Community Foundations of Canada May 8, 2015 | William MacLachlan, CFA, Past Chairman and Institutional Portfolio Manager

October 19, 2014 |

Seen from the Calgary Petroleum Club this morning…

1. Mawer

2. Trends in asset management

3. Trends in the global economy and financial markets

Agenda

• Founded in 1974 by Charles Mawer

• A 100% independent portfolio manager

• Broadly owned by 37 professionals within the firm

• Singular, team-based investment approach

• A strong values based, firm-wide culture

• A staff of 117, with offices in Calgary, Toronto and Singapore

• $20.4 billion in institutional assets under management

• $3.4 billion in not-for-profit and foundation assets

Firm Overview

Mawer’s Core Values and Mission

Core Values • Act with integrity

• Put clients’ interests first

• Pursue excellence

• Work as a team

• Think long-term

Mission To be our clients’ most trusted investment manager, a position earned through long-term investment excellence, strong client partnerships, and a commitment always to do the right thing.

Trends in Asset Management

Industry Trends

• Technological change: data,

connectivity, immediacy,

simplicity, security

Technology Exploding

Industry Trends

• Client confidence at risk

• Transparency

• Governance

• Risk Management

• Compliance

• Regulation

Trust Had Eroded

Industry Trends Trust Had Eroded

Industry Trends

• Passive and alternative investing gaining momentum

• Transitory or permanent shifts?

• Correlation to low interest rates

Investment Style Shifts

Source: PWC

Industry Trends

• Move towards objective based outcomes - benchmark agnostic

• Socially responsible investing

• Search for fixed income solutions/alternatives

• Fee compression

• Globalization

Other Trends

Trends in the Global Economy and Financial Markets

Central Bank Quantitative Easing

Nov ‘08

Federal Reserve Announces Large Scale

Asset Purchase (LSAP) program

$600 billion

Nov ‘10

Fed launches LSAP2

$600 billion

Apr ‘13

BoJ unleashes largest QE push ever

$1.4 trillion

Jan ‘09

BoE creates Asset Purchase

Facility (APF) Fund

£200 billion

Sep ‘11

Fed announces Maturity Extension

Program (MEP) $400 billion

Oct ‘11

BoE expands APF £75 billion

Mar ‘09

FOMC expands LSAP

$1.15 trillion

Oct ‘14

Fed ends QE program

Mar ‘15

ECB QE $1.2 trillion

Yields – How Low Can They Go? Treasury Yields Fall

Source: Bloomberg

Discount?

Source: Bloomberg

Inflation – MIA

Normal?

• Waves of monetary policy easing continue to surprise market with level of stimulus

• Nestlé borrows at negative rates

• Rates will should rise in 2015 …sometime

• Oil…

• Greece, Ukraine, Libya, Syria, Iraq, Yemen…

• Geopolitical issues – globalization’s Achilles heel?

• Growing disconnect between financial markets and fundamentals

A New Normal While in Europe…

Conclusion: Build A Resilient Portfolio

• Diversify

• Cash and bonds a de facto insurance policy against equity risk

• Macro event forecasts fail – shift the focus to micro fundamentals, buying quality

securities at reasonable prices

• Expect lower nominal portfolio returns, but satisfactory real returns

Looking Ahead

• U.S. stock returns from 1824 to 2013 were 8.4% annualized

• U.S. immediate post crisis returns were 9-12% per year

• Expected equity return now is 6-8% for typical developed market

• Fixed Income outlook challenging in near term

Cognition

• Perspective

• Complacency increases risk

• Unpredictable – literally…

• Is it really different this time?

Perceiving Reality

Cognition Perceiving Reality