tag:blogger.com,1999:blog-47936486463541486552024-02-19T02:01:15.799-05:00Zen and the Art of InvestingUnknownnoreply@blogger.comBlogger36125tag:blogger.com,1999:blog-4793648646354148655.post-43933313478986948102021-07-29T17:58:00.000-04:002021-07-29T17:58:04.340-04:00<p> </p><p class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 1;"><b><span style="font-family: "Arial Narrow",sans-serif; font-size: 18.0pt; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 24.0pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-CA; mso-font-kerning: 18.0pt;">Card counting and the stock market<o:p></o:p></span></b></p>
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</w:wrap></v:imagedata></v:shape><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">Previously, we compared
the stock market with a casino to see which investment strategies offered the
best odds. We observed that:<o:p></o:p></span></p>
<ul type="disc">
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt;"><span style="font-family: "Arial Narrow",sans-serif;">all active investment
strategies outperform sometimes;<o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt;"><span style="font-family: "Arial Narrow",sans-serif;">identifying outperformers
ahead of time is almost impossible; and<o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: normal; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt;"><span style="font-family: "Arial Narrow",sans-serif;">in the long run, selecting
any strategy’s index at low cost is a good
bet.<o:p></o:p></span></li>
</ul>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">As
evidence of the first point, low volatility ETFs in Canada outperformed other
available strategies over the three- and five-year periods ending Oct. 31,
2017. Yet risk-based strategies generally outperformed most frequently in the
Cass School of Business’s 10-million monkey survey, which looked at performance
from 1968 to 2011 for 10 million randomly constructed U.S. equity indices.<o:p></o:p></span></p>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">This
month we study how investors, like gamblers, can use odds to their advantage.
For instance, in blackjack, which has house odds of less than 1%, professionals
often create an edge through card counting.<o:p></o:p></span></p>
<h2><span style="color: windowtext; font-family: "Arial Narrow",sans-serif; font-size: 11.0pt; line-height: 115%;">Counting on the past<o:p></o:p></span></h2>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">By
keeping a running count of high and low cards played, the card counter assesses
whether remaining cards in the deck have more high-count cards (10s through
aces, which advantage the player) or low-count cards (two through six, which
favour the dealer). The strategy works because casino rules require the dealer
to draw on certain hands, and because odds depend on the decks of cards rather
than chance.<o:p></o:p></span></p>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">When
the remaining deck still contains more high cards on balance, the player is
favoured not only because the chance of hitting 20 or 21 is higher, but because
the chance the dealer will go over 21 is also elevated. In August 2014, Evan
Horowitz wrote in the Boston Globe that disciplined card counting could improve
a player’s odds by 0.5% or more.<o:p></o:p></span></p>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">Professional
gamblers, like professional investors, diversify their bets. Making many small
bets improves the chances of capturing a small edge. How does this apply to
stocks? Consider that the S&P/TSX Composite advanced 18 of 27 calendar
years between 1990 and 2016; the worst year saw -35.0% performance (2008),
while the best year was +30.7% (2009). Making small annual bets (1% of
bankroll) would have limited exposure to big declines and maximized exposure to
the 66.7% up-market edge. Passive investing benefits from this principle.<o:p></o:p></span></p>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">Let’s
apply the idea to daily returns.<o:p></o:p></span></p>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">Recall
that in card counting, the cards played impact the cards remaining. Historical
stock returns tell us little about future returns (the monthly autocorrelation
is about 0.04%) but past volatility tells us quite a bit about future
volatility (the monthly autocorrelation is 0.6%).<o:p></o:p></span></p>
<p><a href="http://www.advisor.ca/investments/market-insights/card-counting-and-the-stock-market-248626#table1"><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">Table 1</span></a><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;"> shows the
annualized return, growth of $1 and risk (standard deviation) of the
S&P/TSX Composite Index from May 23, 1992, through Oct. 30, 2017, a period
for which Australian data was available for comparison.<o:p></o:p></span></p>
<h2><a name="table1"></a><span style="color: windowtext; font-family: "Arial Narrow",sans-serif; font-size: 11.0pt; line-height: 115%;">Table 1: Canadian
performance, 1992 to 2017<o:p></o:p></span></h2>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="mso-cellspacing: 0cm; mso-yfti-tbllook: 1184; width: 100%px;">
<tbody><tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="padding: .75pt .75pt .75pt .75pt; width: 40.42%;" width="40%"></td>
<td style="padding: .75pt .75pt .75pt .75pt; width: 21.82%;" width="21%">
<p align="center" class="MsoNormal" style="text-align: center;"><b><span style="font-family: "Arial Narrow",sans-serif;">Annualized return<o:p></o:p></span></b></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><b><span style="font-family: "Arial Narrow",sans-serif;">Growth of $1<o:p></o:p></span></b></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><b><span style="font-family: "Arial Narrow",sans-serif;">Standard deviation<o:p></o:p></span></b></p>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="padding: .75pt .75pt .75pt .75pt; width: 40.42%;" width="40%">
<p class="MsoNormal"><span style="font-family: "Arial Narrow",sans-serif;">S&P/TSX
Composite Index<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt; width: 21.82%;" width="21%">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">9.48%<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">$9.88<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">15.7<o:p></o:p></span></p>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="padding: .75pt .75pt .75pt .75pt; width: 40.42%;" width="40%">
<p class="MsoNormal"><span style="font-family: "Arial Narrow",sans-serif;">Exclude
5 worst and 5 best days<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt; width: 21.82%;" width="21%">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">9.75%<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">$10.51<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">14.9<o:p></o:p></span></p>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="padding: .75pt .75pt .75pt .75pt; width: 40.42%;" width="40%">
<p class="MsoNormal"><span style="font-family: "Arial Narrow",sans-serif;">Exclude
100 worst and 100 best days<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt; width: 21.82%;" width="21%">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">11.96%<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">$17.43<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">11.9<o:p></o:p></span></p>
</td>
</tr>
<tr style="mso-yfti-irow: 4; mso-yfti-lastrow: yes;">
<td style="padding: .75pt .75pt .75pt .75pt; width: 40.42%;" width="40%">
<p class="MsoNormal"><span style="font-family: "Arial Narrow",sans-serif;">Exclude
500 worst and 500 best days<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt; width: 21.82%;" width="21%">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">14.98%<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">$34.22<o:p></o:p></span></p>
</td>
<td style="padding: .75pt .75pt .75pt .75pt;">
<p align="center" class="MsoNormal" style="text-align: center;"><span style="font-family: "Arial Narrow",sans-serif;">7.8<o:p></o:p></span></p>
</td>
</tr>
</tbody></table>
<p><span style="color: white; font-family: "Arial Narrow",sans-serif; font-size: 11.0pt; mso-color-alt: windowtext;">Source: TMX Group</span><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;"><o:p></o:p></span></p>
<h2><span style="color: windowtext; font-family: "Arial Narrow",sans-serif; font-size: 11.0pt; line-height: 115%;">Canada is skewed<o:p></o:p></span></h2>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">Removing
the worst and best days increases the portfolio’s annualized return. Excluding
the worst and best 100 days boosts the return to 11.96%, while eliminating the
500 worst and 500 best days would have provided a 14.98% annualized return—a
staggering 5.5% advantage over the index return of 9.48%. Is this an anomaly?<o:p></o:p></span></p>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">We examined the
impact of eliminating worst and best days from Canadian, U.S. and Australian
stock indexes from May 31, 1992, to Oct. 30, 2017. Portfolios from all markets
are negatively skewed, and all would have benefited from eliminating the worst
and best days. Canada and the U.S. would have benefited from eliminating up to
about 500 worst and 500 best days, and for Australia, it’s about 442. The
Canadian market’s skew (-0.51), however, stands out compared with that of
Australia (-0.33) or the U.S. (-0.07).<o:p></o:p></span></p>
<p><a name="chart1"></a><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;"></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEio2SMxYPbKy3GLlDFoeyL2qumefyqQfqxliG-020Tzfhyy3ZNy1NMja1JkO5wGCYcx6d4Jr7HEr28bEZaElPiK9bHPNm4RkRfuV7fcD-MZUoIHzKe1qxRbAqNzWOin2WNXZHP5Ts_R_PQ//" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="263" data-original-width="540" height="203" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEio2SMxYPbKy3GLlDFoeyL2qumefyqQfqxliG-020Tzfhyy3ZNy1NMja1JkO5wGCYcx6d4Jr7HEr28bEZaElPiK9bHPNm4RkRfuV7fcD-MZUoIHzKe1qxRbAqNzWOin2WNXZHP5Ts_R_PQ/w416-h203/image.png" width="416" /></a></div><br /><br />
<span style="mso-no-proof: yes;"><v:shape alt="Chart 1: Comparing performance with best/worst returns removed" id="Picture_x0020_1" o:spid="_x0000_i1025" style="height: 197.25pt; mso-wrap-style: square; visibility: visible; width: 405pt;" type="#_x0000_t75">
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</v:imagedata></v:shape></span><o:p></o:p><p></p>
<p><span style="font-family: "Arial Narrow",sans-serif; font-size: 11.0pt;">Gamblers
would try to exploit this return distribution by removing highs and lows. For
their part, investors try to identify characteristics that will outperform over
time like value, small cap and low volatility. But in stock markets, like
casinos, winners come only at the expense of losers. Professional gamblers use
card counting to determine whether odds favour them; similarly, exploiting a
stock market’s negative skew may stack the deck for investors. As we’ve seen,
standard deviation falls and returns increase when highs and lows are
eliminated. Next month we will explore how much of this advantage we can
capture by controlling risk as measured by standard deviation.<o:p></o:p></span></p>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-87282089964311655382017-02-02T07:35:00.001-05:002017-02-02T07:35:55.248-05:00Does passive investing undermine capitalism?Passively managed products account for one third of U.S. mutual fund
assets today—up from 20% four years ago—reflecting a net US$2 trillion
shift to passive and away from<span class="sponsored-keyword"> <span class="keyword">active</span></span> management.<br />
But questions about this trend’s sustainability, and warnings about
its consequences, have arisen. Take, for instance, the note from
brokerage firm Sanford C. Bernstein, entitled “The silent road to
serfdom: why passive investing is worse than Marxism.” In it, analyst
Inigo Fraser-Jenkins argues that active management helps the efficient
allocation of capital, an important function in a free market.<br />
For our part, we define passive investing as cap- or market-weighted
indexing derived from the total market value of component holdings. All
others, including alternative or smart beta, are forms of active
management that require periodic rebalancing.<br />
What consequences does the continuing movement toward passive
investing suggest, and what does it mean for investors and advisors?<br />
<h2>
Valuation concerns</h2>
Passive investing does not involve analyzing individual companies, so
relative and absolute valuations may be distorted, impairing the
market’s ability to effectively allocate capital based on enterprise
merit.<br />
The less money available for selecting companies with better
prospects, the worse off the function of price discovery that underpins
the capital markets—and capitalism itself. This is the concern of
Bernstein’s note, which references economist Frederich Hayek’s “The Road
to Serfdom” and the complaint against “free-riding” indexers.<br />
But consider that the annual turnover rate of active mutual fund
holdings in the U.S. is 85%, according to The Motley Fool. That compares
to 4.98% for the S&P 500 and 4% for the S&P/TSX Composite. So,
even if passive grows to 80% of assets, the turnover from the 20% active
slice would be $3 trillion—certainly enough for price discovery. More
compelling than that argument is Ayn Rand’s idea of self-interest, a
force that would ensure that asset mispricing wouldn’t last for long.<br />
<a href="https://www.blogger.com/null" name="chart1"></a><br />
<img alt="" src="https://www.advisor.ca/wp-content/uploads/2016/11/chart1-U.S.-domestic.jpg" /><br />
<h2>
Diversification concerns</h2>
The investment industry’s primary risk management tool is
diversification. If money flows into (or out of) all the holdings of an
index at the same time, all components will move in the same direction,
blunting the effectiveness of diversification against volatility.<br />
I’d argue that risk management is most needed to protect against
major declines. But when those major declines are happening,
correlations tend towards 1.0, rendering diversification less effective.
Advisors need better risk management tools generally, and those tools
could compensate for the anti-diversification effects of passive
investing en masse.<br />
<h2>
Performance</h2>
Most active managers underperform their passive benchmarks through
most periods—as shown by the S&P Dow Jones SPIVA
scorecard—contributing to the popularity of passive investing. But no
trend goes on forever. Consider personal leverage in 1929, corporate
leverage in 1987, oil stocks in the 1980s and technology stocks
2000-2001. Surely active management will have its day?<br />
The reality is that active performance before costs equals passive
performance, and this would be the case regardless of the proportion of
active and passive management employed. <br />
Passive investors would not trade and active investors would trade
only with each other. Active
managers in aggregate represent a cap-weighted market index.<br />
<h2>
Distortions</h2>
Passive investing can create distortions in three circumstances.
First, net cash flows into a passive portfolio create a cash position,
leading to a performance difference from the index until the cash is
invested. Second, when passive funds are forced to buy or sell, the lack
of liquidity of some smaller index components may temporarily push
prices higher or lower than would otherwise be the case.<br />
<a href="https://www.blogger.com/null" name="table1"></a><br />
<img alt="" src="https://www.advisor.ca/wp-content/uploads/2016/11/table1-passive-and-active.jpg" style="float: right; padding: 5px;" /><br />
Third, when the index’s composition changes, there is a period of
adjustment as passive portfolios sell the removed companies and buy
replacements. The cost of these changes was estimated to be 0.2% per
annum in the U.S., according to Winton Capital.<br />
After eight additions were made to the S&P TSX Composite on
September 16, 2016, they were up an average of 4.2% in their first week
while the index advanced only 0.4%. So, pricing distortions can follow
changes to an index.<br />
Investors need to be aware of the distortions caused by passive
strategies. They allocate capital by market capitalization but can also
impact individual holdings.<br />
<h2>
In a passive world, winners are investors</h2>
Motivated market players will always find market mispricing and
arbitrage it away. Valuation distortions should lead to more
opportunities for active managers, but the difference between the most
over- and undervalued assets is an important factor in determining this.
Since less-skilled investors may move to passive investing, leaving
more skilled active managers to undertake price discovery, these spreads
may narrow. Better long/short strategies will also close this gap.<br />
Corporate governance may also improve as large, passive shareholders
like Vanguard use their influence across all their holdings, including
the smallest ones that may have escaped previous institutional scrutiny.
Investors are the winners. The biggest future losers from more passive
encroachment will continue to be active managers, unless they find a way
to beat their passive benchmarks with more consistency or develop a
value proposition using passive issue selection within active allocation
strategies.<br />
<div class="credit-footnote">
<a href="http://www.advisor.ca/columnists/mark-yamada">Mark Yamada</a> is President of <a href="http://purinvesting.com/" target="_blank">PÜR Investing Inc.</a>,
a registered portfolio manager and software development firm.
Disclosure: PÜR Investing Inc. sub-advises for, and provides risk-based
model portfolios to, Horizons ETFs.</div>
mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-8925688393692354392012-07-05T19:08:00.000-04:002012-07-05T19:08:02.143-04:00<!--[if gte mso 9]><xml>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-bidi-font-size: 11.0pt;">The puck stops here: Use ETFs as a portfolio’s last line of defence</span></b></div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-bidi-font-size: 11.0pt;">This
is the third article in a series.</span></b></div>
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<span style="font-family: "Times New Roman","serif";">Portfolio
managers can learn from hockey. Previously, we’ve discussed balanced and
aggressive attacks for neutral and positive markets, and the neutral-zone trap <s>as</s>
to <s>defense</s> defend against <s>a</s> potentially hostile markets. This
month<s>,</s> we address the “chip and chase” and the last line of defence,
goaltending. </span></div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Low-volatility chip and chase </span></b></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif";">Playing
the puck deep into the opponent’s end and quickly pursuing it involves risk.
Giving up control may award your opponent with possession. Some risk is
mitigated by <s>the fact that it happens</s> positioning so deep in the
opponents’ end. A low-volatility market is perfect for taking such risks. But
you need good speed and solid fore-checking. </span></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif";">Gordie
Howe and Bobby Hull rarely employed this approach; Jagr, Malkin, and Crosby use
it infrequently. However, the Canuck’s line of Alex Burrows and the Sedin
brothers [DASH] who don’t mind banging bodies in the corners [DASH] are
extremely effective in frustrating and wearing down opponents with their
“cycle”-type offence. </span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">The
“cycle” approach is like identifying uncorrelated asset classes [DASH] some
will do well, while others won’t. Equities, commodities and bonds are three
good examples (see, “Equities, commodities, bonds,” this page). Someone should
always be open for a shot or a pass. </span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">Yet
asset correlations aren’t static. The relationship between stocks, bonds and
commodities will change over time and must be watched carefully, particularly
when volatility is high or rising. Other aspects of the chip and chase are
similar to the 2-1-2 structure described in the first article of this series
(see, “<a href="http://www.advisor.ca/news/etfs/etf-tips-from-the-rink-75955">ETF
tips from the rink,</a>” advisor.ca/etf-hockey).</span></div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Last line of defence</span></b></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif";">Recent
market volatility has shown that cash or short-term fixed-income instruments
are occasionally the only safe havens. Diversification simply fails to control
risk during periods of high volatility. In a low-interest-rate environment,
this is an even more painful realization. If investing time horizons are long
[DASH] 10 years or more [DASH] trying to rebalance to a fixed mix may pay off.
For some individual investors, however, there is no guarantee asset-class
returns will approach the long-term averages that underpin their financial
plans in time to skate them back on side. Sometimes, we must rely on that last
line of defence [DASH] goaltending. </span></div>
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<span style="font-family: "Times New Roman","serif";">Goaltending
has evolved, as have the choices in short-term fixed-income offerings. Today,
most goalies use the “butterfly” technique. They spend lots of time on their
knees with legs splayed outwards to maximize ice-level net coverage. Glove,
blocker and stick skills deflect everything else, making superior mobility and
quickness important. Glenn Hall and Tony Esposito were early proponents. One
risk is the so-called “five hole” between the legs. Like credit or liquidity
risk for a bond fund, this is not normally a concern, but occasionally causes
gnashing of a coach’s teeth.</span></div>
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<span style="font-family: "Times New Roman","serif";">So
how should we deal with money-market funds in low-interest-rate environments?
Forget about them. iShares Premium Money Market ETF (CMR) has an MER of 0.27%,
compared to major banks’ money-market mutual-fund MERs of about 0.55%, a
bargain if your client has $25,000 or more to park. </span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">However,
it is difficult to justify with annual returns of around 1.0%. Like a
vulnerable goaltender on the blocker side (the Leafs’ Jonas Gustavsson) or on
the glove side (James Reimer or Ben Scrivens), low net-of-fee returns from
money-market funds suggest looking elsewhere for protection and <s>yield</s>
income. </span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">Marty
Brodeur, Tim Thomas and Dominik Hasek have successfully used hybrid goaltending
styles. Likewise, other ETF vehicles can be used effectively as money market
substitutes but with more risk. Short-term fixed-income ETFs are the obvious
first choice, but short-term laddered-fixed-income government and corporate
ETFs, and short-target-maturity ETFs, give advisors even more flexibility (see
“ETF vehicles,” this page). </span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">In
low-volatility environments, diversification helps most. Consider equities,
commodities and bonds. When volatility increases, stronger defence may be
needed. Short-term fixed-income choices, other than money-market, are available
to enhance yield; but watch out as costs become more important considerations.
AER</span></div>
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<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">Table 1</span><span style="font-family: "Times New Roman","serif";"></span></div>
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<br /></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">HED:
<b style="mso-bidi-font-weight: normal;">Equities, commodities, bonds</b></span></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: solid black 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt;">Broad-based
equities</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt;">Broad-based
commodities</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt;">Broad-based
Canadian bonds</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt; mso-bidi-font-weight: bold;">iShares MSCI World (XWD)</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt;">iShares
Broad Commodity (CBR) </span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt;">Vanguard
Canadian Aggregate Bond ( VAB)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt; mso-bidi-font-weight: bold;">Vanguard MSCI US Broad Market (VUS)</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt;">iShares DEX
Universe (XBB)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt; mso-bidi-font-weight: bold;">iShares S&P/TSX Capped Comp. (XIC) </span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 159.6pt;" valign="top" width="213">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 8.0pt; mso-bidi-font-size: 11.0pt;">BMO
Aggregate Bond (ZAG)</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">Table 2</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">HED: ETF vehicles</span></b></div>
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: medium none; width: 640px;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Short-term fixed income </span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Symbol</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Mgt. Expenses</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Vanguard
Canadian Short-Term Bond </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">VSB</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.15%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO
Short term Federal Bond </span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZFS</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.22%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares
DEX Short-Term Bond </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XSB</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.25%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares
DEX Short-Term Corporate </span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XSH</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.25%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO
Short Provincial Bond</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZPS</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.27%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6; mso-yfti-lastrow: yes;">
<td style="border-bottom: solid black 1.0pt; border-left: solid black 1.0pt; border-right: none; border-top: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO
Short Corporate Bond</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZCS</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.32%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: medium none; width: 640px;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 324.35pt;" valign="top" width="432">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Short-term laddered</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 63.8pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Symbol</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.15pt;" valign="top" width="123">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Mgt. Expenses</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 324.35pt;" valign="top" width="432">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares
1-to-5 yr Laddered Government </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 63.8pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">CLF</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.15pt;" valign="top" width="123">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.17%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 324.35pt;" valign="top" width="432">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Powershares
1-to-5 yr Laddered Investment Grade Corporate<span style="mso-spacerun: yes;">
</span></span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 63.8pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">PSB</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.15pt;" valign="top" width="123">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.25%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 324.35pt;" valign="top" width="432">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares
1-to-5 yr Laddered Corporate </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 63.8pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">CBO</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.15pt;" valign="top" width="123">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.28%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: medium none; width: 640px;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Short-term target maturity</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Symbol</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Mgt. Expenses</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO
2013 Corporate Bond Target Maturity</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZXA</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.30%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">RBC
2013 Target Corporate Bond </span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">RQA</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.30%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 336.1pt;" valign="top" width="448">
<div class="MsoNormal" style="margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">RBC
2014 Target Corporate Bond</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.3pt;" valign="top" width="62">
<div class="MsoNormal" style="margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">RQB</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.9pt;" valign="top" width="131">
<div align="center" class="MsoNormal" style="margin-left: 0cm; text-align: center;">
<span style="font-family: "Times New Roman","serif";">0.30%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-left: 0cm;">
<br /></div>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-61060062914606854112012-07-05T18:55:00.001-04:002012-07-05T18:55:32.537-04:00<!--[if !mso]>
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<br />
<div class="MsoNormal" style="line-height: 150%;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">The
neutral-zone trap</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">: P</span><span style="font-family: "Times New Roman","serif";">ositioning ETFs to
counteract volatile markets</span> </div>
<div class="MsoNormal" style="line-height: 150%;">
</div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">This is the second in a series.
Next month: the chip and chase for rotational markets and goaltending styles
for the last line of defense.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 18.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif";">In
the previous issue,
we discussed the need for a balanced and aggressive attack during neutral and
positive markets. This month, we examine the neutral-zone trap for protecting
against a potentially hostile market. </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Setting
the trap</span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif";">When
the opposition controls the puck in its own end, the neutral-zone trap can be
used to counteract the rush before it develops into a major threat. In recent
years, capital markets have appeared unpredictable for extended periods. They
seem to react to one crisis after another, while dominating investors by
keeping them off balance. Current events, rather than longer-term disciplines,
seem to be most important. </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif";">Both
Jacques Lemaire (Devils and Wild) and Guy Carbonneau (Canadiens) have leveraged
the trap effectively to thwart attacks. Randy Carlyle, too, used it to coach
Anaheim to the 2007 Stanley Cup (Leaf fans can dream on!). It was so effective
that the NHL moved to strictly enforce obstruction rules, while allowing the
two-line pass to make the trap less useful (see “Two-line passes,” this page). </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif";">Meant
to disrupt momentum, players space themselves in the neutral zone in a 1-2-2
formation with one fore-checker looking to take advantage of a turnover. In a
portfolio, this checker can be an aggressive equity fund like a small-cap or an
emerging-markets fund that will respond quickly if the market trend suddenly
turns positive (see “Fore-checker: aggressive small cap and emerging markets,”
this page). </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif";">Two
forwards block any attack lanes along the boards forcing the play toward the
centre. These players must be ready to strike if they create a turnover.
Broadly-based equity positions would serve this two-way function well, perhaps
one domestic like XIC or VCE and one global/international like XWD, VEF or ZIN.
(See “Forward: Canadian Equity,” and “Forward: global/international equity,” this
page).</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif";">The
two players on defence delay attackers while their forwards reposition to
defend if no turnover can be forced. In a portfolio, these positions will
depend on the risk tolerance of the investor. In a low-interest-rate
environment, some return potential is important, but defence is the primary
objective. High-yield or convertible bonds are risky, but offer better upside.
Pairing with a defensive offset, like a short term/duration or laddered ETF,
would provide the right mix of defence with offensive potential.<span style="mso-spacerun: yes;"> </span>(See “Defence: high yield and convertible bonds,”
and “Defence: short-term or laddered bonds,”<b style="mso-bidi-font-weight: normal;"> </b>this page).</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">Mounting a defence in the face of
a powerful market onslaught can be a challenge. When volatility picks up, there
are few tactics [DASH] other than cash or high-quality short-term bonds [DASH]
that can preserve capital. Whether or not you have a sense about the kind of
market threats ahead, ETFs can be useful players in positioning you correctly
to defend and attack. AER</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">Thanks again to Dr. Jim Sugiyama,
hockey savant, for his input.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">NOTE TO ART: This will likely be
two pages</span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">BOX</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">If you are an advisor currently
using or looking to learn more about ETFs, take one of our ETF CE Credit
Courses (www.cecorner.ca) and automatically qualify to become a PŮR BETA
TESTER. PŮR builds tools to help advisors use ETFs more effectively and needs
advisor feedback to improve them. Join an exclusive group for a sneak peek at
some cool ways to improve your practice. </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">SIDEBAR 1</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">HED: Two-line passes </span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span lang="EN-US" style="font-family: "Times New Roman","serif"; mso-ansi-language: EN-US; mso-no-proof: yes;">
</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">SIDEBAR 2</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">HED:
Fore-checker: aggressive small cap and emerging market funds<span style="color: white; mso-bidi-font-weight: bold;"><br style="mso-special-character: line-break;" />
<br style="mso-special-character: line-break;" />
</span></span></b><span style="font-family: "Times New Roman","serif";"></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: solid black 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Exchange traded
fund</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Symbol</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; mso-themecolor: background1;">Mgt.
Expenses</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares Russell 2000 Index Fund
(CAD hedged)</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XSU</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.35%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Vanguard MSCI Emerging Markets
Index </span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">VEE</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.49%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares S&P/TSX SmallCap
Index Fund</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XCS</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.55%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO Emerging Markets Equity
Index</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZEM</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.57%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Claymore BRIC ETF</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">CBQ</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.67%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Claymore Broad Emerging Markets
ETF</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">CWO</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.71%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 7; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares MSCI Emerging Markets</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XEM</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.82%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">SIDEBAR 3</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">HED: <b style="mso-bidi-font-weight: normal;">Forward: Canadian Equity (broad lowest cost) </b></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: solid black 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Exchange traded
fund</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Symbol</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Mgt. Expenses</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Horizons BetaPro S&P/TSX60
Index (swap) </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">HXT</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.07%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Vanguard MSCI Canada Index </span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">VCE</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.09%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO Dow Jones Titans 60 Index</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZCN</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.16%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares S&P/TSX 60 Index</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XIU</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.17%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares S&P/TSX Capped
Composite Index</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XIC</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.25%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">SIDEBAR 4</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">HED:
Forward: Global/International equity </span></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: solid black 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Exchange traded
fund</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Symbol</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Mgt. Expenses</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Vanguard MSCI EAFE Index (CAD
hedged) </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">VEF</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.37%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares MSCI World Index </span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XWD</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.45%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO International Equity Hedged
to CAD Index</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZIN</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.50%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">SIDEBAR 5</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">HED:
Defence: High yield and convertible bonds </span></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: solid black 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Exchange traded
fund</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Symbol</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Mgt. Expenses</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Claymore Advantaged Convertible
Bond</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">CVD</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.45%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares DEX HYBrid Bond Index</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XHB</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.45%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Claymore Advantaged High Yield
Bond</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">CHB</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.56%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares U.S. High Yield Index</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XHY</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.60%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">XTF Canadian Convertible Liquid
Universe</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">CXF</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.65%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Powershares Fundamental High
Yield Corporate Bond</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">PFH</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.65%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 7; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO High Yield Corporate bond </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZHY</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.69%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="background: yellow; font-family: "Times New Roman","serif"; mso-highlight: yellow;">SIDEBAR 6</span><span style="font-family: "Times New Roman","serif";"></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">HED:
Defence: Short term or laddered</span></b><span style="font-family: "Times New Roman","serif";">
<b style="mso-bidi-font-weight: normal;">bonds</b></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: solid black 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Exchange traded
fund</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Symbol</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif";">Mgt. Expenses</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Claymore 1-5 year Laddered
Government Bond</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">CLF</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.17%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO Short Federal Bond Index</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZFS</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.22%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares DEX Short Term
Corporate Universe + Maple </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XSH</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.25%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Powershares 1-5 year laddered
Inv. Grade Corp. Bond</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">PSB</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.25%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">iShares DEX Short Term Bond
Index </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">XSB</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.25%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">Claymore 1-5 Year Laddered
Corporate Bond</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">CBO</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.28%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 7;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO 2013 Corporate Bond Target
Maturity</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZXA</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.30%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 8;">
<td style="border-left: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">RBC Target 2013 Corporate Bond</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ROA</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.30%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 9; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 281.85pt;" valign="top" width="376">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<b><span style="font-family: "Times New Roman","serif";">BMO Short Term Bond</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.45pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">ZCS</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.5pt;" valign="top" width="131">
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">0.32%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0cm;">
<br /></div>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com2tag:blogger.com,1999:blog-4793648646354148655.post-17156914476891165392012-07-05T18:49:00.000-04:002012-07-05T18:49:00.130-04:00<!--[if !mso]>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">ETF tips from the rink: Handy hockey tactics for portfolio construction</span></b></div>
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<a href="http://www.purinvesting.com/"><i style="mso-bidi-font-style: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"></span></i></a><i style="mso-bidi-font-style: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"></span></i>
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<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">In hockey, as in
portfolio management, offense is not always the best defense. Coaches know what
investment professionals too often forget: a balanced two-way capability is
usually most effective. </span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Constructing a
portfolio, like drafting and coaching a hockey team, demands a fundamental
understanding of what it takes to win. Portfolios built strictly to maximize
gains are akin to lineups consisting of five forwards. Any coach knows that’s
risky. Investment advisors could learn something from hockey tactics,
particularly when facing big volatile markets that can slam any game plan into
the boards. </span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 18.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Getting the
right lineup on the ice at the right time is a coach’s primary job. If you wish
to manage tactically for your clients, here are two ideas to help exploit game
situations.</span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Battle for control</span></b></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">If the puck is
in the neutral zone and control is at issue [DASH] trendless market, lacklustre
economy [DASH] a balanced attack with a defensive emphasis may be suitable. </span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">One strategy
involves a 1-2-2 with one forechecking forward, two supporting forwards and two
defensive players back. This approach was popular with Jacques Lemaire when he
coached the Wild and Devils. </span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 18.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Diversified
exposure to global and international economic growth is a good objective for
the forechecking forward position. The support can be broad Canadian and U.S.
equity exposure (see “1-2-2 Forecheck,” this page). There’s a lot of choice for
defence. Mid-term and laddered options are versatile and broad-based bond
exchange traded funds (ETFs) can anchor the blue line. Short target maturity
ETFs like RBC Target 2017 (RQE) and short term index-based ETFs could act like
a hard-checking defence that minimizes risk around the net. <span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 12.0pt;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Green light</span></b></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">When playing
opportunistically [DASH] low volatility, upward trending stock market, and a
positive economic backdrop [DASH] coaches may favour an aggressive 2-1-2
structure with two penetrating forwards on forecheck, supported by a forward
and a rushing pair on defence. This tactic makes best use of goal-scoring
skills and was favoured by Scotty Bowman with the Habs in the 1970s and Mike
Babcock with the current Red Wings. Ironically, Lemaire played on many Scotty
Bowman teams! </span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Attacking
forwards can include aggressive ETFs for broad scoring punch, including emerging
markets, growth, and small-cap strategies [DASH] think Guy Lafleur and Evgeni
Malkin (see “Aggressive 2-1-2,” this page). More concentrated exposure from
country, region or industry-specific ETFs is also possible, like BMO Junior Oil
(ZJO), BMO Junior Gas (ZJN), iShares Latin America (XLA), Claymore China (CHI),
iShares MSCI Brazil ( XBZ), iShares S&P CNX Nifty India (XID).<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Broadly-based exposure
to technology-rich NASDAQ or Russell 2000 ETFs offers good support. Rushing
defensemen with offensive potential like Bobby Orr, or currently Drew Doughty
(Kings) and Kris Letang (Penguins), include high yield and convertible bond
funds. Long-term corporate bond funds may be good for a quick shift if you
expect corporate-government yield spreads to narrow [DASH] iShares IG Corporate
Bond (XIG), BMO Long Corporate Bond (ZLC), Horizons Corporate Bond (HAB) and
any of the longer-dated target bond funds RBC Target 2020 or 2019 (RQH, RQG),
BMO 2020 or 2025 Corporate Bond (ZXC, ZXD) (see “Rushing defensemen,” this
page). </span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 18.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">This is clearly
an aggressive lineup with obvious risks. If the market turns nasty, the
portfolio is vulnerable and may be caught “up ice”. The only stopper is the
goaltender (cash and cash equivalents). Nimbleness is required to shift
sufficient assets to cash if this occurs. </span></div>
<div class="MsoNormal" style="line-height: 115%; margin-bottom: 6.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Conclusion: Puck control</span></b></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Controlling the puck is important, but not always
possible. Similarly, controlling portfolio risk is essential, but from time to
time the market dominates [DASH] usually on the downside. Having specific
tactics for different market environments can be an effective way to respond. </span></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Next time: the neutral zone trap, the chip and chase,
and goaltending. </span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">Thanks to Dr.
Jim Sugiyama, hockey savant, for his valuable contribution to this article. </span></i></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="background: yellow; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt; mso-highlight: yellow;">TABLE 1:</span></b><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"> HED: 1-2-2 Forecheck</span></b></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableLightListAccent2" style="border-collapse: collapse; border: none; mso-border-alt: solid #4F81BD 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: -1;">
<td style="background: #4F81BD; border-bottom: none; border-left: solid #4F81BD 1.0pt; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div align="center" class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 5; text-align: center;">
<span style="color: white; font-family: "Times New Roman","serif";">Fore-checking forward</span></div>
</td>
<td style="background: #4F81BD; border-top: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div align="center" class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 1; text-align: center;">
<span style="color: white; font-family: "Times New Roman","serif";">Supporting forwards</span></div>
</td>
<td style="background: #4F81BD; border-bottom: none; border-left: none; border-right: solid #4F81BD 1.0pt; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div align="center" class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 1; text-align: center;">
<span style="color: white; font-family: "Times New Roman","serif";">Defensemen</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 0;">
<td style="border-right: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 68;">
<span style="font-family: "Times New Roman","serif";">iShares MSCI World
(XWD)</span></div>
</td>
<td style="border-bottom: solid #4F81BD 1.0pt; border-left: none; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">iShares S&P/TSX
Capped Composite (XIC) </span></div>
</td>
<td style="border-left: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">Claymore 1-10 year
Laddered Government Bond (CLG)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-left: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 4;">
<span style="font-family: "Times New Roman","serif";">Vanguard MSCI EAFE
(VEE)</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">Horizons S&P/TSX 60 (HXT)</span></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
</td>
<td style="border-right: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">Vanguard Canadian Aggregate
Bond (VAB) </span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-right: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 68;">
<span style="font-family: "Times New Roman","serif";">BMO International
Equity (ZDM)</span></div>
</td>
<td style="border-bottom: solid #4F81BD 1.0pt; border-left: none; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">iShares S&P/TSX
60 Index (XIU)</span></div>
</td>
<td style="border-left: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">iShares DEX Universe
Bond (XBB)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-left: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 4;">
<span style="font-family: "Times New Roman","serif";">iShares MSCI EAFE
(XIN)</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">BMO Dow Jones Canada Titans
(ZCN)</span></div>
</td>
<td style="border-right: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">Claymore 1-5 Laddered Corporate
Bond (CBO) </span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border-right: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 68;">
<br /></div>
</td>
<td style="border-bottom: solid #4F81BD 1.0pt; border-left: none; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">Vanguard MSCI US
Broad Market (VUS)</span></div>
</td>
<td style="border-left: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">Powershares 1-5
Laddered Investment Grade Corp. (PSB)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="border-left: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 4;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">BMO US Equity hedged (ZUE)</span></div>
</td>
<td style="border-right: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 68;">
<br /></div>
</td>
<td style="border-bottom: solid #4F81BD 1.0pt; border-left: none; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">iShares S&P 500
(XSP)</span></div>
</td>
<td style="border-left: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="background: yellow; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt; mso-highlight: yellow;">TABLE 2:</span></b><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"> HED: Rushing defensemen</span></b></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-prop-change: Kanu 20120222T1853;">
<span lang="EN-US" style="font-family: "Times New Roman","serif"; mso-ansi-language: EN-US; mso-no-proof: yes;">
</span></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="background: yellow; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt; mso-highlight: yellow;">TABLE 3: </span></b><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;">HED: Aggressive 2-1-2</span></b></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableLightListAccent2" style="border-collapse: collapse; border: none; mso-border-alt: solid #4F81BD 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: -1;">
<td style="background: #4F81BD; border-bottom: none; border-left: solid #4F81BD 1.0pt; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div align="center" class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 5; text-align: center;">
<span style="color: white; font-family: "Times New Roman","serif";">Attacking forwards</span></div>
</td>
<td style="background: #4F81BD; border-top: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div align="center" class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 1; text-align: center;">
<span style="color: white; font-family: "Times New Roman","serif";">Supporting forwards</span></div>
</td>
<td style="background: #4F81BD; border-bottom: none; border-left: none; border-right: solid #4F81BD 1.0pt; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div align="center" class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 1; text-align: center;">
<span style="color: white; font-family: "Times New Roman","serif";">Rushing defensemen</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 0;">
<td style="border-right: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 68;">
<span style="font-family: "Times New Roman","serif";">Vanguard MSCI
Emerging Markets (VEE)</span></div>
</td>
<td style="border-bottom: solid #4F81BD 1.0pt; border-left: none; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">Powershares QQQ (QQC)</span></div>
</td>
<td style="border-left: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">Claymore Advantaged
High Yield Bond (CHB) </span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-left: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 4;">
<span style="font-family: "Times New Roman","serif";">iShare Dow Jones
Canada Select Growth (XCG) </span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">iShares NASDAQ 100 (XQQ)</span></div>
</td>
<td style="border-right: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">iShares US High Yield Bond
(XHY)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-right: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 68;">
<span style="font-family: "Times New Roman","serif";">iShares S&P/TSX
Smallcap (XCS)</span></div>
</td>
<td style="border-bottom: solid #4F81BD 1.0pt; border-left: none; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">iShares Russell 2000
(XSU)</span></div>
</td>
<td style="border-left: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">Powershares
Fundamental High Yield Corporate (PFH)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-left: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 4;">
<span style="font-family: "Times New Roman","serif";">Claymore BRIC (CBQ)</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">BMO NASDAQ 100 (ZQQ)</span></div>
</td>
<td style="border-right: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">BMO High Yield Corporate Bond (ZHY)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border-right: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 68;">
<span style="font-family: "Times New Roman","serif";">BMO Emerging Markets
(ZEM)</span></div>
</td>
<td style="border-bottom: solid #4F81BD 1.0pt; border-left: none; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<br /></div>
</td>
<td style="border-left: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">Claymore Advantaged Convertible
Bond (CVD)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="border-left: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 4;">
<span style="font-family: "Times New Roman","serif";">Claymore Broad
Emerging Markets (CWO)</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>
</td>
<td style="border-right: solid #4F81BD 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<span style="font-family: "Times New Roman","serif";">Convertible bond XTF (CXF)</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 68;">
<span style="font-family: "Times New Roman","serif";">Horizons North
American Growth (HAW)</span></div>
</td>
<td style="border-bottom: solid #4F81BD 1.0pt; border-left: none; border-right: none; border-top: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<br /></div>
</td>
<td style="border-left: none; border: solid #4F81BD 1.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 147.6pt;" valign="top" width="197">
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm; mso-yfti-cnfc: 64;">
<span style="font-family: "Times New Roman","serif";">iShares JP Morgan
Emerging Markets Bond (XEB) </span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<a href="http://www.purinvesting.com/"><br /></a><i style="mso-bidi-font-style: normal;"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-bidi-font-size: 11.0pt;"></span></i></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 0cm;">
<br /></div>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-9767677263569913372012-02-08T11:36:00.000-05:002012-02-08T11:36:06.082-05:00Safety tips for synthetic ETF use<!--[if gte mso 9]><xml>
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<span style="font-family: "Times New Roman","serif";">Losing money is the fundamental risk
for anyone buying any financial product. Whether a stock, bond, mutual fund, or
ETF, investors have an expectation that information about these products will
be correct, timely and complete. An entire industry has grown up around compliance
and disclosure. Regulations for marketing and advertising investment products seem
more rigorous than for lottery tickets that have a significantly lower expected
return than most investment products and whose buyers appear less likely to afford
losses. Go figure. Lotteries in Ontario alone account for about $3.8 billion in
annual revenue with about half going to the government. I “Googled” <i style="mso-bidi-font-style: normal;">tax on the stupid</i> and “lottery” popped
up. What then should we make of the higher regulatory scrutiny over mutual
funds and the $10 billion plus of fees charged ($772.6 billion in assets @ 1.50%)?<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">Investors know there are many ways
to lose money. In looking at ETFs the risk of losing money can be broken into component
parts.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Highest
risk of losing money: costs </span></b></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">One never knows in advance what
an investment’s return is going to be, but its cost is well known. Cost
represents the greatest certainty of reducing capital for any product. Despite
this obvious fact, it is stunning how many investors I’ve met have no real understanding
of what they pay for products and services. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">Some synthetic ETFs use swaps in
their construction. In Canada these includes Horizon S&P/TSX 60 Index (HXT)
and Horizons S&P 500 Index (HXS). Part of the cost of these products is the
swap fee paid to counterparties to deliver the return of the underlying index. While
the swap fee for HXT is listed as zero, interest and fees for securities
lending likely provides the required margins. HXS bears a 0.30% fee. Investors
should add this to the MER of 0.15%. The total expense ratio for HXT is 0.07%. These
two ETFs offer a particular advantage for taxable investors by providing the
total return of the underlying indices, the S&P/TSX 60 (HXT) and the
S&P 500 (HXS). No taxable distributions are involved so capital compounds
unfettered by tax.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Next
highest risk of losing money: stupidity</span></b></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">Bet you thought this might be
risk #1, but costs are certain. A stupid investor could actually get lucky once
in a while!</span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">Leveraged and inverse leveraged
ETFs have been categorized as appropriate for daily trading only. This
satisfies regulators and the compliance departments of brokerage firms even
though the actual category should be “appropriate for daily trading only for
dummies who won’t read the prospectus or bother to estimate volatility drag”.
Otherwise intelligent people condemn these vehicles because compounding returns
conceptually escapes them! Leveraged and inverse ETFs use synthetic structures
although they are not listed in the table below. They form a subset of ETFs with
embedded strategies. If you don’t understand a product, don’t buy it.</span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";"><span style="mso-spacerun: yes;"> </span><b style="mso-bidi-font-weight: normal;">Sometime
risk of losing money: counterparty</b></span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">Replicating an underlying index can
be cumbersome. Some ETF sponsors choose to synthetically recreate performance.
This involves posting collateral and having a counterparty (in Canada this means
a bank) pledge the return. The quality of the counterparty and the liquidity
and value of the collateral are the key points of concern for these ETFs. Synthetic
structures involve fees that are classified as trading costs but should be
considered as an overall cost of the structure. <span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">If one of the major banks fails
as a counterparty, Canadians will have much more to worry about than just a
synthetic ETF. Nevertheless, safeguards limit single counterparty exposure in
Canada to 10%. In Europe, there is concern that ETF sponsors are using their
own banks as counterparties. This has not happened in Canada yet. The risk of
counterparty failure is difficult to assess. Just because it hasn’t happened
here doesn’t mean it will never occur even if collateral in Canada is all cash.
I learned from U.S. bond traders that some unquantifiable risks could be
assessed as .05% on a trade. If one assumes that counterparty risk is 0.05% per
annum, HXT’s actual-plus-notional cost would be 0.13% (0.08% TER plus 0.05% for
counterparty risk). Over twenty years, the risk of a counterparty collapse with
100% cash collateral is 1.0%. This seems reasonable. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">The table below shows all
non-leveraged or inverse synthetic ETFs in Canada. Data is from a comprehensive
report about ETF regulatory issues by National Bank Financial’s ETF team of
Chiefalo, Straus and Zhang and is ranked by market value. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableLightList" style="border-collapse: collapse; border: none; mso-border-alt: solid black 1.0pt; mso-border-themecolor: text1; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: -1;">
<td style="background: black; border-bottom: none; border-left: solid black 1.0pt; border-right: none; border-top: solid black 1.0pt; mso-background-themecolor: text1; mso-border-left-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 5; text-indent: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-themecolor: background1;">ETF Name</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; mso-background-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 1; text-align: center; text-indent: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-themecolor: background1;">Symbol</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; mso-background-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 1; text-align: center; text-indent: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-themecolor: background1;">MV ($M)</span></b></div>
</td>
<td style="background: black; border-top: solid black 1.0pt; border: none; mso-background-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 1; text-align: center; text-indent: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-themecolor: background1;">TER</span></b></div>
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 1; text-align: center; text-indent: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-themecolor: background1;">(%)</span></b></div>
</td>
<td style="background: black; border-bottom: none; border-left: none; border-right: solid black 1.0pt; border-top: solid black 1.0pt; mso-background-themecolor: text1; mso-border-right-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 1; text-align: center; text-indent: 0cm;">
<b><span style="color: white; font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-themecolor: background1;">Structure</span></b></div>
</td>
</tr>
<tr style="mso-yfti-irow: 0;">
<td style="border-right: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 68; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Horizon
S&P/TSX 60 Index </span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">HXT</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$326</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">0.08</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Swap</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="border-left: solid black 1.0pt; border: none; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 4; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Claymore
Advantaged High Yield Bond </span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">CHB</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$290</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">0.53</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border-right: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 68; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Claymore
Global Monthly Advantaged Dividend</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">CYH</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$128</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">0.67</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="border-left: solid black 1.0pt; border: none; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 4; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Claymore
Advantaged Canadian Bond Fund</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">CAB</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$118</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">0.56</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border-right: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 68; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Claymore
Natural Gas Commodity</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">GAS</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$94</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">0.86</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="border-left: solid black 1.0pt; border: none; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 4; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Claymore
Broad Commodity</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">CBR</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$45</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">0.90</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6;">
<td style="border-right: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 68; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Horizon
COMEX Silver</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">HUZ</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$18</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">1.28</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 7;">
<td style="border-left: solid black 1.0pt; border: none; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 4; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Horizon
Betapro S&P 500 VIX Short Term <span style="mso-spacerun: yes;"> </span>Futures Bull+</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">HVU</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$18</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">1.30</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 8;">
<td style="border-right: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 68; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Horizon
COMEX Gold</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">HUG</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$15</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">1.28</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 9;">
<td style="border-left: solid black 1.0pt; border: none; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 4; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Horizon
S&P 500 Index</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">HXS</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$11</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">0.45</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Swap</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 10;">
<td style="border-right: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 68; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Horizons
Winter-term NYMEX Crude Oil</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">HUC</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$4</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">1.28</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 11;">
<td style="border-left: solid black 1.0pt; border: none; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 4; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Horizon
Betapro S&P 500 VIX Short Term Futures</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">HUV</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$2</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">0.90</span></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 12; mso-yfti-lastrow: yes;">
<td style="border-right: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 274.75pt;" valign="top" width="550">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 68; text-indent: 0cm;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Horizons
Winter-term NYMEX Natural Gas</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">HUN</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 42.5pt;" valign="top" width="85">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">$1</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: none; border-top: solid black 1.0pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 49.65pt;" valign="top" width="99">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">1.28</span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; mso-border-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.2pt;" valign="top" width="110">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin: 0cm; mso-yfti-cnfc: 64; text-align: center; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt;">Forward</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";"><span style="mso-spacerun: yes;">
</span></span></div>
<div class="MsoNormal" style="line-height: normal; margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: "Times New Roman","serif";">Synthetic structures are making
useful products available to retail investors in cost effective packages. If
you don’t understand these products or don’t want to do the research, may I
commend lottery tickets or mutual funds for your consideration? Synthetic-based
ETFs require more scrutiny. A little research will reveal valuable new strategies
and products to you but you can’t pick them by using your spouse’s birth date. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span></span></div>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-20986133062082737452012-01-07T17:18:00.000-05:002012-01-07T17:18:53.391-05:00Don't pick your nose with a power drill<!--[if gte mso 9]><xml>
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<br />
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif";"></span><a href="http://www.purinvesting.com/"><span style="font-family: "Times New Roman","serif";"><br /></span></a></div>
<span style="font-family: "Times New Roman","serif";">Derivatives
offer useful and cost-effective ways for investors to manage risks. In the ETF
world, derivatives have democratized investor access to asset classes like
commodities and currencies, and to strategies like covered-call writing, use of
leverage and short selling. Previously the sole domain of professional and
sophisticated investors, this freedom has come with the expected consequences
of misuse and plain ignorant use of some or all of these products. </span>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif";">Three
questions arise from the increasing use of synthetic structures in retail
products. </span></div>
<ol start="1" style="margin-top: 0cm;" type="1">
<li class="MsoNormalCxSpMiddle" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Times New Roman","serif";">Are the benefits and costs
associated with these products adequately understood by users?</span></li>
<li class="MsoNormalCxSpMiddle" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Times New Roman","serif";">Are there potential systemic
risks arising from the growing popularity of these instruments? </span></li>
<li class="MsoNormalCxSpMiddle" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Times New Roman","serif";">Who is best equipped to
determine if investors should have access to these products: regulators,
investment professionals, or investors themselves? Each will be examined
in more detail over the next three months. Here is a broad overview. <span style="mso-spacerun: yes;"> </span></span></li>
</ol>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Overview: The right tool for the
job</span></b></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif";">Having a
plan is as basic to portfolio construction as it is in the workshop. What will
the portfolio have to do? What characteristics must it have? Selecting the
appropriate tools and materials and understanding the capabilities and inherent
risks with each is simply common sense. While possible to drive a nail with a
screwdriver, it isn’t always as effective as using a hammer. Selecting ETFs is
no different.</span></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif";">Returns
are difficult to predict, but costs are different. The ETF Screener on the TMX
Money website offers two basic ETF classifications: those using passive
strategies and those using embedded strategies and costs are behind each.</span></div>
<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "Times New Roman","serif";">Passive </span></i></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif";">These
are straightforward ETFs that replicate an index and hold the actual components
or a stratified sampling of the index holdings. Examples:</span></div>
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<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><i style="mso-bidi-font-style: normal;"><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">PASSIVE</span></i></b></div>
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<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">TICKER</span></div>
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<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">MER</span></div>
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<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">BMO Aggregate Bond</span></b></div>
</td>
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<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">ZAG</span></div>
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<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.50%</span></div>
</td>
</tr>
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<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">Claymore S&P/TSX Canadian Dividend</span></b></div>
</td>
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<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">CDZ</span></div>
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<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
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<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.60%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
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<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">Claymore Gold Bullion</span></b></div>
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<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">CGL</span></div>
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<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.50%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">iShares S&P/TSX 60 Index</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">XIU</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.17%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">iShares S&P/TSX Capped Energy</span></b></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">XEG</span></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.55%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6;">
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">iShares S&P 500</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">XPS</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.24%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 7;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">PowerShares Canadian Dividend Index</span></b></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">PDC</span></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.50%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 8;">
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">PowerShares QQQ (CDN Hedged)</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">QQC</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.32%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 9;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">PowerShares Ultra DLux Long Term
Government Bond</span></b></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">PGL</span></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.25%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 10;">
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">RBC 2013 Target Corporate Bond</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">RQA</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.30%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 11;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">RBC 2014 Target Corporate Bond</span></b></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">RQB</span></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.30%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 12; mso-yfti-lastrow: yes;">
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">RBC 2020 Target Corporate Bond</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">RQH</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.30%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "Times New Roman","serif";">Embedded strategies</span></i></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif";">All
other ETFs fall into this category, suggesting additional analysis may be
required. We have broken these into three subsets with additional costs
associated with each. </span></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Strategic:</span></b><span style="font-family: "Times New Roman","serif";"> Holding equal dollar amounts of
index components is one example. Proponents claim reduced large capitalization
company bias in an index allows smaller faster-growing companies to contribute
equally. Whether or not you believe this (there is research supporting both
sides), more frequent rebalancing incurs more trading costs. This holds true
for so-called fundamentally weighted indexes and active ETFs. Investors must
decide if the costs are justified by the strategy. Examples:</span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-bottom-alt: solid black 1.0pt; mso-border-top-alt: solid black 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-table-layout-alt: fixed; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><i style="mso-bidi-font-style: normal;"><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">EMBEDDED STRATEGIES – STRATEGIC</span></i></b><b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"></span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">TICKER</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">MER</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">BMO S&P/TSX Equal Weight Oil &
Gas</span></b></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">ZEO</span></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.55%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">Claymore Canadian Fundamental</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">CRQ</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.65%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="background: silver; border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">Horizons Dividend </span></b></div>
</td>
<td style="background: silver; border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">HAL</span></div>
</td>
<td style="background: silver; border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.70%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Exchange-traded derivatives: </span></b><span style="font-family: "Times New Roman","serif";">These ETFs can involve options
and futures and introduce time as a more critical investment factor.
Covered-call ETFs, for example, alter risk over time; <span style="color: #c0504d;">modestly
for ETFs overwriting a small portion of underlying holdings (i.e. FXF) to those
that overwrite all of the holdings (i.e. ZWB). </span>Commodity ETFs can hold
the underlying commodity, but many use futures. This subjects these ETFs to
liquidity, basis, contango and backwardation risk. ETFs using exchange-traded
derivatives introduce some elements of additional cost from liquidity, basis,
timing (backwardation/contango) in addition to possibly higher management
costs. Leveraged-long and leveraged-short ETFs also fall into this category. </span></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif";">Examples:</span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-bottom-alt: solid black 1.0pt; mso-border-top-alt: solid black 1.0pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-table-layout-alt: fixed; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><i style="mso-bidi-font-style: normal;"><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">EMBEDDED STRATEGIES - EXCHANGE TRADED
DERIVATIVES</span></i></b><b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"></span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">TICKER</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">MER</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">BMO Covered Call Canadian Banks</span></b></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">ZWB</span></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.65%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">Horizons S&P/TSX 60 Bull</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">HXU</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">1.15%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">XTF Can 60 Covered Call</span></b></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">LXF</span></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.65%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">XTF Can Financial Covered Call</span></b></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">FXF</span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.65%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5; mso-yfti-lastrow: yes;">
<td style="background: silver; border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">XTF Tech Giants Covered Call</span></b></div>
</td>
<td style="background: silver; border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">TXF</span></div>
</td>
<td style="background: silver; border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.65%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Times New Roman","serif";">Over-the-counter derivatives: </span></b><span style="font-family: "Times New Roman","serif";">OTC derivatives are based upon
total return swaps. A dealer commits to pay the return of an index over a
particular time period in exchange for collateral. This introduces a potential
cost as credit risk because the dealer or counterparty is promising to pay. It
also introduces potential liquidity risk related to the collateral. Examples:</span></div>
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<tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><i style="mso-bidi-font-style: normal;"><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">EMBEDDED STRATEGIES -OVER-THE-COUNTER
DERIVATIVES </span></i></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">TICKER</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">MER</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 1;">
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">Horizons S&P/TSX 60 Index (swap
fee 0.0%)</span></b></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">HXT</span></div>
</td>
<td style="background: silver; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.07%</span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2; mso-yfti-lastrow: yes;">
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 352.7pt;" valign="top" width="705">
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">Horizons S&P 500 (swap fee 0.30%)</span></b></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">HXS</span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 2.0cm;" valign="top" width="113">
<div align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="color: black; font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-bidi-font-size: 11.0pt;">0.15%</span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif";">Investors
and their advisors have a duty to understanding the risks inherent in these
products and their potential impact on broader markets. Do regulators know
better than advisors or their clients whether these products have a place in
retail portfolios? We’ll address these issues in future columns. </span></div>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-27102142421104879272011-12-03T14:01:00.001-05:002011-12-03T14:17:24.511-05:00Pension Breakthrough for the Rest of Us<a href="http://www.newswire.ca/en/story/888327/pension-breakthrough-for-the-rest-of-us">http://www.newswire.ca/en/story/888327/pension-breakthrough-for-the-rest-of-us</a><br />
<br />
This is a press release that introduces an approach that could be disruptive to suppliers of the $525 billion invested in target date funds (TDFs) in the U.S.. TDFs are the fastest growing product in the defined contribution market in the U.S., Canada, Australia and elsewhere because they make investing simple. But they all benefit from a fundamental half-truth. They reduce equity exposure on a predetermined fixed glide path or become more conservative as a target date, like retirement, approaches. To the casual observer, it sounds like the fund reduces its exposure to risk over the life of the product. This would be exactly what plan members want and would do if they had the time and investing acumen to monitor and manage the assets themselves. Sadly these funds do not manage risk at all. The paper "What DC Plan Members Really Want" describes why this is the case and offers two ideas to fix and improve outcomes. mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-72543845279336491502011-11-04T12:19:00.005-04:002011-11-04T12:27:51.164-04:00Target Practice<div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjC99waMfs7DcaLtYjxtVaWsxkjeshxAYJ7pd8L9ZUpa1c8oasJ98zZLjgVsLDcIjugrqwQ47Y2zBpREHYSE2myzBe8aRxElwSJOBU2FgeL4dL8XFPJJXObTFtTwnH9RSyYXiXqbNDcpBM/s1600/glide+path.png"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 320px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjC99waMfs7DcaLtYjxtVaWsxkjeshxAYJ7pd8L9ZUpa1c8oasJ98zZLjgVsLDcIjugrqwQ47Y2zBpREHYSE2myzBe8aRxElwSJOBU2FgeL4dL8XFPJJXObTFtTwnH9RSyYXiXqbNDcpBM/s320/glide+path.png" alt="" id="BLOGGER_PHOTO_ID_5671176432507808722" border="0" /></a><br /><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >Figure 1: Capital Accumulation Plan</span></div><!--[if !mso]> <style> v\:* {behavior:url(#default#VML);} o\:* {behavior:url(#default#VML);} w\:* {behavior:url(#default#VML);} .shape {behavior:url(#default#VML);} </style> <![endif]--><!--[if gte mso 9]><xml> <o:officedocumentsettings> <o:relyonvml/> <o:allowpng/> <o:pixelsperinch>72</o:PixelsPerInch> <o:targetscreensize>1024x768</o:TargetScreenSize> </o:OfficeDocumentSettings> </xml><![endif]--><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:trackmoves/> <w:trackformatting/> <w:donotshowrevisions/> 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mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} </style> <![endif]--> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >Accumulating enough money to retire with a 60% replacement income is great, unless you were planning for 70%. Last month, we described Personal Alpha<sup>TM</sup> as achieving a goal beyond a target, like saving money and earning extra years of retirement income. Accountants and financial planners, particularly fee-only planners who consider their client’s interests unbiased by product trailers and incentives, have been doing this successfully for some time. But new products like exchange traded funds (ETFs) and services like discount and online brokerages have ushered in a new reality. As consumers become more knowledgeable, financial advisors (FAs) will have to develop and expand their value proposition beyond trading and research.</span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >ETFs allow investors access to instant diversification and relatively inexpensive exposure to a large and rapidly growing list of asset classes, regions, countries, styles, capitalizations, sectors, and industries. As retail investors discover the flexibility that ETFs offer, their expectations from other financial products will change. One consequence of an informed public is the growing acceptance of the principles of passive or index investing as the efficient way to access market or beta exposure. The debate over active or passive will rage on as investment professionals protect the turf that pays their bills. But most active managers concede a role for passive investing, particularly in a multi-fund, multi-manager environment when overlap yields market returns at full fees. At the very least, more investors understand that adding returns above the market is not easy and that few can do it consistently. FAs may find building a core business around this kind of activity to be frustrating at best.<span style="mso-spacerun:yes"> </span></span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style="font-size:12.0pt; mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >Managing risk </span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >An investment professional’s definition of risk - volatility - is different than most retail clients who fear absolute losses. An alternative definition, based on the reality of client’s lives, is the risk of not achieving a goal. </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >Let’s use retirement investing as an example. Defined benefit (DB) pension plans, given to Members of Parliament and civil servants, are tenaciously guarded by unions and some large corporations. They are professionally managed and, in retirement, pay a percentage of final year’s salary depending upon each plan. DB plans are administered by expert committees and employers are obliged to pay or, in the example above, the taxpayers are.</span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >While both employer and employee contribute, investment decisions are left to the committee. Mandatory valuations every three years assess how the fund measured up to the theoretical liability to pay all those folks their pensions currently, if retired, or in the future, if still working. Any shortfall or funding deficit must be made up over time by the employer or taxpayers. In contrast, defined contribution (DC) plans are like registered retirement plans. The employee makes contributions, usually with employer matches, but the responsibility for investment decisions is the employee’s. Importantly, there is no target income in retirement and no triennial valuations assuring that the program is tracking towards success or failure. In fact, no targeted percentage of income like a DB plan is required. Over several decades, many DB plans have switched to DC or stopped admitting new members in an attempt to control corporate liabilities. </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >Financial advisors have a great opportunity here. By targeting a percentage of salary as retirement income, a DC or RSP portfolio can be managed like a DB plan. Investors benefit by focusing on a stream of income in retirement rather than short-term performance, and improve the chance that they receive what they want from a retirement plan - a reliable income. Here’s how to do it. </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >If someone wants to replace 70% of annual income in retirement, the FA calculates the capital required to fund an immediate annuity that would pay this amount in today’s dollars at retirement. Using the investor’s contribution rate and assumptions for inflation and something reasonable for returns, the FA establishes a capital accumulation path towards the target retirement capital. (See Figure 1, “Capital accumulation path.”) </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif";mso-no-proof:yesfont-family:";font-size:11.0pt;" > </span><span style="font-size:12.0pt;mso-bidi- Times New Roman","serif"font-family:";font-size:11.0pt;" ></span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" ><br /></span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >Actual performance will be above or below this path as indicated by A, B and C in Figure 1. By matching the risk of a portfolio to the capital accumulation path, the FA makes decisions based upon progress towards the goal. The target may change modestly over time as interest rates change or dramatically as the investor’s circumstances change, such as a big promotion, more children than expected, family illness, inheritances or a lottery win. </span></p> <h1> </h1> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:12.0pt;mso-bidi-Times New Roman","serif"font-family:";font-size:11.0pt;" >This is an important function missing in DC and RSP management today. FAs can help investors work on a solution that is useful and valuable. For more details, go to advisor.ca/yamadaDCplan to find a link to our article, “What DC Plan Members Really Want” in the upcoming fall edition of the <i style="mso-bidi-font-style:normal">Rotman International Journal of Pension Management</i>.</span></p>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-75597721244397098422011-10-13T13:13:00.003-04:002011-10-13T13:18:38.576-04:00ETFs Reach Adolescence<!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:trackmoves/> <w:trackformatting/> <w:donotshowrevisions/> <w:donotprintrevisions/> <w:donotshowmarkup/> <w:donotshowcomments/> <w:donotshowinsertionsanddeletions/> <w:donotshowpropertychanges/> <w:punctuationkerning/> <w:validateagainstschemas/> <w:saveifxmlinvalid>false</w:SaveIfXMLInvalid> <w:ignoremixedcontent>false</w:IgnoreMixedContent> <w:alwaysshowplaceholdertext>false</w:AlwaysShowPlaceholderText> <w:donotpromoteqf/> 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style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >The Canadian exchange-traded fund (ETF) market has reached adolescence, and hair is starting to grow in funny places...like their chins.</span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" >What’s that smell?</span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >The Canadian ETF market has matured with sufficient size ($45 billion) and momentum (30% annual growth) to get the attention of the major banks. According to BNY Mellon, the U.S. ETF market will double through 2015 - and Canada’s could match it. Banks and investment companies smell profit potential, and a chance to protect and grow their retail base despite massive books of profitable mutual funds. </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >They may also fear others will crowd them out of a lucrative market that is, apparently, here to stay. Heavy hitters RBC and Vanguard have declared their intention to enjoin iShares, Bank of Montreal, Horizon Beta/AlphaPro, Claymore, a newcomer to Canada, Invesco, and rookie XTF Capital Corp. in the battle of sponsoring ETFs here. A major Korean fund manager’s interest in BetaPro Management confirms the stakes are changing. Deep pockets and sophisticated distribution are changing the landscape. </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" >Where did those come from?</span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >Unlike early plain-vanilla indexes that got simple ETF wrappers, competing sponsors now race to represent different asset classes, occasionally using derivatives to replicate them. Regulators are concerned these structures may lead to another subprime crisis, or a “flash crash” like in May 2010. The Financial Services Authority (FSA) in the UK is considering banning swap-based ETFs from retail use altogether. The FSA is the UK’s version of Canada’s cluster of securities commissions. These products offer an exciting array of tools to enhance and enable new methods of portfolio construction, but registered representatives need to understand the underlying composition of all ETFs not only to use them effectively, but to manage the liability if a structure goes bad. </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" >Why voices need to deepen</span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >Blindsided by collateralized mortgage products, regulators are determined to prevent similar problems with ETFs. Although prospectus disclosure has been the regulatory focus for retail products, veteran fund executive Paul McKenna of One Financial reminded me that ETFs trade in the secondary market where prospectuses are available but issuance to buyers is not mandatory. Most registered reps know that prospectuses are a legal crutch few people read. Regulators need to rethink the principles and practicality of disclosure<b style="mso-bidi-font-weight:normal"> </b>in a digital age and speak to consumers with a new voice. Perhaps making all advisors fiduciaries is part of the answer.<span style="mso-spacerun:yes"> </span></span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" ><span style="mso-spacerun:yes"> </span><span style="mso-spacerun:yes"> </span><span style="mso-spacerun:yes"> </span></span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" >Will the ETF market grow up to look like the mutual fund market?</span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >Duplication is costly and confusing, yet every mutual fund family feels it needs at least an equity, fixed income, and money market fund. ETFs compete for market share based upon a different and more useful set of metrics. Sponsors market ETFs based upon index construction, liquidity, diversification and other risk characteristics rather than how a manager happened to outperform his or her benchmark last year. While the conversation has been elevated to issues that really impact portfolios, it’s not as much fun as talking about whether RIM’s quarter will beat analyst expectations. However, getting money into investors’ pockets through lower costs is a powerfully persuasive pitch.<span style="mso-spacerun:yes"> </span></span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" ><span style="mso-spacerun:yes"> </span><span style="mso-spacerun:yes"> </span></span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >Each bank may want a complete stable of asset classes for their clients, but there may not be enough room for a seventh or eighth ETF based on the S&P/TSX 60. Watching RBC and Vanguard position their Canadian equity offerings will be interesting. </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >BMO’s ETF launch in 2009 signaled the return of banks to a space vacated by TD in 2006. Critically, taken with RBC’s filing of eight target maturity fixed-income ETFs this summer, the product category has been validated. Vanguard, the dominant index fund player in the U.S., will launch a series of funds in Canada by year-end. This is important and intriguing because Vanguard’s reputation for delivering straightforward passive products at low cost will challenge everyone. Will there be a refocusing on passive low-cost ETFs, or will active strategies finally gain traction?<span style="mso-spacerun:yes"> </span></span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" >Waiting for the swelling to go down </span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style=" Times New Roman","serif"font-family:";font-size:12.0pt;" > </span></b></p> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="Times New Roman","serif"font-family:";font-size:12.0pt;" >ETFs represent only 6% of Canadian mutual fund assets - a rounding error. Unquestionably, ETFs offer investors more effective, low-cost delivery of capital market exposure than mutual funds. Only two things stand between the consumer and a superior product: smarter investors and the entrenched investment advisor. Because information is ubiquitous, investors are getting smarter. Savvy RRs are already using ETFs and as clients get better informed, other advisors will follow. Peer pressure works in trading rooms as well as high school lunchrooms. Advisors sitting at the end of the bed waiting for the ETF swelling to go down are being left behind.</span></p> <p class="MsoNormal"> </p>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-31786174535888902502011-08-19T16:15:00.002-04:002011-08-19T16:19:41.689-04:00To women: Is your boss evolved?<!--[if !mso]> <style> v\:* {behavior:url(#default#VML);} o\:* {behavior:url(#default#VML);} w\:* {behavior:url(#default#VML);} .shape {behavior:url(#default#VML);} </style> <![endif]--><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:trackmoves>false</w:TrackMoves> <w:trackformatting/> <w:donotshowrevisions/> <w:donotprintrevisions/> <w:donotshowmarkup/> <w:donotshowcomments/> <w:donotshowinsertionsanddeletions/> <w:donotshowpropertychanges/> <w:punctuationkerning/> <w:validateagainstschemas/> <w:saveifxmlinvalid>false</w:SaveIfXMLInvalid> 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priority="37" name="Bibliography"> <w:lsdexception locked="false" priority="39" qformat="true" name="TOC Heading"> </w:LatentStyles> </xml><![endif]--><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} </style> <![endif]--> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">The CFA candidates gathered in the vaulted Great Hall of Hart House, once the exclusively men’s athletic facility at the University of Toronto. In two weeks these students would sit an exam with a Level 1 pass rate of 37%. Despite dismal odds, these particular students bristled with confidence because all were enrolled in Michael Hlinka’s (CBC Radio Business commentator) preparation course that boasts a 76% pass rate. They had a statistical edge and they knew it. Mr.Hlinka is known for frank observations of business and economics delivered daily on CBC Radio Toronto. Leveraging Michael’s energy, the students seemed completely self-assured. <span style="mso-spacerun:yes"> </span></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">They had come to hear Margaret Franklin, current Chair of the CFA Institute, the organization that oversees the exams and sets international standards of education, conduct and professionalism for the investment industry, a remarkable accomplishment for a Canadian.<span style="mso-spacerun:yes"> </span>Ms. Franklin had presided over the annual CFA conference in Edinburgh earlier in the week and had flown back the night before to attend this reception. <span style="mso-spacerun:yes"> </span></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">Ms. Franklin, one of the 22% women of her graduating class fifteen years ago remarked that women constitute only 20% of the current roster of CFAs. Statistics confirm that women have made little progress in the investment business or in the boardroom. In my experience as a manager of investment professionals I applaud this lack of progress. It has made my job easier. As a young U.S. equity portfolio manager, the best coverage from Wall Street came from women. In retrospect, Canada was considered a third world market so many women would be relegated to cover institutional accounts north of the border because lucrative U.S. accounts were covered by men. What I quickly learned was that any woman in the investment business had to be better, more tenacious, more insightful, and more aggressive to survive. There weren’t many of them and the environment was never accommodating. My job was made easier by just hiring the women. They usually held an edge over the men. </span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">Don’t get me wrong. I was never interested in equality or diversity, big themes with big companies these days, I just knew that for both good and bad reasons, women in the industry had to be better than their XY chromosome cohorts.</span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">Speaking informally with a group of women CFA candidates afterwards, and in bewilderment over the apparent lack of progress over the years, I offered my observations about management in the investment business and how to identify “evolved” managers from those less gender neutral. Others encouraged me to list my albeit-unscientific observations as a guide to others. </span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">If you are a manager, how evolved are you?</span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif""> </span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">How to identify evolved managers</span></b></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">If your boss’s wife works, he is possibly evolved. If your boss’s mother worked and he was secure enough not to resent being left alone occasionally, he has a higher chance of being evolved. If your boss has daughters, he has the potential to be evolved.</span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif""> </span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"">Danger signs</span></b></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">If your boss’s wife is a stay-at-home “soccer” mom, danger; you are in trouble! Corollary rule; someone observed that 90% of investment bankers’ wives do not work; seek employment with bosses from the other 10%. If your boss’s mother did not work – he has a serious impediment to evolution.<span style="mso-spacerun:yes"> </span>If your boss has a son in medical school and daughter in modelling, you are in for serious trouble! </span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">Franklin made an interesting observation that women of an earlier generation were not always helpful to other women. So if your boss is a woman there are no guarantees. In fact some of the same dangers exist. If your boss has a house husband, beware, she is likely to be less empathetic. </span></p> <p class="MsoNormal" style="text-align:center" align="center"><span style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"; mso-fareast-language:EN-CA;mso-no-proof:yes"><img src="file:///C:/Users/Mark/AppData/Local/Temp/msohtmlclip1/01/clip_image002.jpg" height="286" width="428" /></span><span style="font-size:12.0pt; line-height:115%;font-family:"Times New Roman","serif""></span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">Source: Catalyst 2011</span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif""> </span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">Canadian public corporations have only 10.3% women board members according to a Global Survey released by Catalyst in May 2011. Canada is just behind Turkey’s 10.8%! Even the unenlightened U.S. has 15.7%. Why should investment professionals care? As Chief Investment Officer for several large institutional investment companies I have had the responsibility to vote proxies. In my experience, corporate governance in Canada is poor. Nortel is a good example of management failure and lack of board governance yet nobody has gone to jail. Is there any guarantee that adding women to boards would make a positive difference? No. But I know that women in my specialized slice of the world had to be better so why not give them a try? They could certainly not be any worse. In fact, true equality will only occur if women are given a chance to be as mediocre as the boys. </span></p> <p class="MsoNormal"><span style="font-size:12.0pt;line-height:115%;font-family: "Times New Roman","serif"">For those of you looking to hire graduates from that CFA class of 2011 and beyond, here is a tip that could give you the statistical confidence of Hlinka’s CFA candidates. Pick the woman.<span style="mso-spacerun:yes"> </span>She is likely to be better than the average guy because, unfortunately, she has to be.<span style="mso-spacerun:yes"> </span></span></p> mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-17287946503233761092011-04-19T16:26:00.003-04:002011-04-19T16:29:18.784-04:00Final Score: ETFs 1: Leafs 0Too much success can be a bad thing. <p>The Toronto Maple Leafs don’t need to put a competitive team on the ice. Season ticket holders already compete for 90% of all seats, broadcasting revenues are maxed and virtually every game is sold out. </p> <p>The Leafs represent a clear distortion in the marketplace. There is little incentive to win because fans act irrationally.</p> <p>The popularity and institutional success of passive investing in general (replicating the performance of an index), and exchange-traded funds (ETFs) in particular, have led some to believe that distortions result because investors act rationally. </p> <p>“ETFs are radically changing the markets to the point where they, and not the trading of underlying securities, are effectively setting the prices of stocks of smaller capitalization companies, or the potential new growth companies of the future,” write Harold Bradley and Robert R. Litan in a 2010 paper for the Kauffman Foundation. </p> <p>The authors are concerned about ETFs and other influences they feel discourage new issues and impede the efficiency of capital markets. They believe the popularity of ETFs has led to trading volumes that overwhelm the liquidity of underlying securities, thus distorting valuations. </p> <p><a href="http://www.advisor.ca/investments/market-insights/final-score-etfs-1-leafs-0-43379/attachment/hockey_goalie_score" rel="attachment wp-att-43389"><br /></a></p> <p>Fundamental to the authors’ argument is the dominance of passive over active investing. Dominance that overrides the arbitrage of individual stocks gives their argument credibility.<br /><strong><br />The case for indexing</strong></p> <p>In an analysis for Vanguard research, “The Case for Indexing in Canada,” authors Philips, Walker and Kinniry restate in a Canadian context what others have observed elsewhere: that costs are difficult for active managers to overcome. The asset-weighted expense ratio for actively managed Canadian equities funds was 2.29% (May 31, 2010) versus 0.87% for Index funds, a difference of 1.42%. Cap-weighted Canadian equity ETFs have expense ratios between 0.07% (HXT) and 0.25% (XIC) for a difference of 2.04-2.22%. </p> <p>Active management can occasionally overcome this disadvantage in the short term but has difficulty over the long term. The sidebar (see “Relative performance of Canadian actively managed funds”) from the Vanguard study shows the consistency with which actively managed funds underperform their benchmarks, and somewhat alarming median annual return shortfalls. </p> <p><strong>The (weak) case for active management</strong></p> <p><strong>1.</strong> The most popular argument for active management is a desire to beat the market. Advisors say the only way to guarantee you won’t beat the market is to index. It is possible to pick an outperforming stock but difficult to do so consistently, and really difficult to pick a portfolio of winners. If investors selected only a few stocks, watched them closely and kept trading costs low, they would have more success because high turnover costs kill returns. Picking active, outperforming mutual funds is a low-probability activity. Nevertheless, investors try to pick winners because they think it is possible. </p> <p><strong>2.</strong> Fun. Indexing isn’t. There is no question that passive investing is the intelligent choice. Lower costs boost returns, but talking about stock picks is more fun. People do it even if they aren’t quite sure what they are doing. There is higher entertainment value to active management.</p> <p><strong>3.</strong> Special knowledge. In most professional endeavours, specialized education is a barrier to entry. With no apology to my portfolio manager colleagues, picking stocks is not neurosurgery. Anybody can do it. Results may not be consistent and the methodology may at times resemble picking horses at the track, but anybody can open an online account and get some kind of return. In bull markets they are likely to be successful. Less so in bear markets. Investing is egalitarian. </p> <p>Current SEC investigations aside, material non-public information is difficult to obtain and illegal to use, so potential access to inside information is no longer an advantage for Street veterans. Twenty-four-hour business news media has given the public access to the same information as the professionals, on as timely a basis. The poor record of investment professionals—reflected in the mutual fund numbers—suggests that educated and experienced pros find outperforming difficult. Despite what should be a discouraging record, mutual funds have 20 times the assets of ETFs in Canada. This is hardly the overwhelming dominance to which the Kauffman paper alludes.</p> <p><strong>4.</strong> The superstar. Western society has a fascination with the superior individual. The U.S. Naval Academy graduate with a Harvard MBA and PhD in Quantitative Finance from Wharton must be a superior human being and should be able to build portfolios that outperform on any basis. If such a person exists, she is working at a hedge fund and couldn’t care less about your money or mine!</p> <p><a href="http://www.advisor.ca/investments/market-insights/final-score-etfs-1-leafs-0-43379/attachment/hockey_game" rel="attachment wp-att-43407"><br /></a></p> <p><strong>5.</strong> Not-so-smart people do it. Hubris is a huge motivator. The annoying neighbour, the chatty dentist, and Uncle Fred the blowhard all talk about how they picked the stock of the decade. Maybe they did, but you will also notice that only lottery winners are interviewed, not the hundreds of thousands of losers. Ask Uncle Fred about his portfolio’s total return over five years for a reality check. </p> <p>There’s not much of a case for active management. In Canada, however, a $12 billion-a-year gorilla of an investment industry stands between the retail investor and the door containing common sense. Greed will always create the motivation to arbitrage the valuation of underlying securities in an index. This may not happen as instantly as the Kauffman authors would like, but if there is an opportunity to squeeze a penny from the market, it will be done.</p> <p>In the face of all this illogical behaviour, investors can still efficiently participate in the long-term growth of an economy, sector or industry using ETFs at low cost and with full transparency. Unlike the long-suffering, irrational Maple Leafs fan, an ETF investor may appear to perform in mediocre fashion throughout the season but in the long run will beat 90% of the competition. </p> <p>Stanley Cup? Who cares, because someone other than the owners will be laughing their way to the bank: you. </p>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-91112515563954376432011-04-05T19:32:00.000-04:002011-04-05T19:35:11.781-04:00Evolving Revolution in ETFs<!--[if gte mso 9]><xml> <o:officedocumentsettings> <o:relyonvml/> <o:allowpng/> </o:OfficeDocumentSettings> </xml><![endif]--><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:trackmoves/> <w:trackformatting/> <w:punctuationkerning/> <w:validateagainstschemas/> <w:saveifxmlinvalid>false</w:SaveIfXMLInvalid> <w:ignoremixedcontent>false</w:IgnoreMixedContent> <w:alwaysshowplaceholdertext>false</w:AlwaysShowPlaceholderText> <w:donotpromoteqf/> <w:lidthemeother>EN-CA</w:LidThemeOther> <w:lidthemeasian>X-NONE</w:LidThemeAsian> <w:lidthemecomplexscript>X-NONE</w:LidThemeComplexScript> <w:compatibility> <w:breakwrappedtables/> 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font-family:"Calibri","sans-serif"; mso-bidi-font-family:"Times New Roman"; mso-ansi-language:EN-US; mso-fareast-language:EN-US;} </style> <![endif]--> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal">Free at last!</b></p> <p class="MsoNormal">Once an opaque pastime for the rich, investing has been hidden behind obscure terminology, highly paid advisors, and arcane documents, like the mutual fund prospectus. The digital age is changing all that. ETFs are weapons in the movement to emancipate individual investors.<span style="mso-spacerun:yes"> </span></p> <p class="MsoNormal">The explosive growth of exchange traded funds (ETFs) has been both exciting and bewildering. Retail investors, excited by broad access to timely, low-cost, tax efficient and diversified exposure to capital markets are also bewildered by the scope, breadth and number of products – 224 in Canada, 3,500 globally and 500 ETFs in registration with the Securities and Exchange Commission (March 2011).<span style="mso-spacerun:yes"> </span>Sorting, selecting and constructing portfolios are new and growing challenges for investors. Nevertheless, ETFs have provided only the second significant advance for individual investors since the popularization of the mutual fund in the 1990s (the first being the introduction of the index mutual fund). </p> <p class="MsoNormal">Mutual fund companies must also be excited and bewildered. Traditionally marketers and distributors of investment products, banks and fund companies are reassessing their business models. Scale has always been important but it is critical today with compliance expanding and margins contracting. Although the mutual fund continues to dominate retail investing, better-informed investors recognize that costs matter and that in an interconnected world, transparency and access to pricing more than once a day should be fundamental. </p> <p class="MsoNormal">ETFs, because they are listed directly on stock exchanges without having to be “approved” by a sales entity, provide a distribution “end run” around the established axis of bank and fund company control, and give buying choice directly to individual investors. Furthermore, the hype around “star” managers and persistent marketing of past performance has worn thin. It is not exactly breaking news that past performance is no indication of future performance. </p> <p class="MsoNormal">Sophisticated investors have been using ETFs for over a decade, but the broad public is catching on, albeit slowly. Early adopters of ETFs have been CEOs, senior executives, sophisticated high net worth investors, and investment professional themselves.<span style="mso-spacerun:yes"> </span>However, innovation is still driven by professional money managers motivated by increasingly knowledgeable institutional clients. Individual investors can exploit these trends and ETFs enable them. <span style="mso-spacerun:yes"> </span></p> <p class="MsoNormal"> </p><p style="font-weight: bold;" class="MsoNormal">Democratizing diversification </p><b style="mso-bidi-font-weight:normal"></b> <p class="MsoNormal">The principle of diversification is not new. Natural selection and evolution itself may have been the first practical implementation of diversification as a means for the species to survive.<span style="mso-spacerun:yes"> </span>Harry Markowitz put form around the substance of portfolio diversification in (Modern) Portfolio Theory (1952). Retail and institutional investors already knew not to put all their eggs in one basket but it wasn’t until the 1970’s that index or passive investing became pervasive among large institutional portfolios about ten years after the introduction of the Capital Asset Pricing Model (CAPM) suggested a distinction between systematic non-diversifiable or market risk, <span style="mso-bidi-font-family: Calibri">β</span>, and unsystematic diversifiable idiosyncratic or asset specific risk, <span style="mso-bidi-font-family:Calibri">α</span>. The idea of combining a low cost passive core portfolio using index strategies to capture broad market (<span style="mso-bidi-font-family:Calibri">β)</span> returns and using satellite portfolios to generate excess (<span style="mso-bidi-font-family: Calibri">α)</span> returns has been accepted institutional practice for 30 years. Importantly, passive investing, once the domain of the largest institutions and pension funds is becoming “mainstream”. </p> <p class="MsoNormal">Investment professionals were the first to embrace exchange traded funds (ETFs) when the Toronto Stock Exchange introduced Toronto Index Participation Shares (TIPS) in 1990. Replicating the TSE 35 Index (predecessor of the S&P/TSX 60 Index), institutional managers found they could rapidly deploy cash in a diversified manner using TIPS. Individual investors gained their first access to instant transparent diversification through an exchange as a result. </p> <table class="MsoTableGrid" style="border-collapse:collapse;border:none;mso-border-alt:solid windowtext .5pt; mso-yfti-tbllook:160;mso-padding-alt:0cm 5.4pt 0cm 5.4pt" border="1" cellpadding="0" cellspacing="0"> <tbody><tr style="mso-yfti-irow:0;mso-yfti-firstrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt">Diversified Canadian Equity – ranked by diversification and cost </span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">Symbol</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">MER</span></p> </td> </tr> <tr style="mso-yfti-irow:1"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares S&P/TSX Capped Composite</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XIC</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.25%</span></p> </td> </tr> <tr style="mso-yfti-irow:2"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">BMO Dow Jones Canada Titans </span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">ZCN</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.16%</span></p> </td> </tr> <tr style="mso-yfti-irow:3"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">Horizon BetaPro S&P/TSX 60 </span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">HXT</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.07%</span></p> </td> </tr> <tr style="mso-yfti-irow:4;mso-yfti-lastrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares S&P/TSX 60 Index</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XIU</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.17%</span></p> </td> </tr> </tbody></table> <p class="MsoNormal"> </p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal">International diversification</b></p> <p class="MsoNormal">Thirty years ago, international equities were considered “alternative” asset classes. Access to markets and diversification within them were barriers. Not so today. ETFs offer access to a growing array of international markets. The emerging markets are an area of particular interest to professional investors. As a consequence, more granular choices are available to all.</p> <table class="MsoTableGrid" style="border-collapse:collapse;border:none;mso-border-alt:solid windowtext .5pt; mso-yfti-tbllook:160;mso-padding-alt:0cm 5.4pt 0cm 5.4pt" border="1" cellpadding="0" cellspacing="0"> <tbody><tr style="mso-yfti-irow:0;mso-yfti-firstrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style="font-size:10.0pt">International or Global Equity – ranked by diversification and cost <span style="mso-bidi-font-weight: bold"></span></span></b></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">Symbol</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">MER</span></p> </td> </tr> <tr style="mso-yfti-irow:1"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares MSCI World Index<span style="mso-bidi-font-weight:bold"></span></span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XWD</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.45%</span></p> </td> </tr> <tr style="mso-yfti-irow:2"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares MSCI EAFE<span style="mso-bidi-font-weight:bold"></span></span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XIN</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.50%</span></p> </td> </tr> <tr style="mso-yfti-irow:3"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">BMO International Equity Hedged to CAD<span style="mso-bidi-font-weight:bold"></span></span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">ZDM</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.49%</span></p> </td> </tr> <tr style="mso-yfti-irow:4"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">Claymore International Fundamental Index (hedged and non-hedged)</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">CIE</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.68%</span></p> </td> </tr> <tr style="mso-yfti-irow:5"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b style="mso-bidi-font-weight:normal"><span style="font-size:10.0pt; color:black;mso-themecolor:text1">Emerging Markets Equity – ranked by diversification and cost <span style="mso-bidi-font-weight:bold"></span></span></b></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:black;mso-themecolor:text1;mso-bidi-font-weight:bold"> </span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:black;mso-themecolor:text1;mso-bidi-font-weight:bold"> </span></p> </td> </tr> <tr style="mso-yfti-irow:6"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares MSCI E<span style="mso-bidi-font-weight:bold">merging Markets Equity Index</span></span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XEM</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.82%</span></p> </td> </tr> <tr style="mso-yfti-irow:7"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">BMO International Equity Hedged to CAD<span style="mso-bidi-font-weight:bold"></span></span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">ZEM</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.54%</span></p> </td> </tr> <tr style="mso-yfti-irow:8"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">Claymore Broad Emerging Markets</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">CWO</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.65%</span></p> </td> </tr> <tr style="mso-yfti-irow:9"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><b><span style="font-size:10.0pt">Specific Emerging Markets Equity - </span></b><b style="mso-bidi-font-weight:normal"><span style="font-size:10.0pt">ranked by diversification and cost<span style="mso-bidi-font-weight:bold"></span></span></b></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91"> </span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91"> </span></p> </td> </tr> <tr style="mso-yfti-irow:10"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">Claymore China</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">CHI</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.70%</span></p> </td> </tr> <tr style="mso-yfti-irow:11"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">Claymore BRIC</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">CBQ</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.64%</span></p> </td> </tr> <tr style="mso-yfti-irow:12"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">BMO China Equity Hedged to CAD</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">ZCH</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.71%</span></p> </td> </tr> <tr style="mso-yfti-irow:13"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">iShares MSCI Brazil Index</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XBZ</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.75%</span></p> </td> </tr> <tr style="mso-yfti-irow:14"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">iShares China Index Index</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XCH</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.85%</span></p> </td> </tr> <tr style="mso-yfti-irow:15"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">iShares CNX Nifty India Index</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XID</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.98%</span></p> </td> </tr> <tr style="mso-yfti-irow:16"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">iShares MSCI Latin America 40 Index</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XLA</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.65%</span></p> </td> </tr> <tr style="mso-yfti-irow:17;mso-yfti-lastrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91;mso-bidi-font-weight: bold">BMO India Equity Hedged to CAD</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">ZID</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.71%</span></p> </td> </tr> </tbody></table> <p class="MsoNormal"><span style="mso-spacerun:yes"> </span></p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal">The three factor model and the style box </b></p> <p class="MsoNormal">Institutional managers have found CAPM a useful but imprecise tool. The Fama-French three factor model added style (value/growth) and size (small cap/large cap) to market risk finding that, for U.S. equity markets over time, value outperformed growth and small capitalization stocks outperformed large capitalization stocks. These simple ideas provided the basis for the Morningstar Style Box<span style="mso-bidi-font-family:Calibri">™</span> of money management categorization (1992) and contributed to the popularization of mutual funds over the past two decades. ETFs are available that address all three factor approaches.</p> <table class="MsoTableGrid" style="border-collapse:collapse;border:none;mso-border-alt:solid windowtext .5pt; mso-yfti-tbllook:160;mso-padding-alt:0cm 5.4pt 0cm 5.4pt" border="1" cellpadding="0" cellspacing="0"> <tbody><tr style="mso-yfti-irow:0;mso-yfti-firstrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt">Value Canadian Equity – ranked by diversification and cost</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">Symbol</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">MER</span></p> </td> </tr> <tr style="mso-yfti-irow:1"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">Claymore Canadian Fundamental Index <span style="mso-spacerun:yes"> </span></span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">CRQ</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.69%</span></p> </td> </tr> <tr style="mso-yfti-irow:2"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares Dow Jones Canada Select Value</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XIC</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.25%</span></p> </td> </tr> <tr style="mso-yfti-irow:3"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">Horizon AlphaPro North American Value</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">HAV</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.70%</span></p> </td> </tr> <tr style="mso-yfti-irow:4"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt">Growth Canadian Equity – ranked by diversification and cost</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">Symbol</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">MER</span></p> </td> </tr> <tr style="mso-yfti-irow:5;mso-yfti-lastrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares Dow Jones Canada Select Growth</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XCG</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.50%</span></p> </td> </tr> </tbody></table> <p class="MsoNormal"> </p> <table class="MsoTableGrid" style="border-collapse:collapse;border:none;mso-border-alt:solid windowtext .5pt; mso-yfti-tbllook:160;mso-padding-alt:0cm 5.4pt 0cm 5.4pt" border="1" cellpadding="0" cellspacing="0"> <tbody><tr style="mso-yfti-irow:0;mso-yfti-firstrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt">Small<span style="mso-spacerun:yes"> </span>Cap Canadian Equity – ranked by diversification and cost</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">Symbol</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">MER</span></p> </td> </tr> <tr style="mso-yfti-irow:1"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#1F497D;mso-themecolor:text2">iShares S&P/TSX SmallCap</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XCS</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.55%</span></p> </td> </tr> <tr style="mso-yfti-irow:2;mso-yfti-lastrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares S&P/TSX Completion Index</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XMD</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.55%</span></p> </td> </tr> </tbody></table> <p class="MsoNormal"> </p> <p class="MsoNormal"><b style="mso-bidi-font-weight:normal">Sectors and countries </b></p> <p class="MsoNormal">If three factors are good, more must be better. Breaking market risk into more component factors can be a comprehensive way to control components of risk. The simplest example is the aready-pervasive practice of isolating sectors and industries domestically and globally.<span style="mso-spacerun:yes"> </span>Canadian sector ETFs are available for energy, financials, information technology, materials and REITs from iShares with choice in most offered collectively by Bank of Montreal (BMO), Claymore and Horizon BetaPro. Global sectors include agriculture, real estate, and water offered by Claymore with choice in metals and infrastructure offered by BMO. <span style="mso-spacerun:yes"> </span></p> <p class="MsoNormal">For U.S. markets, BMO offers banks, healthcare and NASDAQ ETFs. Investors with access to U.S. markets get an even broader palette of ETFs in every sector imaginable. On the fixed income side, there is a growing list of sector, quality, and term choices with international and inflation protection included. Commodities and income choices are also pervasive. </p> <p class="MsoNormal"> </p><p class="MsoNormal"><b style="mso-bidi-font-weight:normal">What’s next and why </b></p> <p class="MsoNormal">Investors who experienced the financial crisis and market meltdown in 2009 know that there were few places to hide from the twin forces of volatility and a liquidity vacuum. At one end of the spectrum, broad diversification did not save portfolios nor did stock picking at the other. </p> <p class="MsoNormal">Expect more creative approaches towards diversification. Income generation is a popular one at the moment. </p> <table class="MsoTableGrid" style="border-collapse:collapse;border:none;mso-border-alt:solid windowtext .5pt; mso-yfti-tbllook:160;mso-padding-alt:0cm 5.4pt 0cm 5.4pt" border="1" cellpadding="0" cellspacing="0"> <tbody><tr style="mso-yfti-irow:0;mso-yfti-firstrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt">Income – ranked by diversification and cost</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">Symbol</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">MER</span></p> </td> </tr> <tr style="mso-yfti-irow:1"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#1F497D;mso-themecolor:text2">iShares Diversified Monthly Income</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XMI</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.55%</span></p> </td> </tr> <tr style="mso-yfti-irow:2"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">BMO Monthly Income</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">ZMI</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.55%</span></p> </td> </tr> <tr style="mso-yfti-irow:3"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">Claymore Canadian Financial Monthly Income</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">FIE</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.65%</span></p> </td> </tr> <tr style="mso-yfti-irow:4"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">Claymore S&P/TSX CDN Preferred Share </span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">CPD</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.45%</span></p> </td> </tr> <tr style="mso-yfti-irow:5;mso-yfti-lastrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt;color:#365F91">iShares S&P/TSX Preferred Stock Index Hedged to CAD</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">XPF</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.45%</span></p> </td> </tr> </tbody></table> <p class="MsoNormal"> </p> <p class="MsoNormal">Alternative approaches will also start to appear in Canada that replicate hedge fund strategies. BMO’s Covered Call Canadian Banks (ZWB 0.65%) and Horizons AlphaPro S&P/TSX 60 130/30 Index (HAH 0.95%) are examples. In the U.S. merger arbitrage and managed futures ETFs are several active global macro choices are also available. </p> <p class="MsoNormal">Most intriguing are ETFs that reflect what professionals are trying to accomplish using risk and leverage. There is a clear relationship between volatility, as measured by the standard deviation of a market like the S&P 500, and market direction. Stable or falling volatility appears to accompany rising markets while increasing volatility accompanies falling markets. The reason is that volatility is persistent over the short term (autocorrelation = 0.75) and return is not (0.05). This has led to the tracking of VIX, a measure of volatility based upon option premiums.<span style="mso-spacerun:yes"> </span>These strategies are not for the retail investor ...yet. <span style="mso-spacerun:yes"> </span></p> <table class="MsoTableGrid" style="border-collapse:collapse;border:none;mso-border-alt:solid windowtext .5pt; mso-yfti-tbllook:160;mso-padding-alt:0cm 5.4pt 0cm 5.4pt" border="1" cellpadding="0" cellspacing="0"> <tbody><tr style="mso-yfti-irow:0;mso-yfti-firstrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span style="font-size:10.0pt">Volatility Indices</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">Symbol</span></p> </td> <td style="width:63.05pt;border:solid windowtext 1.0pt; border-left:none;mso-border-left-alt:solid windowtext .5pt;mso-border-alt: solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt">MER</span></p> </td> </tr> <tr style="mso-yfti-irow:1"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span class="titles"><span style="font-size:10.0pt">HBP S&P 500 VIX Short-Term Futures™ </span></span><b><span style="font-size:10.0pt; color:#1F497D;mso-themecolor:text2"></span></b></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">HUV</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">0.85%</span></p> </td> </tr> <tr style="mso-yfti-irow:2;mso-yfti-lastrow:yes"> <td style="width:352.7pt;border:solid windowtext 1.0pt; border-top:none;mso-border-top-alt:solid windowtext .5pt;mso-border-alt:solid windowtext .5pt; padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="705"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt;line-height: normal"><span class="titles"><span style="font-size:10.0pt">HBP S&P 500 VIX Short-Term Futures™ Bull Plus </span></span><b><span style="font-size:10.0pt; color:#365F91"></span></b></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">HVU</span></p> </td> <td style="width:63.05pt;border-top:none;border-left: none;border-bottom:solid windowtext 1.0pt;border-right:solid windowtext 1.0pt; mso-border-top-alt:solid windowtext .5pt;mso-border-left-alt:solid windowtext .5pt; mso-border-alt:solid windowtext .5pt;padding:0cm 5.4pt 0cm 5.4pt" valign="top" width="126"> <p class="MsoNormal" style="margin-bottom:0cm;margin-bottom:.0001pt; text-align:center;line-height:normal" align="center"><span style="font-size:10.0pt; color:#365F91">1.15%</span></p> </td> </tr> </tbody></table> <p class="MsoNormal"> </p> <p class="MsoNormal">As other professionals study the relationship between groups of securities we expect that their experience will be the same as PŮR’s. There are relationships that have always existed but have not yet been exploited. The application of various statistical techniques will lead to new ways to bend and shape risk and ETFs will be the testing ground for these new ideas. The retail investor will benefit in the end because the vehicles will be transparent and available on public exchanges.</p> <p class="MsoNormal">The educated consumer is the ETF’s best customer today and the product stream of the future will affirm this. In a single digit return environment with pension plans shifting liability to individual and social welfare programmes under challenge, investors must take more responsibility for their financial futures. Advisors need to improve their skills and mutual funds will have to find a new value proposition.<span style="mso-spacerun:yes"> </span></p>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-14005490043422901562011-03-24T10:40:00.001-04:002011-03-24T10:43:15.013-04:00Are we mismanaging RRSP and DC pension portfolios?Joe and Sally joined the same company right out of school and enrolled in the registered group savings plan. Sally was three months older than Joe and retired September 1, 2008 with a $600,000 portfolio. Joe’s portfolio was worth only $480,000 when he received his simulated gold watch a few months later. Had they been members of a defined benefit (DB) pension plan [DASH] DB plans determine a pension usually based on a percentage of salary, with the benefit being the employer’s obligation [DASH] Joe and Sally would be drawing identical pensions, all things being equal. They made identical contributions [DASH] with identical employer matches [DASH] to buy identical funds in the identical proportion for forty years. The difference in outcomes because of something as uncontrollable as a birth date seems incredibly unfair. Something is wrong here.<br />DC plans and RSPs are different than DB plans<br />DC and RSP benefits are completely a function of contributions and the actual investment result for each employee. Employees are responsible for the outcome, not employers, and the pension amount is unknown until retirement. High costs, poor investment decision-making and lack of scale are documented problems with DC plans, which have generally experienced returns 1% lower than DB plans over time, according to a recent Towers Watson study. <br />Investing time horizon<br />DB plans need to match long duration liabilities to pay pensions of existing and future workers, so they usually invest with a very long-term view. Mutual funds, following the objectives in their prospectuses, similarly invest with a long-term view and often a perpetual duration. As a result, establishing and rebalancing portfolios to a fixed asset allocation is popular with DB plans because short-term market variability is theoretically evened out over time. Perpetually long investing horizons always have time to make back losses. In reality, Sally, Joe and every RSP and capital accumulation plan investor has an investing time horizon that is shrinking and shortening every day, whether due to retirement or death. Constructing a portfolio that does not recognize this fact is at best irresponsible, and at worst negligent. Yet most advisors, registered reps and educational sessions for DC plans promote the same basic strategies that were designed for DB plans: diversify, buy, hold and rebalance. The exception is the “target date fund” that automatically reduces equity exposure over time on a fixed glide path. Early generations of this increasingly popular approach have not escaped controversy, a subject we will examine next month.<br />Conclusion 1: DB plans invest to match perpetually long-dated liabilities, while DC and RSP investors have investing horizons that are shrinking every day. By building portfolios that have fixed asset mixes without regard for the individual requirements of each investor, the industry is ignoring what investors need. Trimming risk from a portfolio as retirement approaches is one effective tactic. A simple way to do this is to introduce ETFs to build in an increasing proportion of stable, low risk. Here are some low-risk choices that can be introduced at least five years before retirement, ranked by cost.<br />SYMBOL ETF MER<br />CLF Claymore 1-5 Yr Laddered Government Bond ETF 0.15<br />ZFS BMO Short Federal Bond Index ETF 0.20<br />ZFM BMO Mid Federal Bond Index ETF 0.20<br />ZFL BMO Long Federal Bond Index ETF 0.20<br />ZPS BMO Short Provincial Bond Index ETF 0.25<br />CMR Claymore Premium Money Market ETF 0.25<br />CBO Claymore 1-5 Yr Laddered Corporate Bond ETF 0.25<br />ZRR BMO Real Return Bond Index ETF 0.25<br />XSB iShares DEX Short Term Bond Index Fund 0.28<br />ZAG BMO Aggregate Bond Index ETF 0.28<br />CAB Claymore Advantaged Canadian Bond ETF 0.28<br />ZCS BMO Short Corporate Bond Index ETF 0.30<br />ZCM BMO Mid Corporate Bond Index ETF 0.30<br />ZLC BMO Long Corporate Bond Index ETF 0.30<br />XBB iShares DEX Universe Bond Index Fund 0.33<br />XRB iShares DEX Real Return Bond Index Fund 0.39<br />XLB iShares DEX Long Term Bond Index Fund 0.39<br />XGB iShares DEX All Government Bond Index Fund 0.39<br /><br />Conclusion 2: If returns are 1% below DB plans, using passive or indexed vehicles can help make up the difference. ETFs are appropriate to use if RSP contributions are made once a year. If deposits are made more frequently, as they often are with DC plans, the commission cost of buying ETFs may be prohibitive despite their low fees. Buying index mutual funds and making a transfer at the end of each year to one or two ETFs is the most cost-effective approach. Claymore offers a commission-free way to buy their ETFs through certain brokers, an option worth exploring for some investors.<br /><br />SUMMARY<br />Joe and Sally have been abandoned by their employers and the investment industry. They make poor investment choices because they lack the time, inclination and expertise to make better ones. The pension industry [DASH] from portfolio managers, insurance companies and mutual fund companies to registered reps and employers [DASH] guides investors to build portfolios that mimic institutional DB mandates with time horizons ill-suited to the needs of individuals. The high cost of investing has robbed investors of at least 1% annually. ETFs can provide part of the answer, but they aren’t being used in Canadian DC plans at all. Cutting risk from portfolios at the appropriate time can help preserve capital, but investors still don’t get the reliable retirement income they want. We will explore alternative pension approaches that use ETFs in the future.mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-7612559171913974942010-12-09T12:07:00.004-05:002010-12-09T12:38:40.160-05:00Target date fund guidelines miss the problemSEC guidelines for target date funds and disclosure miss the critical problem with these very popular products. They don't do what consumers THINK they do. Target date funds make investing easy for long term investors in 401k and other DC pension schemes by promising to make systematic asset allocation changes that reduce the equity exposure of the portfolio as retirement, or the target date approaches. As a result, 80% of all new and redirected assets into U.S.-based DC plans are flowing into these funds. 77% of assets in these products are controlled by three manufacturers, Fidelity, Vanguard, and T. Rowe Price who must bear much of the responsibility for the misdirection. <br /><br />By suggesting that equity exposure is being reduced over the life of the investment, investors think RISK is being reduced. If this were true, there would be no problem. But equity exposure does not equal risk exposure and risk changes over time. Think in terms of two relatively recent example. The RISK of the S&P 500 pre-Tech Bubble with less that 10% technology exposure and in 2000 with technology representing over 30% the risk in the market, as represented by a 252 day moving average of S&P 500 SD, spiked to over 15% during the period. The recent financial crisis saw an even more dramatic shift in the risk of stocks and bonds as corporate spreads over treasuries ballooned in late 2008 early 2009 and the SD of the S&P 500 spiked to a mind blowing 60%! So for target date funds to imply that they are systematically reducing RISK exposure is misleading at best. <br /><br />The remedy is Target Date Funds 3.0, an approach that maintains a consistent approach towards portfolio RISK. It is a systems solution as much as an investment solution but most importantly in the debate about full disclosure to clients, it provides an honest relationship between what investors understand they are getting and the marketing hype of the industry. For more information www.purinvesting.commfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-58363289629749769502010-10-19T17:24:00.002-04:002010-10-19T17:39:59.781-04:00Risk is a Ten Letter WordInvestors over the recent past not only know about volatility, they likely have the scars to prove it!<br /><br />Exchange-traded funds (ETFs) are well known for their low cost, tax efficiency and diversified exposure to markets, asset classes, sectors, commodities and industries. Less well known is that ETFs provide neat packets of stable risk that can not only be used to construct tailored portfolios but also to control risk easily and more effectively than ever before. <br /><br /><br />Case for more volatility <br /><br />Capital market volatility threatens the adequacy of RRSPs, the solvency of defined benefit pension plans, the patience of clients and the sanity of advisors. Systemic risk from deregulation, interconnected global financial and banking structures exacerbated by an explosion in derivatives use, high frequency trading, and advances in information technology suggests that “returns are likely to remain highly heteroskedastic, showing periods of consistently high and low volatility,” says Ioulia Tretiakova, Manager of Quantitative Strategies, PŮR Investing Inc.. Nothing in currently proposed banking reform legislation suggests otherwise. The problem is that capital markets dislike uncertainty most of all. <br /><br />Even if you believe that the credit crisis was a “once-in-a-lifetime” aberration, advisors have a duty to clients to protect them from it.<br /><br /><br />Managing volatility <br /><br />Diversification theory suggests selecting assets that don’t move in the same direction at the same time (uncorrelated). This is smart because if one asset class is zigging (i.e. Canadian equities) while another is zagging (i.e. gold) the volatility of the combined portfolio will be dampened. But very much like a balance sheet, these relationships are more like a snapshot than the dynamic of an income or cash flow statement that show changes between periods. Two important things to remember:<br /><br />• correlation between asset classes can and does change over time; <br />• market volatility can over-ride correlations.<br /><br />I mention these caveats because they are too often ignored or forgotten by investment professionals and retail investors alike. The table below shows the correlations between several asset classes represented by ETFs. Because they are already individually diversified, ETFs provide reliable risk that can be assembled into effective portfolios. Low and negative correlations are the best combinations for diversification.<br /><br /> <br /><br />Diversification failed to protect portfolios during the market meltdown. There is little protection against crises of confidence and lack of liquidity. <br /><br /> <br />This chart illustrates the development of the U.S. credit crisis as represented by the interest rate spread between U.S. Treasury bonds and corporate bonds. As confidence deteriorates, lenders demand higher yields to hold any debt instrument other than Treasuries, so the spread opens up. The shaded area shows the volatility of the S&P 500 – 126 day moving average. Volatility remained stable until mid-2007 before spiking in 2008-2009. <br /><br />Market volatility is a big challenge for investors and their advisors. Let’s assume a 60% stock 40% bond portfolio is considered appropriate for an investor in 2005. As the stock market rose in 2006 and 2007, the portfolio sells stocks and buys bonds to rebalance to the 60:40 fixed asset mix. This seems reasonable because we’re supposed to “sell high” and “buy low”, right? But is the “risk” of the portfolio the same in 2008-2009 as it was in 2005? Clearly it is not. <br /><br />A better solution would be to maintain the “risk” represented by the 60:40 asset mix consistently through periods of market volatility. The risk of a portfolio should represent the risk tolerance of the investor that doesn’t change in good or bad markets. If “12” represents the risk of a 60:40 mix in 2005, the “risk” of the portfolio would have spiked to over 30 in 2008-2009! To keep this portfolio at 12, equities would be 20% and bonds 80% in mid 2008. An alternative less disruptive to the mix would have been to buy the iPath S&P 500 VIX Short Term Futures ETN (VXX). Either approach would have saved serious money for investors.<br /><br /><br />Sophisticated <br /><br />The idea of managing to a consistent risk is a sophisticated institutional approach on two levels. Firstly, the idea of budgeting risk is a concept used only by the largest pension funds and institutional pools of capital. No mutual fund in Canada uses this strategy as far as I know. Secondly, managing volatility is a cutting edge idea. The availability of volatility ETFs like VXX and VXZ (the mid-term version of VXX) makes these tactics available to individual investors. Hedging long positions with short or inverse ETFs is also a tactical option, but that is a subject for another time. <br /><br /><br />Summary<br /><br />ETFs offer the potential to bend and shape risk in ways previously available only to institutional portfolio managers with hundreds of millions under management. This capability comes with the responsibility for advisors to “up” their game, but the payoff will benefit their clients and their practices.mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-41210189568990818852010-10-19T17:19:00.003-04:002010-10-19T17:22:10.094-04:00ETFs and the Egg Management FeeI met a broker from Rochester at breakfast on the second day of an ETF conference in Albany New York. I was a speaker on the first day and a moderator on the second and was curious about the audience’s knowledge level and how the message was getting through. “Do you use ETFs in your practice?” I asked. He admitted that he had purchased some SPDRs (Standard & Poor’s Depositary Receipts, SPY) for his largest client. “I went to a meeting with her auditor and all he said was ‘I see that your broker bought an ETF for your portfolio, he must be doing a good job for you!’. I am here to find out what I bought and why they are so good!” <br />There is a halo effect over ETF use that transcends their undeniably beneficial use in portfolios. But we, in the industry, should not rest on our laurels. There is a directness that has accompanied the electronic revolution and social media that can bite, so making ETFs just another offering on the investment product buffet could be dangerous. <br />Take for example the Ally Bank ads that portray conventional bankers as insensitive to clients. Clients are portrayed as kids in the commercials. Fine print, exclusionary offers, undisclosed information, run-arounds, and the now ubiquitous “egg management fee” are offered as proof of big bank practices that “even kids know” aren’t fair. It could be argued that banks deserve this treatment. But mutual funds could be tarred with the same brush and with them, the entire investment profession. In Canada, the major banks, through branches and wholly-owned brokerage firms, account for two thirds of all mutual fund sales. And yes, mutual fund fees seem inexplicably large in relationship to what they deliver particularly when compared with ETF fees. But mutual funds still provide retail investors with professional management and diversification while sharing expenses. That their structure is out-dated is not entirely their fault: lack of transparency in an era of full disclosure, once-a-day pricing in a 24-hour-a-day global market, bundled fees when everything is being unbundled (except cell phone packages, strangely enough). The traditional mutual fund format struggles to keep up. <br />The same fate may await practitioners if they treat ETFs like just a bunch of mutual funds and stuff them into client portfolios like “last year’s hot performer”. ETFs should be used to provide the kinds of solutions, continuous client value and vehicles for managing risk for which they are so well suited with costs justified and construction communicated simply and effectively.<br /><br /><br />Managing an expanding ETF universe <br />There are lots of ETFs and more each week. While there are many ways to sort them, keeping things simple has great appeal because it is easier to explain to clients. Ioulia Tretiakova, Director of Quantitative Strategies at PŮR Investing, classifies the ETF universe into two basic categories: those that are passive and those with embedded strategies. <br />“Passive ETFs follow a simple index or an unleveraged commodity. They are characterized by low fees. Those with embedded strategies are everything else. ETFs with embedded strategies often have higher fees. Leveraged and inverse ETFs and those that follow a manipulated index like revenue or fundamentally weighted, are examples. Actively managed ETFs are the most obvious examples of an embedded strategy.”<br />Explaining to clients that a low cost core of passive ETFs is an effective way to capture beta, or exposure to market returns will help. You could build a core of actively managed mutual funds or ETFs with embedded strategies that try to outperform your benchmark, but it is difficult to identify successful ones in advance, extremely difficult to pick them consistently year after year, and you risk the inefficiency from fund overlap (see AER Sept 2010 “How Many?). You do, however, know their cost in advance. Go with what you know, it’s logical and clients understand it. <br />With your passive core established, consider the manageable characteristics of ETFs (or other assets) that make the most impact on portfolios, cost and diversification are the most important followed by liquidity, tax efficiency and tracking error. This column has examined each of these in the past. <br />What about returns? They can’t be predicted in advance, but by capturing the market return inexpensively with a core of passive products, you can select other “satellite” assets around the core that position the portfolio to perform. Diversified exposure to areas you feel will do well like small capitalization stocks, emerging markets, or commodities, can be added as individual securities, passive ETFs, mutual funds or ETFs with embedded strategies. If the satellite investments chronically underperform the core, you will know and so will your clients. But what to do about it will be clear. In coming issues we will examine the considerations for satellite assets more closely. <br />Keeping portfolio construction and classification of ETFs simple will help clients understand what you are doing, help dispel the mystery of the “egg management fee” and will distinguish ETFs as a signature part of the portfolio menu. <br />Mark Yamada is the President and CEO of PŮR Investing Inc. www.purinvesting.commfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-43705504493167405102010-07-12T18:23:00.004-04:002010-07-12T18:46:42.001-04:00Target date funds 3.0By showing declining equity exposure as a retirement date approaches, target date fund managers imply that portfolio risk is automatically being reduced. This seems like a wonderful thing to investors who do not have the time or inclination to make asset mix changes themselves. Well, 2008-2009 showed us that risk for each asset class is far more important than the static relationship that professional money managers use to establish diversification between asset classes. In other words, they buy stocks, bonds, cash, and commodities in the belief that they all won't zig at the same time. <br /><br />Target date 1.0 offered a date in the future. Target date 2.0 added conservative, moderate and aggressive options to each target date but the flaw remains. Fixed equity glide paths are like staring at a balance sheet; useful in helping to describe a "point in time" but useless in a dynamic capital market with risk that changes...often by a lot! <br /><br />Target date 3.0 uses a dynamic glide path and constant volatility re-balancing. This means that the RISK of the portfolio is managed to a declining glide path and the asset mix is changed to reflect what is happening in the market right now. In TDF 1.0 and 2.0, the asset mix is managed to a fixed glide path while the risk is allowed to fluctuate. It doesn't make any sense to subject an investor to inappropriate risk. Furthermore, investors working towards a capital accumulation goal should know whether they are ahead or behind their projected growth path. TDF 3.0 automatically shifts risk based on progress towards this goal. Get behind, take a little more risk, get ahead, take a little less. Common sense. How does one do this for a defined contribution pension plan with thousands of members? Mass customization. www.purinvesting.commfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-26934210787291161112010-05-20T18:18:00.000-04:002010-05-20T18:19:24.526-04:00The Death of Asset Allocation as You Know It Part 2“Experienced investors understand four wonderfully powerful truths about investing, and wise investors govern their investing by adhering to these four great truths:<br /><br /> 1. The dominant reality is that the most important decision is your long term mix of assets; how much in stocks, real estate, bonds, or cash.<br /><br /> 2. The mix should be determined by the real purpose and time of use of money.<br /><br /> 3. Diversify within each asset class – and between asset classes. Bad things do happen – usually as surprises.<br /><br /> 4. Be patient and persistent. Good things come in spurts – usually when least expected – and fidgety investors fare badly. “Plan your play and play your plan,” say the great coaches. “Stay the course” is also wise. So is setting the right course – which takes you back to great truth number 1.”<br /><br /> — Charles D. Ellis, 2007<br /><br />Charles Ellis is a dean of institutional investing. The founder and managing partner for 30 years of respected consulting firm Greenwich Associates, he pioneered the systematic application of measurable investing activity. Supported by the 1986 research of Gary Brinson, L. Randolph Hood, and Gilbert Beebower, and follow on work by Jahnke, Ibbotson and others, the important role of asset allocation in the investment process developed.<br /><br />In 2008-2009, extreme volatility, caused by the financial crisis, repealed the laws of asset allocation. Everything went down. Judicious choice of non-correlated assets was meant to invoke the protective properties of diversification. But correlations, based on historical relationship, have always wavered in the face of crisis. Yet advisors and professional investors alike embrace the tenets articulated by Ellis above.<br /><br />It is not that these platitudes are wrong. There aren’t many absolutes in the investment world after all (except, perhaps, that costs detract from returns). Rather, there should be a fifth truth:<br /><br /> “The risk of assets selected for a portfolio should not only be consistent with the goals, time horizon, and risk tolerance of the investor or mandate, but should be kept consistent particularly when market risk rises and falls.”<br /><br />Risk is like the temperature of bath water, some like it hotter than others, some cooler. If the temperature is too hot, add some cool. Conversely for a cooler bath, remove some cool and add some hot. Portfolios can be managed the same way.<br /><br />If you would like to follow our ongoing research, please leave your email address and we’ll keep you apprised as we progress over the next several quarters.mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-33076878965578485922010-04-15T18:52:00.002-04:002010-04-15T19:17:06.341-04:00Bird-brained stock pickingLess guesswork with exchange-traded funds <br /><br /><br />Every week at home, as a keen young portfolio manager, I would pour over the charts of all the stocks traded on the New York and American Stock Exchanges that were included in a binder with 12 charts to the page, 24 in total when open. <br />My pet cockatiel, named Dow Jones, would fly around the room as I worked. One day, he landed on my shoulder and walked down my arm onto the chart book. He shuffled around and pecked showed his displeasure in a unique bird-like way on one of the charts. The next day that stock went down sharply! A humorous coincidence! <br />He did it the next week and the next. Each stock that received a “deposit” went down in price. Still a humorous coincidence, but I realized it represented a random key to how many people make investment decisions. <br />People are notoriously random when it comes to making investment decisions. They base them on conversations overheard in the office bathroom, or relatives who’ve seen big returns on their investments, or the sound bites of investment journalists. And then they pray. People do what they think worked for them in the past regardless of the method’s randomness. Sometimes their lottery ticket selection strategy is more systematic. No wonder so many investors end up with a portfolio of random securities with no plan or purpose. <br />But when it comes to exchange-traded funds, there is no guesswork. There is less guesswork with exchange-traded funds (ETFs). These securities track an broad indicies, a commodities, currencies, sectors and industries and allow investors to take leveraged long and short positions. a grouping of assets like an index fund, or a trade like a stock on an exchange. They offer diversification, and the ability to sell short, buy on margin, and purchase as little as one share and trade like a stock during regular exchange hours. <br />There are only three basic ways to build portfolios with them, all others are variations. Over the next three issues, I will examine each of these.<br />Here is a brief overview of how ETFs portfolio construction works:<br /><br />Fundamental approaches<br />The fundamental approaches use some form of “top down” or “bottom up” analysis. Assessing views of global, regional and local economies and their impact on sectors, industries and companies, ETFs lend themselves nicely to these strategies because they make country, regional, sector and industry investing simple. <br />Institutional managers can use ETFs to establish broad exposure before making specific securities investments and they can hedge existing exposure by shorting the relevant ETF. Portfolios for individual investors can similarly benefit from diversified exposure to elements identified by the portfolio manager. <br />“Bottom up” managers, or stock pickers who screen for superior growth, value a combination of both or other factors, have style ETFs as well as large, mid-cap, and small capitalization alternatives in different regions and sectors to choose from. <br />Many large portfolios and pension schemes employ “core” plus “satellite” or “tactical” approaches. They create a passive core cheaply and select active alpha-seeking strategies around that core. <br />ETFs offer flexibility and choice at a low cost so these traditional approaches can be applied to private client portfolios effectively. The tax efficiency of separately managed accounts combines nicely with ETFs so many firms will be encouraged to transition pooled and mutual fund assets to this format. Indeed, low costs contribute to better performance, so complacent product vendors should pay attention. <br /><br /><br />Market timing<br />Today, there are 1,000 ETFs available worldwide, with another 500 or so in registration, a fact attractive to many. Include currency; commodity; leveraged or enhanced; long and short; so-called “fundamental” and even Chinese real estate ETFs; and the possibilities grow.<br />Traders feed on volatility. So it’s good news that the dampened relative volatility of groups of securities, which counters traders’ need for action, is offset by better liquidity from the ETF structure. <br /><br />Leveraged ETFs that offer the holder two times the daily price movement of an index are available; inverse versions go up two times the daily fall in price of an index. This is the type of action that traders want. But leveraged ETFs are not just for traders. <br />Trading has done much to democratize capital markets for individual investors; specialized education in financial analysis is not required. Technical analysis, the trader’s discipline, doesn’t care about companies, products, margins or market share. All that matters is price movement. <br />Within the movement of prices (and sometimes trading volume) lies all the necessary information needed to make buy and sell decisions. Anybody can apply these methods to the price of anything. This is pure market timing. <br /><br /><br /><br />SIDEBAR<br />Risk management<br />The low cost and tax efficiency of ETFs are what individual investors should exploit. However, there are many other perks to using ETF products:<br />1. A free lunch: Lowering risk by using levered ETFs : If achieved, investors benefit from the higher return potential from leverage without assuming additional risk. <br />2. Risk budgeting through sophisticated portfolio construction: Only the most sophisticated institutions use this approach that optimizes diversification by assigning weights by risk.<br />3. Constant volatility: Consistent risk exposure for individuals can help avoid sharp market declines.<br />ETFs are neat little packages of diversified risk that make effective building blocks for many kinds of portfolios. Next month: ETFs in greater detail.mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-44698588570489246932010-02-18T17:32:00.002-05:002010-02-18T17:37:18.559-05:00ETF Tracking Error: Where's the beef?The 1 kg of stewing beef I bought ended up tasting like pork. When confronted, the butcher retorted “Well buddy, it’s meat isn’t it?” Most consumers would be incensed at this response, but for some reason, investors are far more tolerant. It may be that mutual funds have dulled our expectations by underperforming their benchmarks for decades.<br /><br />But for exchange-traded funds (ETFs), the standards should be higher. <br /><br />They should be higher because their benchmarks are transparent indices (for the most part) and the goal is replication. <br /><br /><br /><span style="font-weight: bold;">Tracking error, what is it and why is it important</span><br /><br />Mathematically, tracking error is the standard deviation of the difference between index and ETF returns. Example: 4% tracking error means that annual ETF returns will be within ±4% of index return, two times out of three.<br /><br />Ioulia Tretiakova, Director of Quantitative Strategies, PŮR Investing Inc., affirms that while tracking error can be important if ETFs are used to hedge a portfolio, understanding tracking error helps individual investors employ these vehicles more effectively.<br /><br /><span style="font-weight: bold;">Causes of tracking error</span><br />There are three ways to replicate an index:<br />Stratified sampling: buy only some of the underlying securities: you order a chicken and get 1 wing, 1 breast, 1 leg, 1 thigh. <br /><br />Optimization: use underlying securities and/or derivative instruments to mimic an index’s return: chicken fingers!<br /><br />Full replication: buying all the components of an index is the most effective way to minimize tracking error. You order a chicken and get the whole bird.<br /><br />Ordering a chicken and getting chicken fingers may not bother some investors, but understanding the possibility is important. To be fair, stratified sampling and optimization can be the only practical approaches given size and liquidity considerations. The DEX Universe Bond Index has 1,058 holdings while the popular iShares CDN Bond Index Fund (XBB) that mirrors it, holds only 301 issues.<br /><br />Ms. Tretiakova observes, “Regulation has an impact. There is no maximum security weight for ETFs in Canada, but in the U.S. there is a 19.99% cap. Hence the return of Vanguard’s Information Technology ETF (VGT) lagged its benchmark MSCI U.S. Investable Market Information Technology Index, by 50% since inception (1/26/2004 to 1/3/2010) in part because the index weight of AT&T was 49% and only 19.99% for VGT.” This is like ordering three chickens and getting the two-bird maximum.<br /><br /><span style="font-weight: bold;">Should daily returns be used to calculate tracking error? </span><br />The index underlying the iShares MSCI EAFE Index Fund (EFA) and its “Loonie-hedged” cousin, XIN, does not have a contemporaneous closing time, so using daily closing NAVs and index values for tracking error calculations makes little sense; like roosters crowing dawn in each time zone.<br /><br />On the other hand, the tracking error of leveraged ETFs (in Canada, the Horizon BetaPro series) should be calculated using periods no longer than daily. Over the longer term, daily rebalancing will cause divergence made all the greater by volatility; like ordering an egg and getting a two egg omelette.<br /><br /><span style="font-weight: bold;">Leveraged ETF tracking error</span><br />The multiple-of-daily-index-return objective of leveraged ETFs is not completely accurate, warns Ms. Tretiakova. What actually happens, in the case of a 2X ETF, is that “there is twice the total return minus one times the cost of capital. Currently, this is slightly better for investors than the stated objective of twice the price return because dividend yields are slightly higher than the cost of capital. However, when these two rates vary, the difference may be more significant.”<br />Leveraged Fund Performance Relative to Stated Objective<br />and its relationship to dividend yield-interest rate differential<br /><br /><span style="font-weight: bold;">ETFs with unusual tracking error</span><br />Some ETFs operate without a specifically stated benchmark, defining only broad asset class exposure. For example, the Claymore Broad Emerging Markets ETF (CWO, launched April 7, 2009) states that “The Manager will select an Emerging Markets Benchmark Index such as the MSCI Emerging Markets Index, the FTSE RAFI Emerging Index or another widely recognized emerging markets index in order to provide such exposure and may change the Emerging Markets Benchmark Index in its discretion without unit-holder approval.” This sounds like advertising chicken while delivering duck. The challenge is trying to determine the tracking error when the target index is changing. One comfort these unit-holders have is that the indicies for groups of emerging markets will likely have similar volatility (risk). This means that the advertised chicken is unlikely end up being pork chops! <br />Finding tracking error information<br /><br />Most ETF sponsors offer tracking error information on their websites. Often shown in chart form, price movement of ETFs are easily compared with their underlying index. The actual tracking error of Canadian-traded ETFs and how they compare to others is available at http://purinvesting.com/demo/Screen.htm .<br /><br />A cost to investors, tracking error is well worth monitoring. It’s one way of keeping ETF sponsors honest and assuring you don’t get salt pork when you expected steak.<br /><br />Mark Yamada is President of PŮR Investing Inc. a registered portfolio manager specializing in risk management using exchange-traded funds.<br /><br /><span style="font-weight:bold;"></span>mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-91774323283572325802010-01-26T10:44:00.001-05:002010-01-26T10:53:38.690-05:00Lower costs, better portfolios (sometimes)Exchange-traded funds (ETFs) are less expensive than mutual funds by a wide margin. Embedded mutual fund distribution costs, paid to financial advisors for selling them, are most of the difference. Claymore is the only ETF sponsor in Canada paying advisors from a separate ETF series that is 0.50-0.75% more expensive. While brokerage costs must also be considered when acquiring ETFs, improving transparency is helping investors make more informed choices. <br />Canadian Median Mutual Fund MER vs. ETF MER<br /> <br />Canadian Equities Mutual Fund Median 2.45% <br /> 0.16% BMO Dow Jones Canadian Titans 60 (ZCN)<br /> 0.17% iShares Large Cap 60 (XIU)<br /> 0.25% iShares CDN Composite (XIC)<br /> 0.65% Claymore Canadian Fundamental (CRQ)<br /> 1.15% HBP S&P TSX 60 Bull Plus (HXU)<br /> <br />Canadian Bonds Mutual Fund Median 1.96% <br /> 0.15% Claymore 1-5 yr Laddered Gov’t Bond (CLF)<br /> 0.325% BMO Canadian Gov’t Bond Index (ZGB)<br /> 0.35% iShares CDN Government Bond (XGB)<br /> <br />Int’l Equities Mutual Fund Median 2.69% <br /> 0.455% BMO International Equity Hedged (ZDM)<br /> 0.49% iShares MSCI EAFE Hedged (XIN)<br /> 0.65% Claymore International Fundamental (CIE)<br /> <br />Emerging Markets Mutual Fund Median 2.93% <br /> 0.535% BMO Emerging Mkts Equity Index (ZEM)<br /> 0.65% Claymore BRIC (CBQ)<br /> 0.82% iShares CDN MSCI Emerging Markets (XEM)<br /> 1.15% HBP MSCI Emerging Mkt Bull Plus (HJU)<br /> <br />Commodities Mutual Fund Median 2.60% <br /> 0.40% iShares COMEX Gold Trust (IGT)<br /> 0.75% HBP COMEX Gold (HUG)<br /> 1.15% HBP COMEX Gold Bullion Bull Plus (HBU)<br /> <br /><br />ETF COST DIFFERENCES<br />Among the Canadian Equity ETFs shown, newcomer Bank of Montreal (BMO) undercut comparable and more established iShares LargeCap 60 by 0.01%. and similarly positioned themselves in bonds, U.S. and international equities, and emerging markets.<br /> <br />Sometimes costs reflect structural differences. Higher-priced iShares CDN Composite at 0.25%, includes a broader holdings base (S&P/TSX Composite’s 204 issues). Claymore’s Canadian Fundamental (0.65%) would appear to be out of step with the group, but includes an “embedded strategy” namely a value bias in the construction of its index. Claymore is actually offering an actively-managed ETF in passive clothing. <br /><br />PASSIVE OR EMBEDDED STRATEGIES<br />Distinguishing passive ETFs from those with embedded strategies is a good starting point for portfolio building. One is not better than the other, but those with embedded strategies are usually more expensive. Director of Quantitative Strategies at PŮR Investing, Ioulia Tretiakova, maintains: “You never know what the future return of an ETF is going to be, but you do know its cost.” <br />Embedded strategies try to offer something in return for their higher cost. In Claymore’s RAFI Fundamental series, it is a tilt towards value stocks. If this is what you want, ETFs can give you effective access. The Horizon BetaPro (HBP) Plus ETF series offers two times the DAILY return for the “Bull” version and two times the inverse DAILY return for the “Bear” series. This powerful leveraging capability comes at a cost of 1.15% but considering the “double exposure” makes the effective MER 0.575%. This appears expensive in the Canadian equity category with offerings at 0.16-0.17%, but in emerging markets, where iShares cost 0.82%, HBP appears more competitive. <br /><br />TRADING COSTS<br />While lower cost is a key ETF benefit, management expense ratios tell only part of the story. Studies of U.S. mutual funds showed that annual trading costs were 1.44% per year (Edelin/Evans/Kadlec, 2007). Canadian mutual fund trading costs are not available, but exchange traded fund trading costs are certainly lower than mutual fund costs for two reasons:<br /><br />1. the index nature of ETFs means little trading is required for rebalancing;<br /><br />2. market-makers for Canadian ETFs assume the cost and risk of rebalancing including index composition changes. Elsewhere in the world, the cost of an index change is borne by the ETF unit-holder. If the annual trading cost for an active Canadian mutual fund is 1.0%, and the comparable ETF cost is 0.0%, it is little wonder that active funds have so much difficulty beating index and ETF performance. <br /><br />LOONIE EH?<br />Canadian investors, like counterparts around the world, focus most investments in their domestic currency. This makes sense because liabilities and expenses are Loonie-centric. Some international ETFs are offered “hedged”. This comes at a cost. Is it better to buy the hedged or unhedged ETF? The answer is related to your expected holding period. Here’s a guideline:<br /><br />1. The longer the holding period (over 4 years) you may be better off unhedged. The cost of hedging is fixed and compounds over time.<br />2. If you have a view about the direction of currencies, hedging for protection or unhedging for exposure can become part of your strategy.<br /><br />ETFs offer an increasing palette of risk shapes and colours giving investors broad scope to construct portfolios that reflect their views and address their needs. Cost is a rare certainty in a financial world filled with unknowns. Consequently, it is one of the most important considerations in building any portfolio. <br /> <br />PŮR Investing Inc. is a registered portfolio manager specializing in risk management using exchange traded funds. PŮR’s free ETF screener is available at: http://purinvesting.com/demo/Screen.htm .mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-84011861092069606112010-01-26T10:35:00.001-05:002010-01-26T10:40:16.487-05:00Taxes, like hemorrhoids, are annoying ETFs can provide relief<meta equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 11"><meta name="Originator" content="Microsoft Word 11"><link rel="File-List" href="file:///C:%5CDOCUME%7E1%5CMARKYA%7E1%5CLOCALS%7E1%5CTemp%5Cmsohtml1%5C01%5Cclip_filelist.xml"><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="place"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="country-region"></o:smarttagtype><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:punctuationkerning/> <w:validateagainstschemas/> <w:saveifxmlinvalid>false</w:SaveIfXMLInvalid> <w:ignoremixedcontent>false</w:IgnoreMixedContent> <w:alwaysshowplaceholdertext>false</w:AlwaysShowPlaceholderText> <w:compatibility> <w:breakwrappedtables/> <w:snaptogridincell/> <w:wraptextwithpunct/> <w:useasianbreakrules/> <w:dontgrowautofit/> </w:Compatibility> <w:browserlevel>MicrosoftInternetExplorer4</w:BrowserLevel> </w:WordDocument> </xml><![endif]--><!--[if gte mso 9]><xml> <w:latentstyles deflockedstate="false" latentstylecount="156"> </w:LatentStyles> </xml><![endif]--><!--[if !mso]><object classid="clsid:38481807-CA0E-42D2-BF39-B33AF135CC4D" id="ieooui"></object> <style> st1\:*{behavior:url(#ieooui) } </style> <![endif]--><style> <!-- /* Font Definitions */ @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-1610611985 1073750139 0 0 159 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-parent:""; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Times New Roman"; mso-fareast-font-family:"Times New Roman"; mso-ansi-language:EN-CA;} a:link, span.MsoHyperlink {color:blue; text-decoration:underline; text-underline:single;} a:visited, span.MsoHyperlinkFollowed {color:purple; text-decoration:underline; text-underline:single;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.25in 1.0in 1.25in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} /* List Definitions */ @list l0 {mso-list-id:771704872; mso-list-type:hybrid; mso-list-template-ids:670078840 67698703 67698713 67698715 67698703 67698713 67698715 67698703 67698713 67698715;} @list l0:level1 {mso-level-tab-stop:.5in; mso-level-number-position:left; text-indent:-.25in;} ol {margin-bottom:0in;} ul {margin-bottom:0in;} --> </style><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} </style> <![endif]--><b style=""><span lang="EN-CA" style="font-family:Calibri;"><o:p></o:p></span></b> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;">People don’t like to talk about them and they are decidedly a pain . . . but taxes are the bane of an investor’s existence.</span></p><p class="MsoNormal">
<br /><span lang="EN-CA" style="font-family:Calibri;"><o:p></o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;">Investment professionals know that three key characteristics make exchange–traded funds (ETFs) tax efficient:<o:p></o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <ol style="margin-top: 0in;" start="1" type="1"><li class="MsoNormal" style=""><span lang="EN-CA" style="font-family:Calibri;">Index-based ETFs have extremely low turnover. Transactions trigger gains taxable in the hands of unit holders.<o:p></o:p></span></li></ol> <p class="MsoNormal" style="margin-left: 0.25in;"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <ol style="margin-top: 0in;" start="2" type="1"><li class="MsoNormal" style=""><span lang="EN-CA" style="font-family:Calibri;">The redemption of ETFs allows for in-kind transfers, allowing sponsors to transfer out the lowest cost shares without incurring tax. This maintains the adjusted-cost base closer to the market value. Unit holders pay most taxes when they sell the ETF, effectively deferring taxes until realized.<o:p></o:p></span></li></ol> <p class="MsoNormal" style="margin-left: 0.25in;"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <ol style="margin-top: 0in;" start="3" type="1"><li class="MsoNormal" style=""><span lang="EN-CA" style="font-family:Calibri;">The creation method and exchange-traded nature of ETFs means that supply and demand are balanced in the marketplace and units do not have to be sold (incurring a possible tax liability) to meet redemption requirements as mutual funds do. As a consequence, ETFs hold less cash to earn taxable income. (albeit not much lately given low interest rates).<o:p></o:p></span></li></ol> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;">These tax minimizing characteristics are a big relief for taxable investors. Had they owned mutual funds, they could be subjected to big taxes unrelated to their actual investment results. Paying for the capital gains or income received by others is just silly.
<br /></span></p><p class="MsoNormal">
<br /><span lang="EN-CA" style="font-family:Calibri;"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><b style=""><span lang="EN-CA" style="font-family:Calibri;">Tax losses<o:p></o:p></span></b></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;">ETFs are ideally suited for capturing tax losses. The conventional way is to replace a losing stock position with an ETF. Example: sell Research in Motion (RIM) at a loss to buy iShares Canadian Tech Sector ETF (XIT). The loss in the stock position is captured, to be used to offset capital gains in the current year, back three years or carried forward indefinitely. The portfolio exposure, to the technology sector in this case, is maintained.</span></p><p class="MsoNormal">
<br /><span lang="EN-CA" style="font-family:Calibri;"><o:p></o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;">Another effective tactic is to swap between ETFs with similar underlying risk. An example is iShares S&P 500(IVV) and SPDR 500(SPY). Both have the S&P 500 as their underlying index but because the ETFs have different sponsors, BlackRock and State Street Global Advisors respectively, they are considered different securities for tax purposes. Therefore, they may be traded simultaneously to capture a loss. The 30 day waiting period to avoid a superficial loss is not required. <o:p></o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;">Holding a core portfolio of ETFs and owning a satellite portfolio of individual stocks is a good way to protect capital gains generated by the stock portfolio by applying tax losses generated from the core. Some firms may offer a tax-loss-capture module, like PŮR Investing’s, that does this automatically.</span></p><p class="MsoNormal">
<br /><span lang="EN-CA" style="font-family:Calibri;"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><b style=""><span lang="EN-CA" style="font-family:Calibri;">Caution<o:p></o:p></span></b></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;">Ms. Ioulia Tretiakova, Director of Quantitative Strategies for PŮR Investing, says that while ETFs have tax efficient characteristics, some have shocked investors at tax time. <o:p></o:p></span></p> <p class="MsoNormal"><span lang="EN-CA" style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;">The 2008 experience with some leveraged Rydex Inverse sector series ETFs is shown here.<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <div align="center"> <table class="MsoNormalTable" style="width: 369pt; border-collapse: collapse;" width="492" border="0" cellpadding="0" cellspacing="0"> <tbody><tr style="height: 32.25pt;"> <td style="border-style: none solid solid none; padding: 0in 5.4pt; width: 300pt; height: 32.25pt;" valign="top" width="400"> <p class="MsoNormal" style=""><span style="font-family:Calibri;">ETF<span style=""> </span><o:p></o:p></span></p> </td> <td style="border-style: none none solid; padding: 0in 5.4pt; width: 69pt; height: 32.25pt;" valign="top" width="92"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">Gain<o:p></o:p></span></p> </td> </tr> <tr style="height: 31.5pt;"> <td style="border-style: none solid solid none; padding: 0in 5.4pt; width: 300pt; height: 31.5pt;" valign="top" width="400"> <p class="MsoNormal"><span style="font-family:Calibri;">Rydex Inverse 2x Sector Energy<o:p></o:p></span></p> </td> <td style="border-style: none none solid; padding: 0in 5.4pt; width: 69pt; height: 31.5pt;" valign="top" width="92"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">86.61%<o:p></o:p></span></p> </td> </tr> <tr style="height: 32.25pt;"> <td style="border-style: none solid solid none; padding: 0in 5.4pt; width: 300pt; height: 32.25pt;" valign="top" width="400"> <p class="MsoNormal"><span style="font-family:Calibri;">Rydex Inverse 2x Sector Technology<o:p></o:p></span></p> </td> <td style="border-style: none none solid; padding: 0in 5.4pt; width: 69pt; height: 32.25pt;" valign="top" width="92"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">59.46%<o:p></o:p></span></p> </td> </tr> <tr style="height: 31.5pt;"> <td style="border-style: none solid none none; padding: 0in 5.4pt; width: 300pt; height: 31.5pt;" valign="top" width="400"> <p class="MsoNormal"><span style="font-family:Calibri;">Rydex Inverse 2x Sector Financial<o:p></o:p></span></p> </td> <td style="border: medium none ; padding: 0in 5.4pt; width: 69pt; height: 31.5pt;" valign="top" width="92"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">42.35%<o:p></o:p></span></p> </td> </tr> </tbody></table> </div> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;">Ms Tretiakova explains that inverse, leveraged long and leveraged inverse ETFs use swaps and derivative instruments rather than securities that can be transferred in-kind. This creates potential tax liability when the contracts are closed out. Capital gains, influenced by volatility and the expiration of futures contracts related to the underlying sectors on January 1, 2009, were huge for several Rydex ETFs. In <st1:place st="on"><st1:country-region st="on">Canada</st1:country-region></st1:place>, a similar situation is not expected although in 2012 the Horizons Beta Pro’s leveraged ETF products listed below have OTC derivative contracts maturing. A different Canadian structure, unavailable in the <st1:place st="on"><st1:country-region st="on">U.S.</st1:country-region></st1:place>, allows sponsors to better minimize taxes. At any rate, leveraged ETFs should always be watched carefully.
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<br /><span style="font-family:Calibri;"><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <div align="center"> <table class="MsoNormalTable" style="border-collapse: collapse;" border="0" cellpadding="0" cellspacing="0"> <tbody><tr style="height: 32.25pt;"> <td style="border-style: none solid solid none; padding: 0in 5.4pt; height: 32.25pt;" valign="top"> <p class="MsoNormal" style=""><span style="font-family:Calibri;">ETF<span style=""> </span><o:p></o:p></span></p> </td> <td style="border-style: none solid solid none; padding: 0in 5.4pt; height: 32.25pt;" valign="top"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">Date<o:p></o:p></span></p> </td> <td style="border-style: none none solid; padding: 0in 5.4pt; height: 32.25pt;" valign="top"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">Symbol<o:p></o:p></span></p> </td> </tr> <tr style="height: 31.5pt;"> <td style="border-style: none solid solid none; padding: 0in 5.4pt; height: 31.5pt;" valign="top"> <p class="MsoNormal"><span style="font-family:Calibri;">HBP S&P/TSX Financials Bull Plus ETF <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;">HBP S&P/TSX Financials Bear Plus ETF<o:p></o:p></span></p> </td> <td style="border-style: none solid solid none; padding: 0in 5.4pt; height: 31.5pt;" valign="top"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">June 11, 2012<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">June 11, 2012<o:p></o:p></span></p> </td> <td style="border-style: none none solid; padding: 0in 5.4pt; height: 31.5pt;" valign="top"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">HFU<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">HFD<o:p></o:p></span></p> </td> </tr> <tr style="height: 32.25pt;"> <td style="border-style: none solid solid none; padding: 0in 5.4pt; height: 32.25pt;" valign="top"> <p class="MsoNormal"><span style="font-family:Calibri;">HBP S&P/TSX Energy Bull Plus ETF<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;">HBP S&P/TSX Energy Bear Plus ETF<o:p></o:p></span></p> </td> <td style="border-style: none solid solid none; padding: 0in 5.4pt; height: 32.25pt;" valign="top"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">June 18, 2012<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">June 18, 2012<o:p></o:p></span></p> </td> <td style="border-style: none none solid; padding: 0in 5.4pt; height: 32.25pt;" valign="top"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">HEU<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">HED <o:p></o:p></span></p> </td> </tr> <tr style="height: 31.5pt;"> <td style="border-style: none solid none none; padding: 0in 5.4pt; height: 31.5pt;" valign="top"> <p class="MsoNormal"><span style="font-family:Calibri;">HBP S&P/TSX Global Gold Bull Plus ETF<o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;">HBP S&P/TSX Global Gold Bear Plus ETF<o:p></o:p></span></p> </td> <td style="border-style: none solid none none; padding: 0in 5.4pt; height: 31.5pt;" valign="top"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">June 25, 2012<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">June 25, 2012<o:p></o:p></span></p> </td> <td style="border: medium none ; padding: 0in 5.4pt; height: 31.5pt;" valign="top"> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">HGU<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family:Calibri;">HGD
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<br /><span style="font-family:Calibri;"><o:p></o:p></span></p> </td> </tr> </tbody></table> </div> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><b style=""><span style="font-family:Calibri;">Screening ETFs for tax efficiency<o:p></o:p></span></b></p> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;">While it should be clear by now that taxable investors should always use ETFs rather than mutual funds, differences in the tax efficiency of ETFs bears some attention. Like other forms of investing, “tax” should never be the prime reason to make an investment, however, it is common sense to be mindful of an instrument’s tax impact. <o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;">Screening ETFs by the proportional size of their historical distributions is a fair way to assess their tax efficiency. It is these distributions that incur the tax that investors seek to avoid. To be fair, indexes that change their components or are in start-up mode, may incur more transactions and more taxable activity. This should diminish over time.<span style=""> </span><span style=""> </span><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal"><span style="font-family:Calibri;">When choosing between similar ETFs, picking the one with better tax efficiency may improve your after tax return. To see the tax efficiency of ETFs trading in <st1:place st="on"><st1:country-region st="on">Canada</st1:country-region></st1:place>, check the free screener at: <span style=""> </span><a href="http://purinvesting.com/demo/Screen.htm">http://purinvesting.com/demo/Screen.htm</a></span></p><p class="MsoNormal">
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<br /><o:p></o:p></span></p> mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-50415359166774964982009-10-30T18:10:00.003-04:002009-10-30T18:15:08.984-04:00Picking the right ETF: LiquidityLack of liquidity is treacherous for everyone.<br /><br />Catastrophe in capital markets is always characterized by a lack of liquidity. Significant imbalances between buyers and sellers (widened bid-ask spreads) can create market “gaps”. Occasionally this happens to the upside but predominately it occurs on the downside. Examples: October 1987, September 2001, Q4 2008. Liquidity is important for investors, but a lack of liquidity is treacherous for everyone.<br /><br /><br />Liquidity of underlying securities<br /><br />Since the 1990 launch of the first exchange-traded fund (ETF), the Toronto Index Participation Securities (TIPS), liquidity has been important. Originally developed for retail investors, TIPS became popular among institutional investors seeking broad market access in part because of the liquidity of the 35 stocks underlying TIPS. It follows that ETFs with illiquid holdings should be watched carefully. Fixed income ETFs can fall into this category. <br /><br />Theoretically, trading volume and liquidity for today’s ETFs is not a problem with the creation/redemption mechanism. This structure authorizes designated brokers to create additional units if demand exceeds supply, and conversely, remove units when supply exceeds demand. But there are differences in bid-ask spreads impacting every investor’s bottom line that require explanation.<br /><br /><br />Timing and volume<br /><br />“An ETF manager may be doing a terrific job of tracking an index,” says Ioulia Tretiakova, Director of Quantitative Strategies for PŮR Investing, “but the retail investor may still be impacted by liquidity costs, paying a hefty price in the form of wide bid-ask spreads or volatile premiums/discounts to net asset value (NAV), all resulting in less than stellar market liquidity.<br /><br />“Transacting before a holiday or at other times when volume is expected to be low, can be expensive and should be avoided. For example the closing bid-ask spread for actively traded iShares CDN S&P/TSX 60 (XIU), as of Friday, October 9, 2009 (Thanksgiving weekend) was $17.08-17.10 or 11.7 bps (normally about 5.8 bps) and for less actively traded Claymore Canadian Fundamental Index ETF (CRQ), was $10.85-10.99 or 129 bps (normally about 28 bps). Bid-ask spreads are generally correlated with trading volume and tend to be tighter for ETFs with more assets under management as the examples above demonstrate. 3 month average trading volume: XIU 17.6 million shares vs. CRQ 35,632 shares. The chart below demonstrates that trading volume and bid-ask spreads are correlated. This is not a surprise. More activity reflects popularity which suggests better arbitrage opportunities to keep spreads narrow and ETF values close to NAV. <br /><br />“Poor liquidity can cost investors money. Most ETF prices oscillate around their NAV. The absolute level of premium/discount and its standard deviation, a measure of how far, on average, the market price of an ETF tends to deviate from the NAV, warrants scrutiny. Some ETFs, primarily fixed income, trade mostly at a premium. For these ETFs, the magnitude of the average premium depends on the liquidity of the underlying assets, a good example being iShares Canadian Real Return Bond ETF, (XRB). Due to the limited depth of the Canadian real return bond market, this ETF tends to trade at a premium to NAV, closing at $20 on October 9, 2009 with a NAV of only $19.75, or a 1.27% premium.”<br /><br />The daily historical premium/discount to NAV for the XRB is shown below.<br /><br /><br />Conclusion<br /><br />The overall measure of ETF liquidity is a combination of factors; bid-ask spreads, fund assets, trading volume, premium-discount and last, but not least, the liquidity of the underlying assets. Imbalances can lead to tracking error that can distort strategies (to be covered in a future article).<br /><br />If investors intend to hold positions for longer than 6 months, liquidity may be less of an issue, but larger spreads can be costly over time to frequent traders. A rule of thumb for liquidity is that if the securities underlying the ETF are popular, the ETF’s construction is transparent, and trading is active, liquidity should be pretty good.<br /><br />PŮR Investing Inc. offers a free ETF screener on their website that includes liquidity: www.purinvesting.com.mfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0tag:blogger.com,1999:blog-4793648646354148655.post-25555902769937737202009-10-30T18:07:00.001-04:002009-10-30T18:09:31.462-04:00Picking the right ETF: DiversificationPICKING THE RIGHT ETF: Diversification<br /><br />First of a series of articles exploring how to sort and evaluate exchange traded funds. <br /><br /><br />The need<br /><br />Exchange-trade funds (ETFs) have had the most profound impact on personal investing since the introduction of the modern mutual fund in 1924. To the advantages that drove mutual fund growth; diversification, professional management, and shared expenses, ETFs have added low costs, transparency, market access throughout the trading day and tax efficiency. <br /><br />Institutions lead the use of ETFs for effective acquisition and hedging of portfolio positions. In 2008, the ability to short financial ETFs while shorting individual financial company shares was banned is only one example of the value of these instruments.<br /><br />With over 100 ETFs trading in Canada, over 800 in the U.S., and over 500 more in registration, this rapidly expanding universe demands better selection tools. <br /><br />These articles will explore key factors for evaluating ETFs beyond simple categorization and screening. Diversification, liquidity, cost, tax efficiency and tracking error will be examined for their impact on portfolio construction.<br /> <br /><br /><br />DIVERSIFICATION<br /><br /><br />Definition <br /><br />Diversification is a method to control risk by limiting exposure to any one holding. Institutions typically diversify by: <br /><br /> asset class (stocks, bonds, cash, real estate, commodities, currency) <br /> region (domestic, foreign, emerging markets) <br /> style (value, growth, core)<br /> size (large cap, mid-cap, small cap)<br /> sector (financials, materials, technology, energy)<br /> <br />All of these are available via ETFs. Individual investors no longer need millions of dollars to get broad exposure. <br /><br /><br />How to measure it<br /><br />The quantitative way to measure diversification is by measuring the specific (idiosyncratic) risk in a portfolio. The less specific risk there is, the better the diversification. Specific risk is the risk "specific" to a security, not explained by systematic market factors (such as energy prices, interest rates, etc). <br /><br />Specific risk is a metric routinely calculated by risk models. Investors without access to risk models can use PŮR’s “rule of thumb” approach:<br /><br /> total number of securities (PŮR recommends at least 50), <br /> weight represented by the top 10 holdings (PŮR recommends under 30%) <br /> weight of maximum individual holdings (PŮR recommends 10%). <br /><br /><br />Why it is important<br /><br />According to capital market theory, specific risk is not rewarded. That's why minimizing exposure to this risk by increasing diversification makes sense. Better diversification can mean less variability in a portfolio’s value. Professionals call this “risk management”, investors call it “sleeping at night”. <br /><br /><br />How it works<br /><br />The principle is based on the idea that prices of selected assets can move independently from one another (uncorrelated). Good diversification means lots of different risks not lots of different assets, as many investors often forget. ETFs’ risk is more reliable than that of individual securities because it is dampened by the variety and number of their holdings. The result offers a more effective approach to portfolio construction. <br /><br /><br />What are you trying to do?<br /><br />Are you an investor or a trader? This will impact how you choose ETFs. <br /><br />Investor: Your investing horizon is 5 years plus and you’re looking to overweight areas of the economy that will outperform. You need to manage risk, so diversification is important. Selecting the more diversified ETFs from different asset classes, regions, styles, sizes and sectors is a good way to succeed. <br /><br />Trader: Your investing horizon is lunchtime tomorrow (maybe up to one year). All you need to predict price movements is in price, volume and trading statistics. You gain by exploiting volatility and you trade frequently. Ironically, ETFs dampen volatility! Nevertheless, it may be easier to make a call on a sector (like financials) rather than a single security (like TD Bank ). Diversification is a two-edged sword for you, but is useful in assessing broad or specific exposure to underlying indices. <br /><br />Examples<br /><br />An ETF’s diversification is a function of the number, concentration and nature of its holdings. <br /><br />iShares CDN Large Cap 60 Index Fund (Symbol: XIU) with 60 holdings vs. iShares CDN Composite Index Fund (Symbol: XIC), with 220 holdings, illustrates similar ETFs with different diversification. While similar, the XIC is somewhat better. This doesn’t necessarily mean that XIC is the better choice however. As we will see in a future article, cost is a very important factor. <br /><br />The iShares CDN Tech Sector Index Fund (Symbol: XIT) with only 5 holdings is a very concentrated ETF that would score low on diversification but may be interest traders. <br /><br />Single commodity-based ETFs represent pure systematic risk. They are asset classes by themselves. Some U.S. ETFs track commodity indices that have different sector concentrations. Look before leaping. <br /><br /><br />Summary<br /><br />Diversification is one the most important factors in ETF evaluation. It is central to portfolio construction and an important reason for ETF popularity today. In the next issue, we will discuss liquidity, important for when the $%^t hits the fan as it did in 2008. <br /> <br />PŮR Investing Inc. is a registered portfolio manager specializing in risk managment using exchange traded funds. PŮR’s free ETF screener is available at: http://purinvesting.com/demo/Screen.htmmfninjahttp://www.blogger.com/profile/14449493161320809495noreply@blogger.com0