June 2016Monthly Perspectives Portfolio Advice & Investment Research
This document is for distribution to Canadian clients only.
Please refer to the last page of this report for important
Brad Simpson, Chief Wealth Strategist
In this issue
Volatility seems to be the hardest word�� 1 - 2
Own your risk���������������������������������������� 3 - 4
Low volatility strategies�������������������������� 5 - 6
Monthly market review������������������������������� 7
Important information�������������������������������� 8
Call him Voldemort, Harry. Always use the proper name for things.
Fear of a name increases fear of the thing itself. - J.K. Rowling
Volatility. There, I said it…and appear no worse off in the doing. It's incredible
the fear that seems to come with its mere mention, but there is nothing to be
afraid of. In fact, if you are prepared for it, volatility can be a positive contributor
to your long-term financial well-being. The reason for this is that volatility,
if experienced in reasonable quantities, is actually critical to a healthy financial
market because it helps establish a much needed balance in the financial system.
A financial environment with moderate volatility separates the wheat from the
chaff, so investments that are poorly functioning go down in value, while ones
that are functioning well go up. A financial environment without appropriate
volatility sees all assets, good or bad, go up in value, which is unsustainable in
the long term.
Volatility seems to be the hardest word
2. 2 Monthly Perspectives June 2016
Volatility seems to be the hardest word (cont’d)
Brad Simpson, Chief Wealth Strategist
The question that warrants due consideration is whether our
current environment is well balanced and in good health? A well-
functioning financial environment needs three key things:
If one of these components fails to function effectively, there is
usually a price correction leading to modest volatility. If all three
are severely impaired, as was the case during the Credit Crisis of
2008, the likelihood of a financial crisis is high because financial
markets are in their least effective state. During jubilant market
highs, investors are driven by the fear of missing out and tend to
think that markets can only go up. As a result, they are willing to
pay more for less. During manic market lows, however, investors
en masse are willing to pay less for more. But markets are not this
black and white; all good or all bad. A healthy financial system
works by striking a balance between the two extremes.
1 Investors in a marketplace must have opposing
views on the value of underlying assets.
2 Investors must have equal access to all available
Rewards and penalties
3 Investors who have a view based on all available
information and get it wrong should lose money;
those who get it right should make money.
Achieving this balance is precisely what central banks, particularity
the U.S. Federal Reserve (Fed), want to orchestrate today. Years
of unconventional monetary policies, such as zero interest rates,
led to the rampant decline of cognitive diversity, and investors
began to run from one side of a proverbial boat to the other as the
term “risk on” or “risk off” entered the common investor lexicon.
This sort of thinking impaired the pricing mechanism of the market
itself where there were no good or bad investments just “risk
assets,” which moved with the whims of the masses shuffling back
and forth. The Fed’s interest rate increase in December 2015 and
the related volatility that followed in January and February 2016
should be seen as the Fed’s way of trying to inoculate the financial
system with volatility to achieve balance. Markets corrected, they
recovered and cognitive diversity has improved, resulting in fewer
investments moving in unison.
Years of unconventional monetary
policies led to the rampant decline
of cognitive diversity.
In the long term, we believe that high debt, full valuations,
decelerating earnings growth, central bank policy and geopolitical
risks will continue to act as sources of volatility. For the short
term, however, volatility seems to have tapered off due to some
recent positive trends. For instance, in the second week of May,
U.S. retail sales beat expectations. This was followed by a stream
of positive data for the U.S. economy with reports on housing,
industrial production, and consumer prices all suggesting that there
are many good things happening in the world’s biggest and most
important economy. According to TD Economics, this positive data
has not gone unnoticed by Fed officials, with plenty of hawkish
rhetoric heard soon after the release. Alongside the also hawkish
minutes from their April meeting, the Fed looks increasingly likely
to go ahead with another interest rate increase in the near future—
as long as data continues to cooperate and the global economy
remains out of the headlines.
The current lull in volatility offers an
opportunity for investors to make
With all this said, we feel that the current lull in volatility offers
an opportunity for investors to make portfolio adjustments. Speak
with you advisor about how you can prepare for a potential rise
in volatility. While there are a number of ways to construct and/or
make portfolio adjustments to protect capital and prosper during
periods of turbulence, we will consider three that are consistent
with our risk priority philosophy: ownership, low volatility and
conservative hedge fund strategies.
3. 3 Monthly Perspectives June 2016
Own your risk
Chris Blake, CFA
Energy 19.5% 7.2% 0.5% 7.1% 12.7% 0.4% 2.8%
Materials 12.4% 2.9% 0.5% - 6.6% 7.7% 5.9%
Industrials 8.0% 10.1% 4.5% 6.3% 6.7% 21.5% 14.8%
Consumer Discretionary 6.5% 12.5% 18.8% 2.8% 11.3% 19.3% 10.5%
Consumer Staples 4.4% 10.3% 5.7% 2.1% 19.8% 9.8% 6.1%
Health Care 1.0% 14.7% 14.4% - 9.9% 11.3% 5.6%
Financials 37.3% 16.2% 7.7% 55.1% 20.5% 5.9% 41.8%
Information Technology 2.9% 20.1% 46.5% 11.5% 1.5% 14.8% 7.6%
Telecommunication Services 5.5% 2.7% 1.2% 8.7% 6.4% 9.0% 0.6%
Utilities 2.4% 3.4% 0.1% 6.3% 4.7% 0.3% 4.3%
Figure 1: Composition of Major Indices Around the World
Source: Bloomberg Finance L.P. As at May 20, 2016.
One of the most tried and tested ways to manage volatility is to
make the philosophical decision to be an owner of businesses and
not get caught up in the manic gyrations of equity markets. In our
day to day business, we see a lot of Canadian investors’ portfolios,
and too infrequently we see ones based on ownership. Instead,
what we often see are portfolios heavily skewed towards Canadian
benchmarks. As a result, the portfolios are deeply tilted to holdings
in a few sectors: utilities, financial services, telecommunications,
and commodities (both materials and energy). These sectors are the
cornerstones of the Canadian equity market index. But you have to
ask yourself: Is this the optimal portfolio allocation that will allow
me to achieve my goals? Underlying that question is the question
of whether the goals and risks of the SP/TSX Composite Index
(SP/TSX) match your goals and your risk tolerance. In most cases
the answer is an unequivocal no.
A closer look at index risk
Equity indices can be thought of as imaginary portfolios that
represent the average performance of the stock market each day.
Indices are generally created using statistical measures designed to
find equities across sectors that are large, liquid and characteristic
of the market the index is replicating. Although that may sound
like an investor’s portfolio, they are quite different because indices
generally have many more equities in them, often running into the
hundreds (Dow Jones Industrials Index, with just 30 equities, is a
For example, the SP/TSX is constructed of 234 individual equities
across all ten of the GICS (Global Industry Classification Standard)
sectors. However, the financial sector itself had a better than 37%
weight in the index as at May 20, 2016, and the combined weight
of energy and materials stocks was almost 32%. That’s almost 70%
allocated to just three sectors. Because these index averages are
quoted on the nightly news and referenced in the morning paper,
investors tend to focus on their performance and use them as a
yardstick (or benchmark) to measure the performance of their own
The investing world is driven by benchmarks. They are present
even when hidden by the cloak of an ETF, mutual fund or pension
portfolio. ETFs are often designed specifically to track indices, and
mutual fund managers are often given performance compensation
based at least in part on their fund’s performance relative to
some index or combination of indices. It should surprise no one
that a quantitative review recently published by the Globe Mail
found that many fund managers had performance characteristics
suspiciously close to that of the indices against which they were
measured. The same is true of pension fund managers; they also
tend to be compensated relative to a benchmark so naturally they
are highly benchmark aware.
Speaking of benchmarks
As figure 1 illustrates, not all indices are created equal. In fact, the
differences in the composition of some of the major indices around
the world can be quite drastic. As an example, financial services
exposure varies from a low of just under 6% in Japan to a high of
over 55% in Hong Kong. Similarly, information technology exposure
varies from a low of less than a 3% weight in Toronto to a high of
a 46.5% weight in the U.S. Nasdaq 100. So why are these indices
so different? For the most part, the national indices are reflective
of the underlying economy. In Canada, our economy has a greater
reliance on resource extraction and so the combined weights of the
energy and materials sectors is almost 32% compared to an SP
500 Index (SP 500) weighting of a little over 10% and a Nasdaq
100 weighting of 1%.
A market index is simply a measure of
what the market has done, and does not
consider the investor’s goals.
These indices are not built as portfolios; they are built to be
representative of the underlying stock market that inevitably
tends to mirror the domestic economy in which it is situated.
These underlying differences are the key to the different returns of
4. 4 Monthly Perspectives June 2016
Own your risk (cont’d)
Chris Blake, CFA
various indices over time, and can provide diversification benefits
to a well-constructed portfolio. However, individually they may be
inappropriate relative measures for most individual investors.
A market index is simply a measure of what the market has done,
and does not consider the investor’s goals. It is more appropriate
to measure the success of an investor’s portfolio against his or her
unique set of goals, not against an arbitrary benchmark that may
carry more risk than an investor wants or needs to take. Investors
who structure their portfolios to meet their individual goals and
preferences, such as diversification benefits, dividend income or
low volatility securities, and therefore deliberately deviate from the
sector allocation of market indices, must understand that those
indices may not be relevant benchmarks for them.
This leads to our second observation about the many portfolios
we see: they tend to be overly concentrated in Canada. Similar
to the index that they mirror (mostly the SP/TSX) the portfolios
are vulnerable to all the macro-economic shocks that can hit the
domestic economy, and we don’t have to look back far to find the
perfect example. Canadian equities performed relatively poorly in
2014 and 2015, only picking up somewhat since the start of 2016.
The reason for the underperformance was clearly because the
Canadian economy has a high exposure to commodities. Foreign
investors reduced their exposure to commodities by reducing
exposure to Canada. Further, the financial sector was viewed as
vulnerable on the belief that weak commodity performance might
drive layoffs, impinging on consumer sentiment and finances,
which could result in loan defaults.
Diversification within the equity class would dampen such an
impact. That diversification should be across industry groups as well
as across geographies and currencies.
Currency: a portfolio risk or return enhancer?
Many investors have an aversion to investing outside of their home
country since their financial goals are most likely denominated in
domestic currency; investing outside their home country would
therefore add a layer of currency risk. While some investors mitigate
currency risk by sticking to the domestic market, currency can
actually be a driver of portfolio returns, thus helping meet long-
term goals. For example, let us look at the returns for a Canadian
investor under a few scenarios (figure 2).
In 2014 and 2015, not only did the SP 500 outperform the SP/
TSX but Canadian dollar denominated investment in the SP 500
provided investors with a significant added benefit. To date, 2016
has not worked out so well for Canadian investors who ventured
south of the border, both because the SP 500 has underperformed
the SP/TSX and because the Canadian currency has strengthened,
turning a meagre return for SP 500 investors into a loss in Canadian
dollars (CAD). Notwithstanding the lower CAD based returns in the
last few months, the point of diversification, both in terms of the
investment set and the potential benefit of currency diversification
can be seen in the last two lines of the table, which evaluate the
5- and 10-year performance metrics. Over the long term, currency is
more likely to be neutral than either a head or tail wind, depending
on the starting point.
Source: Bloomberg Finance L.P. A: Annualized; TR: Total Return. As at May 20, 2016.
Figure 2: Currency Impact on Index Performance
2014 (TR) 10.55% 13.68% 24.24%
2015 (TR) -8.33% 1.37% 20.67%
January 1 to May 20, 2016 (TR) 8.25% 1.31% -3.79%
January 1, 2014 to May 20, 2016 (A) 4.04% 6.85% 16.42%
January 1, 2011 to March 31, 2016 (A) 3.04% 12.19% 18.02%
January 1, 2006 to May 20, 2016 (A) 4.69% 7.25% 8.41%
In an index such as the MSCI All Country World Index, which tracks
stocks from 23 developed and 23 developing markets covering
85% of the world’s investable universe, Canada had a mere 3.25%
weighting as at April 29, 2016. There are a lot of opportunities
outside this country and many leading global companies are
domiciled right next door in the United States, a country with a
52.7% weight in that index. Many investors can take advantage of
the ease with which a Canadian can invest in the U.S. market.
Risk should be thought of as risk of
failing to meet personal goals, not the
day-to-day volatility of stock prices and
performance of arbitrary indices.
Redefine your risk
Let’s face the facts, the primary objective of most investing is goal
realization: saving and earning a return so that goals can be met.
Given this objective, risk should be thought of as risk of failing
to meet these goals, not the day-to-day volatility of stock prices,
currencies and benchmark indices. Most investors understand that
a long-term approach to investing is important and the short-
term blips (whether up or down) tend to even out in the long run.
Adding diversification based on the concept of company ownership
and exposure to different currencies and geographies can not only
reduce some of that daily volatility, but be a source of return to help
meet investment goals. It’s time to stop looking at our portfolios
and how they fare relative to arbitrary indices that are not designed
to meet our goals and instead embrace a goals-focused approach
5. 5 Monthly Perspectives June 2016
Low volatility strategies
Christopher Lo, CFA; Brad Simpson
Figure 3: SP 500 Index Equity Returns and Risk
Market Neutral 4.62% 3.06% 0.07 0.74
Long/Short Equity 8.07% 9.24% 0.48 0.63
Global Equities 6.13% 15.72% 1.00 0.31
Canadian Equities 6.56% 20.98% 1.12 0.30
Global Bonds 4.70% 5.47% 0.08 0.43
Source: Bloomberg and Morningstar Direct. Annualized returns from January 1, 1997 -
December 31, 2015. Market Neutral = HFRI Market Neutral Index; Long/Short Equity = HFRI
Equity Market Hedge Index; Global Equities = MSCI World Gross Return Index; Canadian
Equities = SP/TSX Composite Total Return Index; Global Bonds = BofAML Global Broad
Market Total Return Index. All index returns are in USD. Cash equivalent for the Sharpe ratio is
BofAML US Treasury Bill 3 Month Total Return Index and Beta is measured against the MSCI
World Gross Return Index.
Figure 4: Hedge Fund Volatility and Returns
It is safe to say that all investors enjoy the feeling of making a
profitable return. On the opposite side of the spectrum—and
with greater magnitude—they dislike the feeling of loss that
comes with experiencing volatility in their portfolio. There is a
natural assumption that there is a positive relationship between
an investment's potential level of volatility and its expected return.
Meaning that investments deemed to be more volatile should carry
with them the potential for greater returns, after all, an investor
should be compensated for taking on risk. Not surprisingly, financial
academics have analyzed historical stock prices to find supporting
evidence of this correlation. What is surprising, however, is that
most of the research suggests this may not be true over a full
Source: TD Asset Management, Standard Poor’s. Annualized returns on SP 500 Index
constituents are from August 1978 through December 2014. Quintiles represent equally-
weighted portfolios of 100 stocks each, constructed monthly from equities sorted by trailing
36 months standard deviation. For illustrative purposes only.
Figure 3 illustrates this important point as it considers the historical
risk-return pattern of the constituents of the SP 500 Index from
August 1978 through December 2014. Each bar represents the
annualized return on a portfolio of 100 stocks from the index.
Each portfolio has been equally weighted and constructed on the
basis of trailing 36 months standard deviation (standard deviation is
often used to gauge an investment's volatility because it quantifies
how much a series of numbers varies). The data shows that the
most volatile equities (riskiest) have delivered lower average returns
over the long run while less volatile equities performed better.
Low volatility equity portfolios
This sort of evidence has led to the development of low volatility
strategies, such as low volatility equity portfolios. TD Asset
Management is a pioneer in the management of low volatility
portfolios having launched its first low volatility fund, the TD
Emerald Low Volatility Canadian Equity Pooled Fund Trust on
September 11, 2009. Seven and a half years after its launch, the
strategy has delivered strong risk-adjusted returns. Its success
spurred the subsequent launch of other low volatility equity funds
for institutional and individual investors.
Conservative hedge funds
Another way to potentially reduce volatility is through the prudent
use of conservative hedge funds, particularly long/short equity and
market neutral strategies.
Historically, stocks in general have had a high level of correlation
to the state of the overall economy, while long/short and market
neutral strategies have had a lower level of correlation to equity
markets. This means they have shown the tendency to move in
a different direction than equity markets. As such, adding a long/
short or market neutral strategy to a traditional portfolio can act
as a diversifier and potentially lead to a higher return and a lower
level of volatility. As illustrated in the table below, over the past
19 years, hedge funds have had a similar return as stocks but
with significantly less volatility as measured by standard deviation.
The table illustrates the returns and volatility of equities and bonds
compared to long/short and market neutral strategies from 1997
1 The fund purchases undervalued stocks and
sells-short overvalued stocks.
Market neutral funds
2 The fund also employs a long/short strategy;
however, the differentiating factor is that the
manager tries to neutralize market volatility
by limiting the exposure to the broad market,
instead relying on security selection to add value.
Safest Moderate Risk Riskiest
6. 6 Monthly Perspectives June 2016
Low volatility strategies (cont’d)
Christopher Lo, CFA; Brad Simpson
HFRI Market Neutral Index HFRI Equity Market Hedge (Long/Short) MSCI World ex Canada
Median of Returns -0.8% -7.0% -19.0%
Mean of Returns 1.5% -10.9% -23.8%
Source: Bloomberg Finance L.P. and Morningstar Direct. Returns are reported in U.S. dollars and are not annualized.
As a further illustration of the downside protection offered by
hedge funds, the following chart highlights the returns of global
equity markets versus long/short and market neutral strategies
during periods of extreme equity market volatility. In each of the
periods, the losses of the hedge funds were less than that of the
traditional long-only equity markets. When combined with long-
only investments, a portfolio incorporating alternative investments
has the potential to deliver higher risk adjusted returns and a
“smoother” return. Despite their apparent appeal, they are not an
investment suitable for everyone. A hedge fund is an investment fund
that is typically available to institutional and accredited individual
investors. They are similar to mutual funds in that investments are
pooled and professionally managed but differ in that a hedge fund
has far more flexibility in its investment strategies. This flexibility will
vary depending on the strategy, which could incorporate the use of
short positions, leverage and derivatives.
Figure 5: Periods of Extreme Equity Market Downturns
MSCI World ex Canada
HFRI Equity Market Hedge (Long/Short)
HFRI Market Neutral Index
Apr 2011 -
Apr 2010 -
Oct 2007 -
Mar 2002 -
Mar 2000 -
Jun 1998 -
Periods of Extreme Equity Market Downturns
Depending on the specific strategies employed, hedge funds may
provide investors with an investment that has a relatively low
correlation to traditional asset classes and can offer potential for
enhanced returns or capital protection. Investors should be aware
that hedge funds are generally less regulated when compared to
mutual funds, and have minimum investment periods (lock-ups)
and notice periods for redemptions.
In conclusion, while including low volatility strategies in a
portfolio can provide additional diversification, and potentially
reduce portfolio volatility and enhance returns, some alternative
investments, such as hedge funds, may not be appropriate for every
investor. The allocation to these alternative investments depends
upon your investment goals, risk tolerance, time horizon and
investment sophistication. Your advisor can help determine if low
volatility equity portfolios or alternative investments should be part
of your portfolio.
7. 7 Monthly Perspectives June 2016
Monthly market review
(%) (%) (%) (%) (%) (%) (%) (%)
Canadian Indices ($CA) Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years
SP/TSX Composite (TR) 44,751 1.00 10.24 9.46 -3.31 6.77 3.43 4.81 7.50
SP/TSX Composite (PR) 14,066 0.82 9.37 8.12 -6.32 3.60 0.38 1.82 5.05
SP/TSX 60 (TR) 2,110 0.84 9.58 8.72 -3.16 7.37 3.88 5.11 8.04
SP/TSX SmallCap (TR) 884 -0.30 20.31 21.56 0.60 4.29 -2.30 1.15 -
U.S. Indices ($US) Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years
SP 500 (TR) 3,958 1.80 9.12 3.57 1.72 11.06 11.67 7.41 7.88
SP 500 (PR) 2,097 1.53 8.53 2.59 -0.49 8.74 9.29 5.14 5.88
Dow Jones Industrial (PR) 17,787 0.08 7.69 2.08 -1.24 5.57 7.19 4.76 5.91
NASDAQ Composite (PR) 4,948 3.62 8.56 -1.19 -2.41 12.71 11.78 8.55 7.15
Russell 2000 (TR) 5,556 2.25 12.15 2.28 -5.97 6.93 7.86 6.27 7.39
U.S. Indices ($CA) Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years
SP 500 (TR) 5,185 6.26 5.71 -1.98 6.89 20.17 18.61 9.28 7.64
SP 500 (PR) 2,747 5.99 5.13 -2.90 4.56 17.67 16.08 6.97 5.65
Dow Jones Industrial (PR) 23,300 4.47 4.32 -3.39 3.78 14.24 13.86 6.58 5.68
NASDAQ Composite (PR) 6,482 8.16 5.16 -6.48 2.55 21.96 18.73 10.43 6.91
Russell 2000 (TR) 7,277 6.74 8.64 -3.20 -1.19 15.70 14.57 8.12 7.16
MSCI Indices ($US) Total Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years
World 6,495 0.65 9.33 2.11 -3.39 7.05 7.13 5.13 6.28
EAFE (Europe, Australasia, Far East) 6,332 -0.78 8.94 -0.75 -9.24 2.45 2.58 2.40 4.58
EM (Emerging Markets) 1,680 -3.71 9.67 2.40 -17.33 -4.62 -4.50 3.44 5.08
MSCI Indices ($CA) Total Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years
World 8,508 5.07 5.90 -3.36 1.52 15.84 13.80 6.96 6.04
EAFE (Europe, Australasia, Far East) 8,294 3.57 5.53 -6.07 -4.63 10.85 8.96 4.18 4.35
EM (Emerging Markets) 2,200 0.51 6.24 -3.08 -13.12 3.21 1.44 5.23 4.85
Currency Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years
Canadian Dollar ($US/$CA) 76.34 -4.20 3.23 5.66 -4.84 -7.58 -5.85 -1.71 0.22
Regional Indices (Native Currency)
Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years 20 Years
London FTSE 100 (UK) 6,231 -0.18 2.19 -0.18 -10.79 -1.82 0.79 0.85 2.57
Hang Seng (Hong Kong) 20,815 -1.20 8.91 -5.02 -24.10 -2.41 -2.55 2.76 3.12
Nikkei 225 (Japan) 17,235 3.41 7.54 -9.45 -16.19 7.76 12.20 1.09 -1.20
Benchmark Bond Yields 3 Month 5 Year 10 Year 30 Year
Government of Canada Yields 0.55 0.88 1.51 2.08
U.S. Treasury Yields 0.23 1.30 1.83 2.68
Canadian Bond Indices ($CA) Total Return Index Level 1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years
FTSE TMX Canada Universe Bond Index 1017.08 0.91 1.62 2.24 2.81 4.27 4.82 5.37
FTSE TMX Canadian Short Term Bond Index (1-5 Years) 693.82 0.35 0.56 0.63 1.38 2.39 2.62 3.86
FTSE TMX Canadian Mid Term Bond Index (5-10) 116.58 1.20 1.60 2.30 3.87 4.90 5.63 6.16
FTSE TMX Long Term Bond Index (10+ Years) 1621.30 1.42 3.06 4.37 3.96 6.40 7.64 7.28
Sources: TD Securities Inc., Bloomberg Finance L.P. TR: total return, PR: price return. As at May 31, 2016.
8. 8 Monthly Perspectives June 2016
The information has been drawn from sources believed to be reliable. Where such statements
are based in whole or in part on information provided by third parties, they are not guaranteed
to be accurate or complete. Graphs and charts are used for illustrative purposes only and
do not reflect future values or future performance of any investment. The information does
not provide financial, legal, tax or investment advice. Particular investment, trading, or tax
strategies should be evaluated relative to each individual’s objectives and risk tolerance. TD
Wealth, The Toronto-Dominion Bank and its affiliates and related entities are not liable for any
errors or omissions in the information or for any loss or damage suffered.
Certain statements in this document may contain forward-looking statements (“FLS”) that
are predictive in nature and may include words such as “expects”, “anticipates”, “intends”,
“believes”, “estimates” and similar forward-looking expressions or negative versions thereof.
FLS are based on current expectations and projections about future general economic, political
and relevant market factors, such as interest and foreign exchange rates, equity and capital
markets, the general business environment, assuming no changes to tax or other laws or
government regulation or catastrophic events. Expectations and projections about future
events are inherently subject to risks and uncertainties, which may be unforeseeable. Such
expectations and projections may be incorrect in the future. FLS are not guarantees of future
performance. Actual events could differ materially from those expressed or implied in any FLS.
A number of important factors including those factors set out above can contribute to these
digressions. You should avoid placing any reliance on FLS.
All credit products are subject to credit approval and various terms and conditions. Nothing
contained herein should be construed as an offer or commitment to lend by the Toronto-
Full disclosures for all companies covered by TD Securities Inc. can be viewed at
Overall Risk Rating in order of increasing risk: Low (7.3% of coverage universe),
Medium (35.4%), High (42.0%), Speculative (15.4%)
basis, over the next 12 months and it is a top pick in the Analyst’s sector. BUY: The stock’s total
SPECULATIVE BUY: The stock’s total return is expected to exceed 30% over the next 12
months; however, there is material event risk associated with the investment that could result
in significant loss. HOLD: The stock’s total return is expected to be between 0% and 15%,
on a risk-adjusted basis, over the next 12 months. TENDER: Investors are advised to tender
their shares to a specific offer for the company’s securities. REDUCE: The stock’s total return
is expected to be negative over the next 12 months.
Research Report Dissemination Policy: TD Waterhouse Canada Inc. makes its research
products available in electronic format. These research products are posted to our proprietary
websites for all eligible clients to access by password and we distribute the information to
our sales personnel who then may distribute it to their retail clients under the appropriate
circumstances either by e-mail, fax or regular mail. No recipient may pass on to any other
person, or reproduce by any means, the information contained in this report without our prior
Analyst Certification:The Portfolio Advice and Investment Research analyst(s) responsible for
this report hereby certify that (i) the recommendations and technical opinions expressed in the
research report accurately reflect the personal views of the analyst(s) about any and all of the
securities or issuers discussed herein, and (ii) no part of the research analyst’s compensation
was, is, or will be, directly or indirectly, related to the provision of specific recommendations
or views expressed by the research analyst in the research report.
Conflicts of Interest: The Portfolio Advice Investment Research analyst(s) responsible for
this report may own securities of the issuer(s) discussed in this report. As with most other
employees, the analyst(s) who prepared this report are compensated based upon (among other
factors) the overall profitability of TD Waterhouse Canada Inc. and its affiliates, which includes
the overall profitability of investment banking services, however TD Waterhouse Canada Inc.
does not compensate its analysts based on specific investment banking transactions.
Mutual Fund Disclosure: Commissions, trailing commissions, performance fees, management
fees and expenses all may be associated with mutual fund investments. Please read
the prospectus, which contains detailed investment information, before investing.
The indicated rates of return (other than for each money market fund) are the historical
annual compounded total returns for the period indicated including changes in unit value and
reinvestment of distributions. The indicated rate of return for each money market fund is an
annualized historical yield based on the seven-day period ended as indicated and annualized
in the case of effective yield by compounding the seven day return and does not represent
an actual one year return. The indicated rates of return do not take into account sales,
redemption, distribution or optional charges or income taxes payable by any unitholder that
would have reduced returns. Mutual funds are not covered by the Canada Deposit Insurance
Corporation or by any other government deposit insurer and are not guaranteed or insured.
Their values change frequently. There can be no assurances that a money market fund will be
able to maintain its net asset value per unit at a constant amount or that the full amount of
your investment will be returned to you. Past performance may not be repeated.
Corporate Disclosure: TD Wealth represents the products and services offered by
TD Waterhouse Canada Inc. (Member – Canadian Investor Protection Fund), TD
Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by
The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust
The Portfolio Advice and Investment Research team is part of TD Waterhouse Canada Inc., a
subsidiary of The Toronto-Dominion Bank.
Trade-mark Disclosures: FTSE TMX Global Debt Capital Markets Inc. (“FTDCM”), FTSE
International Limited (“FTSE”), the London Stock Exchange Group companies (the
“Exchange”) or TSX INC. (“TSX” and together with FTDCM, FTSE and the Exchange, the
“Licensor Parties”). The Licensor Parties make no warranty or representation whatsoever,
expressly or impliedly, either as to the results to be obtained from the use of the index/indices
(“the Index/Indices”) and/or the figure at which the said Index/Indices stand at any particular
time on any particular day or otherwise. The Index/Indices are compiled and calculated by
FTDCM and all copyright in the Index/Indices values and constituent lists vests in FTDCM. The
Licensor Parties shall not be liable (whether in negligence or otherwise) to any person for any
error in the Index/Indices and the Licensor Parties shall not be under any obligation to advise
any person of any error therein.
“TMX” is a trade mark of TSX Inc. and is used under licence. “FTSE®” is a trade mark of the
London Stock Exchange Group companies and is used by FTDCM under licence.
Bloomberg and Bloomberg.com are trademarks and service marks of Bloomberg Finance L.P.,
a Delaware limited partnership, or its subsidiaries. All rights reserved.
TD Securities is a trade-mark of The Toronto-Dominion Bank representing TD Securities Inc.,
TD Securities (USA) LLC, TD Securities Limited and certain corporate and investment banking
activities of The Toronto-Dominion Bank.
All trademarks are the property of their respective owners.
®The TD logo and other trade-marks are the property of
The Toronto-Dominion Bank.
Percentage of subject companies under
each rating category—BUY (covering
Action List BUY, BUY and Spec. BUY
ratings), HOLD and REDUCE (covering
TENDER and REDUCE ratings).
As at June 1, 2016.
Distribution of Research Ratings
BUY HOLD REDUCE
Percentage of subject companies
within each of the three categories
(BUY, HOLD and REDUCE) for which
TD Securities Inc. has provided
investment banking services within the
last 12 months.
As at June 1, 2016.
Investment Banking Services Provided
BUY HOLD REDUCE