Investing in a low yield world

David Irwin

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EQUITABLE ASSET MANAGEMENT GROUP

Insurance Managers Internal function of the company since 1920 $1.8 billion in assets under management – general

funds & segregated funds

History of Solid Investment Performance Solid investment portfolio, proven even through

weak economic conditions, which contributes to strong corporate earnings

Experienced in asset allocation Nimble, top-down management

INVESTMENT PHILOSOPHY

94%

LOOKING AT THE “BIG-PICTURE”

The economy&

valuations

ZIRPQE

LSAPWIT2

HISTORICALLY LOW RATES

INVESTORS NEED MORE YIELD

13

CANADA SAVINGS BONDS

US FED HAS DRIVEN EQUITY MARKETS HIGHER

THE RETURN OF THE CONSUMER

Consumer

GDP

contribution

CONSUMER DEBTDECREASING IN THE US

Source: Bloomberg

Source: Bloomberg

US

Canada

HOUSING PERMITS > HOUSING STARTS

SPENDING TRENDS IMPROVING

Consumer confidence

Personal consumption

ECONOMIC OUTLOOK

United States Canada

+2.9% +1.7%

S&P 500 SOURCES OF RETURN

S&P 500 RECORD PROFIT MARGINS

US MARKET OVERVALUED?

15.8x

Source: Bloomberg

EQUITIES LOOK BETTER THAN BONDS

Source: Merrill Lynch BBB Corporate credit yield, Bloomberg

Equities 6.0%

Corporate bonds 4.7%

KEY INVESTMENT RULES

Asset class selection comes first

Low interest rates => equities

Inflation => equities

No silver bullet portfolio BUT diversification is the best way to protect against catastrophic losses

A BALANCED APPROACH

ACTIVE MANAGEMENT

OUR TOP-DOWN APPROACH

Momentum

and sentiment

indicators

Thematic

drivers

Market valuation

PAR - NOT YOUR TYPICAL BALANCED FUND

USE OF ILLIQUID ASSETS

Commercial Mortgages: add diversification into an asset class challenging for clients to achieve on their own, by a team of experienced mortgage specialists.

Private Placement Loans: provide corporate bond type returns with reduced risk and/or higher yields.

Real Estate: adds equity-like returns with less volatility. Similar to commercial mortgages, a diversified portfolio of commercial real estate is challenging for clients to acquire and manage independently.

A high quality fixed income portfolio, with long

duration, supports the dividend scale

Investment Mix

Government 50%

Corporate 50%

Investment by Term

Years to Maturity Percentage

0 to 5 years 23%

5 to 10 years 19%

Over 10 years 57%

FIXED INCOME PORTFOLIO

Performance is enhanced with a solid real

estate portfolio, as well as a common and

preferred equity program.

Investment Mix  

Equity Type Percentage

Common Stock 41.2%

Real Estate 41.8%

Preferred Shares 16.9%

Total Equity assets 100.0%

EQUITIES AND REAL ESTATE

The real estate portfolio is comprised of high quality,

income producing properties which are diversified

geographically across Canada and by property type.

35%

23%

42%

REAL ESTATE PORTFOLIO

-30

-20

-10

0

10

20

30

Net Par Account Yield

S&P/TSX Composite Index

5 Year GIC

Consumer Price Index

PAST PERFORMANCE

EQUITABLE LIFE ACTIVE BALANCED PORTFOLIOS

PORTFOLIO POSITIONING

Equitable Life

Active Balanced

Growth Portfolio

Equitable Life

Active Balanced

Portfolio

Equitable Life

Active Balanced

Income Portfolio

Global Neutral

Balanced

Global Equity

Balanced

Canadian Neutral

Balanced

Category Average MER 3.12% 3.04% 2.85%

Equitable Life Active Balanced Portfolios

2.42% 2.35% 2.40%

Equitable Life Active Balanced cost advantage

+0.7% +0.7% +0.4%

COMPETITIVE MER’S

YTD 1-YR 3-YR

Equitable Life Active Balanced Portfolio

8.2% 13.6% 6.8%

Global Neutral Balanced Peer Group

5.5% 12.3% 7.4%

Source: Morningstar, as of August 31 2014

PERFORMANCE

1.Style diversification

2.“Core” funds

3.Cost & transparency

REASONS TO OWN