Market Update & Outlook...prospectus only through registered dealers. Commissions, trailing...

Presented by:

John Bai, CFA

Chief Investment Officer, Aviso Wealth

June 17, 2020

Market Update & Outlook

NEI INVESTMENTS » 2

Vertically integrated, market-leading solutions in each line of business:

• wealth management – Credential

• asset management – NEI Investments

• digital wealth – Qtrade Investor and VirtualWealth

• correspondent & institutional – Aviso Correspondent Partners

$60+ billionCombined assets

300+Financial institution partners

30+ yearsWealth management experience

The strength of one of Canada’s largest

independent wealth management firms


Global, open-ended partnership structure

• Access to unique mandates,

exceptional talent and powerful

alliances that can amplify our

impact as responsible investors

• Flexibility to make changes

and innovate

17external investment

managers

$6 trillion of AUM

100+ offices worldwide


Longstanding commitment to responsible investing

NEI has over a 30-year history of being Canada’s leader in responsible investing

As Ethical Funds

As NEI

Ethical Funds

merges with NW

Funds to form NEI

NEI launches

Canada’s first fossil

fuel free, resource

optimization fund

NEI decides to

apply RI strategies

across entire fund

lineup

NEI becomes part of

Aviso Wealth Group

of Companies w

nearly $60B in

assets

OceanRock

Investments merges

with NEI to create

Canada’s largest ever

RI provider

The decade

of impact

Ethical Funds –

forerunner to NEI

– launches first RI

fund in Canada

Founding member

Social Investment

Organization

(now RIA)

Product lineup

expanded to five

RI funds

First to disclose

Proxy Voting

Guidelines

Launched

shareholder action

program

Joined UN PRI

in its first year

Founding Member

of the Carbon

Disclosure Project


COVID-19: The Crisis

Quick and record-breaking

• It only took 6 days for the S&P 500 to fall from

all-time highs into a bear market, the fastest

decent in history

• Risk assets saw significant declines in prices,

and even investment grade corporate bonds and

periphery eurozone government bonds were

negatively impacted

• The sell-off was further exacerbated by liquidity

issues, and eventually bottomed out on March 23

following massive central bank stimulus

announcements

12%

4%

0%

-17%

-21%

-22%

-24%

-24%

-25%

-30%

-34%

-46%

-50% -40% -30% -20% -10% 0% 10% 20%

US Dollar

Canada IG Bond

Global IG Bond

Growth Equity

US HY Bond

US Equity

EM Equity

Global Equity

Intl Equity

Value Equity

Can LC Equity

Can SC Equity

Asset Class Returns (C$)Jan 1 to Mar 23 (market bottom)

Source: Bloomberg


COVID-19: The unprecedented response

Monetary & Fiscal policy: Quick and sharp

• Policymakers moved quickly as well

• $9 trillion in fiscal support has been announced

globally to help people and firms get through the

crisis.

• Monetary support from central banks were swift

as well.

• Both the Bank of Canada and the U.S. Federal

Reserve dropped their benchmark rates to near

zero and injected massive amounts of liquidity

into the economy. 0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Jan

-08

Au

g-0

8

Ma

r-0

9

Oct-

09

Ma

y-1

0

Dec-1

0

Jul-

11

Fe

b-1

2

Se

p-1

2

Ap

r-13

Nov-1

3

Jun

-14

Jan

-15

Au

g-1

5

Ma

r-1

6

Oct-

16

Ma

y-1

7

Dec-1

7

Jul-

18

Fe

b-1

9

Se

p-1

9

Ap

r-20

Central Banks move swiftly to inject liquidity into the economy

Bank of Canada Federal Reserve Bank

Source: Bank of Canada; Federal Reserve Economic Data

Data as of May 31,2020


COVID-19: Accelerated trends already in place

SMART • Transition to the Digital Economy From physical to digital world

• Transition to the Sustainable Economy From high carbon to low carbon world

• Transition to a Durable EconomyFrom vulnerabilities to ability to withstand increased exogenous

shocks

• Transition to an Equitable EconomyFrom inequalities to a better distribution of wealth

CLEAN

RESILIENT

FAIR


COVID-19: The recovery

Initial market rebound was very narrow

• Technology stocks led the rebound

• The 5 largest S&P 500 companies (Apple,

Amazon, Microsoft, Alphabet and Facebook) had

an average return of +10% to the end of May,

while the other 495 companies had an average

return of -15.5%

• Value stocks lag growth stocks by more than

20% from the beginning of the year to end of

May. FACEBOOK

ALPHABET

AMAZON

APPLE

MICROSOFT

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

-100% -75% -50% -25% 0% 25% 50% 75% 100%

Contr

ibution t

o r

etu

rn (

%)

Total return (%)

S&P 500 Constituent Return (US$)as of May 31, 2020

Source: Bloomberg


30

32

1500

1700

1900

2100

2300

2500

2700

2900

3100

3300

3500

Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20

RI outperforms in periods of crisis

78%

75%

94%

Percentage of RI Indices that outperformed comparable indices

21-Jul-15 to

11-Feb-16

20-Sep-18 to

21-Dec-19

20-Jan-20 to

31-Mar-20

Source: Blackrock, Sustainable Investing: resilience amid uncertainty.

51

57

Focus: Q1 2020

Morningstar

Blackrock

Multiple index providers confirm outperformance in Q1 2020.

15

17

MSCI

Over the last three market pull backs, RI indices outperformed the comparable indices

% Outperformed peer group

% Underperformed peer group


COVID-19: Crisis

Green bond resilience

• Green bonds are best known for funding

renewable energy, but they also fund critical

infrastructure like transportation and

sustainable water management.

• During the depths of the crisis, losses in green

bonds were half those of other corporate

bonds.

• Going forward, the opportunity for pandemic

stimulus monies to build sustainable

infrastructure is huge. This would lead to more

issuance of green bonds.

US green bond performance vs corporate bonds

Source: Bloomberg. April 17, 2020


COVID-19: Recovery

Market recovery has broadened since mid-May

• Outperformance of cyclical sectors such as

Financials, Energy, Industrials, Real Estate

• USD/CAD has weakened from its high of 1.45

down to 1.34

• Commodities such as crude oil, copper, and iron

ore are rallying

• US Treasury curve has steepened, and the 30-

year yield is up 67bps since its all-time low on

March 9

40

60

80

100

120

140

160

180

Dec 2019 Jan 2020 Feb 2020 Mar 2020 Apr 2020 May 2020

Market Indicator Performance, Normalized

MSCI USA CyclicalSectors

MSCI USADefensive Sectors

US Dollar Index

S&P/GS CommodityIndex

US Treasury 5s30sYield Spread

Source: Bloomberg


COVID-19: Recovery

IMF – World Real GDP (YoY%)(Blue bars actual, grey bars forecast)

Source: IMF Fiscal Monitor. As of March 31, 2020.

3.5% 3.6% 3.5% 3.4%3.9%

3.6%

2.9%

-3.0%

5.8%

3.6%

-4%

-2%

0%

2%

4%

6%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Economic Recovery

• Annually, IMF predicts global

economic growth of 5.8% in

2021 after falling -3% in 2020.

• Quarterly, we expect Q2 to be

the low in economic activity,

with gradual recovery in Q3,

Q4 and into 2021.

• Equity markets are forward

looking and are beginning to

discount this scenario.


Investment Outlook

Asset Classes

• As we see continued success in containing the

virus, we expect markets to continue their

recovery and eventually revert to our long-term

equity return assumptions.

• Equity valuations favor Europe, Japan, EM over

US markets.

• As economies and markets recover, we expect a

gradual increase in bond yields, but we remain of

the view that bond yields will stay suppressed on

a secular basis.

• The recent massive stimulus measures will add

to the growing ceiling on global interest rates.

• Fixed income valuations favor corporates over

government bonds.

-3

-2

-1

0

1

2

3

World(ACWI)

EM Europe Canada USA Japan Asia PacificNo

rmali

zed

Valu

ati

on

(Z

-sco

re)

NEI Equity Valuations – May 31, 2020

Long-term Avg Current Composite score

-1%

0%

1%

2%

3%

4%

5%

6%

Gov't ofCanada

Canada IGCorp OAS

Global Gov't Global IGCorp OAS

US Treasury US HY CorpOAS

Re

al Y

ield

NEI Fixed Income Valuations – May 31, 2020

Long-term Avg Current

Source: Bloomberg, NEI Investments


Interest Rates

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Government Bond Yields at low end of 10-year range

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

19.0%

21.0%

Jun-15 Mar-16 Dec-16 Sep-17 Jun-18 Mar-19 Dec-19

High Yield Spreads remain elevated

Gov’t bonds are at the bottom end of their 10-year range. Spreads are still relatively wide. Valuations favour investment grade and high yield corporates over government bonds.

10 Year Government Bond Yield Current (Dot) vs 10-year range BofA High Yield Index Option-Adjusted Spread

Source: Tradingeconomics.com


Investment Outlook

Risk Factors

• Success of reopening and whether countries can successfully adopt test and trace measures

• Success of formulating a vaccine

• Broad areas of the economy able to bounce back after a period of shut-down

• As of June 10, excessive equity market sentiment poses short-term risks:

• S&P 500 (local currency) just broke even for the year

• NASDAQ breached the 10,000 level on June 9 (intra-day)

• Record high of 96% of S&P 500 companies trading above their 50-day moving average


People in northern India see the

Himalayan mountain range, only 200 km

away, for the first time in 30-years.

Pride of lions nap on road in South Africa’s Kruger

National Park that is usually filled with tourists.

Boars in the middle of my hometown, dolphins in the port of Cagliari,

ducks in the fountains in Rome, Venice canals have now clean water

full of fishes. Air pollution dropped. Nature is reclaiming

its spaces during quarantine in Italy.

@Cosodelirante, March 15, 2020

Postcard from the future

NEI 2020 MARKET OUTLOOK 1717NEI INVESTMENTS » 17

Demand More

• Increase the financial wealth of our clients

How? By creating products that impact the triple bottom line:

• Increase the health of the planet

• Increase the human condition of citizens around

the world


For more information about NEI managed solutions, contact your NEI sales representative

at 1.888.809.3333.

The information and opinions in this report were prepared by NEI Investments and are FOR ADVISOR USE ONLY. NEI Investments endeavors to ensure that the

contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However,

NEI Investments makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein.

The views expressed herein are subject to change without notice as markets change over time.

Any reference to a particular company, security, industry or market sector should not be considered an indication of trading intent of any funds managed by NEI

Investments. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. Mutual funds are sold by

prospectus only through registered dealers. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.

Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in units value and

reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that

would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. (“NEI LP”). Northwest & Ethical Investments Inc. is the general partner of NEI LP

and a wholly-owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is the sole limited partner of the Manager. Aviso is a wholly-owned subsidiary of Aviso Wealth LP

(“Aviso Wealth LP”), which in turn is owned 50% by Desjardins Financial Holding Inc. (“Desjardins”) and 50% by a limited partnership owned by the five Provincial

Credit Union Centrals (the “Centrals”) and the CUMIS Group Limited.


Bull and bear markets


How the market anticipates a recession


Bond yields reach new all-time lows

10 Year Government of Canada Bond Yield

Source: Bloomberg. As of April 30, 2020. Bond yield = yield-to-maturity.

0%

2%

4%

6%

8%

10%

12%

14%

1990 1995 2000 2005 2010 2015 2020


Creating Canada’s first impact suite

“Impact investments are

investments made with the

intention to generate

positive, measurable social

and environmental impact

alongside a financial return.”

- Global Impact Investing Network

Impact Bonds

Impact Balanced

Impact Stocks


Example Impact Investments

Global positioning

systems, sensors

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manufacturer that

increases

agriculture

productivity and

reduce inputs. In

2018, its clients

avoided 8.7

million tonnes of

CO2 through

more precise

application of

fertilizers.

Environmental Leaders Fund

Sustainable Agriculture

U.S. Government-

backed investment

vehicle supports

Banco Pichincha to

expand lending for

micro, small, and

medium enterprises

in Ecuador. The

loan—100 percent

of which will go to

women—is

expected to reach

more than 53,000

female

entrepreneurs in the

first five years of

the project.

Global Sustainable Balanced

Gender Equality & Empowerment

Securitization of

loans to finance

the purchase and

installation of

residential solar

power generation

systems and

related items or

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about 8,700 solar

loans resulting in

about 43 MW of

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Global Impact Bond Fund

Renewable Energy

Market Update & Outlook...prospectus only through registered dealers. Commissions, trailing...

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