.

Yes, thanks Anthony. NewGen has done an excellent job protecting our client's assets. Anthony, can you explain what an alternative investment is?

Yeah, of course. So traditional investments are stocks, bonds, and cash very much like your [INAUDIBLE] pension like portfolio that you manage with your team, Jim. Alternative investments are assets like real estate, commodities, private equity hedge funds. Alternative investments have typically been used by institutional investors to provide a unique return stream, to protect her financial downturn, and largely to provide diversification.

Over the last number of years alternative investments have grown significantly in popularity because of their ability to protect capital during market downturns, not to mention the ability to generate an uncorrelated return streams and to help diversify a portfolio. For these reasons, I think they really serve a vital part of a larger portfolio, especially in today's market.

Yeah, agreed Antony. What is the goal of the NewGen alternative income fund we use.

Yes so the NewGen alternative income funds has three goals. One, is to provide investors with 8% to 10% targeted annualized returns. Two, to protect capital during times of market hardship. And three, to provide a very unique return stream and meaningful diversification benefits. Additionally for clients with a focus on generating steady cash flow alongside of strong returns, the NewGen alternative income fund also targets 4% in annual yield via smooth monthly distributions. Jim, your clients also have the ability to decide whether they would like to reinvest the yield payment or to take them in cash through their account with you.

Yes, good point. How has it performed?

Yeah, the funds have both performed incredibly well. Andrew, if you could pull up our second slide, I can illustrate that with our listeners. So this slide reflects our F class returns, net of all fees to the end of August 2020. The second column reflects our year to date return. So you'll notice year to date, the NewGen equity long short fund LP has been North of 12% year to date, versus its benchmark, which is the TSX composite which is still down 3.22% to the end of August.

For the NewGen and alternative income fund, you'll notice we've generated a plus 5% return year to date to the end of August, which is a negative 1.15% for its comparative benchmark TSX total return index. I'm really pleased to comment that if you notice overall time periods here, that both mutual funds have not only outperformed their respective indexes but have also done a good job of protecting capital.

Yeah, to be positive, this year during this crisis is really outstanding, Anthony. Good work. Our clients really appreciate the hard work that you guys are doing. What can we expect from this security going forward?

So going forward, the alternative income targets 8% to 10% annualized returns. The smooth monthly income distribution the focus on protection during periods of market turbulence. And I think one of the big benefits as well as to really complement and diversify the larger portfolio that you currently use through your approach.

Yes, that's exactly how we're using it for sure Anthony who should buy this fund and what is the minimum investor can buy in the fund?

That's a great question. So investors are comfortable with a focus on strong returns regardless of market conditions, capital preservation during volatility, and monthly income distributions would be the ideal client. From a purchase perspective, the minimum purchase for our fund is $500.

Anthony, is there a cost to buy or sell the fund?

No, there's no cost to buy or sell the fund.

Can you explain this well? The cost of purchasing the fund, I know there's a man there are management fees and performance fees and this is a little different than some other funds that we might own.

Yeah, from a cost perspective. So mutual funds, exchange traded funds, and alternative funds are similar in the sense that they all have management fees. So NewGen offers advisors F class and G class shares. The F class class management fee is for your fee based clients, and is 1%. And understanding your client base Jim, this is where I believe the majority of your assets are.

Yes, you are correct, Anthony.

Okay. Separately, we also offer a G Class which is a management fee for trailor based accounts or commission based accounts. Under this program we charge a 2% management fee, this is for non fee based accounts. So this fee structure is standard across the industry and in line or in some cases our numbers are below some of our competitors. Where alternative funds are a little different, is they can have performances. And so a performance fee arises when an alternative investment generates a return. The manager typically takes a portion of that return. So historically it's been about 20%. However, the performance fee in the NewGen alternative income fund is 15%. Now, I would say most importantly to all of this, all the numbers that we quote are always net of all fees inclusive of the management fee and the performance fee.

Great. Thank you for that, Anthony. That's helpful for our listeners. What is the risk of owning this Fund?

Yeah, so alternative investments typically force investors to lock up their money for long periods of time. So this could mean months, it could also mean years. One of the benefits of owning the NewGen alternative income fund, is that it actually provides daily liquidity. So if your clients are unhappy with the returns or simply they just need their capital for other purposes, you have the ability to buy and sell the fund every single business day with money returned to your GF account within two days.

We follow the Canada Pension Plan closely and that's what our pin portfolio is built on we follow a similar asset mix and geography as the Canada Pension Plan. While the CPP has a top notch team of investment professionals inside CPP, they use specialty managers to help the manager manage Canadians money. In fact, they have about 258 external managers. We use the same approach and NewGen is one of our external managers we use to help protect and grow our client's assets.

You and your team, Anthony at NewGen done a great job and we thank you for that. Do you have any final comments?

Thanks for the kind words and the support. And for your listeners, if they happen to have any follow up questions Jim manager you have my contact info we're always happy to provide the info for you guys. You've been a great supporter of us so very much appreciate the time and the consideration.

Thanks Anthony for sharing all this information. And educating us on an investment, which many investments have not had exposure to and one we believe should be in our client's portfolio. We look forward to sharing this idea. Thank you. And thank you everyone for listening.