Canadian Small Cap Growth

Portfolio managers Lane and Sehgal use a unique investment process that combines top-down economic analysis with bottom-up fundamental analysis. The active and flexible growth style adapts as market dynamics change, allowing for the management of both risk and return for consistently superior performance. The overall bias is towards companies demonstrating strong earnings growth.

Given the strategy's emphasis on identifying earnings growth, primary sources of value-added can be attributed equally to segment focus and stock selection. The emphasis does vary over market cycles. For example, in a period of economic slowdown earnings predictability is given a higher emphasis, and as the prospect for the economy improves more emphasis is placed on earnings growth momentum. We then conduct comprehensive fundamental bottom-up analysis including management contact to identify individual companies that become part of the portfolio. The portfolio is always fully invested; therefore neither market timing nor asset allocation is a component of this strategy.

Investment Process

DECISION-MAKING

The portfolio managers generally rely on inputs from our analysts, who do a lot of the quantitative screening. They tend to focus more on the economic environment and security selection as a result. The firm makes use of all major information/data sources. The research process starts with a top-down overview, which leads to fundamental analysis and contact with management. Through the use of our in-house analysts, the number of securities covered ends up being global, with most major sectors accounted for. Final decision-making power rests with the portfolio managers. A regular part of this process involves daily meetings with members of the team and other portfolio managers and analysts at the firm.

SECURITY SELECTION & MONITORING

The process involves running a quantitative screen that filters for growth variables such as earnings momentum, earnings revisions, earnings surprises and earnings predictability, as well as valuation criteria, shifting emphasis on each measure to match current market risk. We then conduct comprehensive fundamental bottom-up analysis including management contact to identify individual companies that become part of the portfolio. While the size of the selection universe is essentially global, the pooled fund version of this strategy limits foreign holdings to 49% of the portfolio.

Full positions are taken immediately upon being identified as having met our requirements. Generally individual security weights are not allowed to surpass the 5-6% mark, and are trimmed if they do. The portfolio typically contains 60-80 names. Risk is controlled primarily through liquidity and defensive characteristics of certain securities. Cash tends to be invested quickly, in keeping with the mandate to remain fully invested. In order to prevent a buildup of cash in the portfolio, the manager may use TIPs or similar vehicles to maintain fully-invested equity exposure in the absence of attractive stock ideas.

SELL DECISION

Each security is reviewed on an ongoing basis to ensure that it has maintained strong fundamentals and is in compliance with our investment process & strategy. A quarterly earnings disappointment is an example of a factor that would lead to a review of a security holding. Careful attention is also paid to the stocks valuation levels with respect to our pre-determined target prices. Once achieved, the stock is reviewed and a decision is made to either sell or hold the security. If the decision is to sell, the position is usually fully disposed of, as long as liquidity is available.

Fees

Series I units
Minimum Investment $1M
On the first $10 Million			0.90%
On the next $40 Million			0.80%
On the next $50 Million			0.70%
Over $100 Million			0.60%
Separate Account (sub-advisory)
Minimum Investment $10M
On the first $50 Million			0.50%
On the next $50 Million			0.35%
On the next $150 Million			0.25%
Over $250 Million			0.21%

HNW Fees

Series I units
Minimum Investment $1M
On the first $10 Million			0.90%
On the next $40 Million			0.80%
On the next $50 Million			0.70%
Over $100 Million			0.60%
Separate Account (sub-advisory)
Minimum Investment $10M
On the first $50 Million			0.50%
On the next $50 Million			0.35%
On the next $150 Million			0.25%
Over $250 Million			0.21%

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