The Greystone Strategist€¦ · The Greystone Strategist | Summer 2018 2 Summer Overview Figure 1: Asset Class Total Returns Benchmarks S ... deploying capital in direct infrastructure

THE POWER OF DISCIPLINED INVESTING®

The Greystone Strategist

Summer 2018

Greystone.ca

300 Park Centre • 1230 Blackfoot Drive

Regina • Saskatchewan • Canada • S4S 7G4

Telephone: (306) 779-6400

Toll-Free: 1-800-213-4286

Suite 1907 • 201 Portage Avenue

Winnipeg • Manitoba • Canada • R3B 3K6

Telephone: (204) 956-1399

Toll-Free: 1-877-872-7686

Suite 4510 • 77 King Street West

TD North Tower

Toronto • Ontario • Canada • M5K 1J3

Telephone: (416) 309-2190

Suite 1, 12/F

International Commerce Centre

1 Austin Road West, Kowloon

Hong Kong

The Greystone Strategist | Summer 2018 2

Summer Overview

Figure 1: Asset Class Total Returns

Benchmarks

S&P/TSX Infrastructure2 Custom Mortgage Benchmark4

MSCI World (Net)1 REALPAC/IPD Canada - All Assets3 FTSE TMX Cda 91 Day T-bill

MSCI Emerging Markets (Net)1 FTSE TMX Cda Universe

FTSE TMX Cda LT Overall

1 MSCI, net of foreign dividend withholding taxes.2 Infrastructure returns are the Preqin Infrastructure Quarterly Index up to Q3 2017 and are Greystone Infrastructure Fund (Canada) LP returns thereafter.3 Real estate returns are the REALPAC/IPD Canada Quarterly Property Index - All Assets up to its most recent publication, Q1 2018 and are Greystone Real Estate Fund Inc. returns thereafter.4 Custom Mortgage Benchmark: FTSE TMX Cda Short Term Overall 60%, FTSE TMX Cda Mid Term Overall 40% + 0.5% per annum.

UPDATE

• Commonly used terms within economic outlooks can often be more impactful through the emotions they induce versus their true meaning. For example, the phrase “late cycle” is increasingly common in the outlooks we read and hear about. The challenge for investors is to check the meaning of late cycle against loss-aversion instincts associated with the end of the cycle, which follows. We remind ourselves of two key points when setting Greystone’s current outlook. First, late cycle does not equate to end of cycle, and it is historically a period of strong market returns until roughly six months before a recession. Second, debate around late cycle growth is focused on the United States with the rest of the world in the earlier stages of a recovery.

• We see signs of continued growth around the world, albeit at a moderating pace. Financial conditions are generally accommodative with low long-term interest rates and tight corporate bond spreads. The United States is healthy with very strong expected real GDP growth in Q2, rising consumer sentiment and modest but accelerating wage growth. Productivity and capital expenditures are also showing signs of improving, which are to a degree offsetting and will continue to be needed to offset rising labour costs. The European Central Bank is likely to keep rates low well into the future and leading manufacturing indicators in Europe remain in expansionary territory.

• Corporations have sustained their progress with revenue and earnings growth, albeit at a moderating pace. An area of increasing focus for us is inflationary and cost pressures that companies are increasingly facing. Tight labour markets, climbing commodity prices and protectionist policies are beginning to impact margins for companies that are unable to pass through costs. These pressures will likely persist as unemployment rates progress lower.

• The Canadian outlook is stable but more cautious. Higher debt loads and mortgage rates may be resulting in consumer fatigue. A lower Canadian dollar has also failed to translate into an acceleration of exports reflecting a lower structural potential for the export sector. Stability, however, is provided to the domestic economy through higher commodity prices, low unemployment rates and population growth. If the global economy continues to grow, we believe Canada may be able to rebalance while maintaining positive economic growth. For investors, it is also important to note that the Canadian equity market is exposed to forces outside the domestic economy and will also perform well if global growth continues.


Summer Overview

Figure 2: S&P 500 Cumulative Returns Prior To Cycle End (Six Months Before Recession)

-20

-10

0

10

20

30

40

50

Mar 49 Sep 53 Dec 57 Sep 60 Mar 70 Mar 74 Jun 80 Dec 81 Dec 90 Jun 01 Mar 08

%

1 Yr to Recession (Less 6 Mths) 2 Yrs to Recession (Less 6 Mths) 3 Yrs To Recession (Less 6 Mths)

Source: Bloomberg. The National Bureau of Economic Research. US$ Returns.

• Interest rates remain close to but still below our assessment of fair value. In our view, 10-year yields will peak at modestly higher levels of between 3-3.5% in the United States and 2.5-3% in Canada. We view the flattening of yield curves as a normal function of tighter monetary policy.

• Within debt markets, we are underweight duration and continue to see strong opportunities in private commercial real estate debt. Spreads available remain attractive when compared to investment grade and high yield bonds. Strong underwriting and strong security from underlying real estate can create strong fundamentals relative to elevated levels of corporate debt.

• In client discussions around real assets, we are increasingly hearing questions regarding capital inflows to private real estate and direct infrastructure. Real asset valuations have risen in recent years, which may reduce expected returns; however, this challenge exists with public markets as well. In a multi-asset framework, the absolute returns nature of real assets can potentially add value while adding diversification to a balanced portfolio of stocks and bonds. In our view, the inaccessibility of real assets by many retail investors and the private nature of these investments preserves this strong relative investment and diversification case.

• Effective deployment of capital is crucial at this phase of the economic cycle in order to maintain healthy risk-adjusted returns for real assets. Investors should focus on finding additional pockets of inaccessibility in order to reduce the competition for their capital, for example, deploying capital in direct infrastructure and real estate investments on an off-market basis.

• We advocate for modest portfolio tilts towards return seeking assets as our economic assessment sees continued growth beyond the next 12-18 months. Through the maturation of the cycle we do believe that strong asset selection will play an increasingly important role for participating in growth.

Figure 3: Q2-2018 Returns

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

Emerging Markets Bond U.S. Corporate Bond Mortgages

%

Source: Bloomberg; Index for Emerging markets is Bloomberg Barclays EM USD Aggregate Total Return Index Value Unhedged ; Index for U.S. Corporate Bond is Bloomberg Barclays US Corporate Total Return Value Unhedged USD, Index for Mortgages is FTSE TMX Cda Short Term Overall 60%,FTSE TMX Cda Mid Term Overall 40%+0.5% per annum

Mortgages provide stable return profile in Q2


Canadian Short-Term

Rates of Return Periods ended June 30, 2018 (Annualized Compound C$)

(%) Q2-2018 1 Year 3 Years 5 Years 10 Years

FTSE TMX Canada 91 Day T-Bill Index 0.3 1.0 0.6 0.7 0.9

Figure 4: Canadian Core CPI YOY

0

0.5

1

1.5

2

2.5

3

May-12 May-14 May-16 May-18

Source: Statistics Canada. Bloomberg.

Figure 5: Canadian Dollars to U.S. Dollars

0.7

0.72

0.74

0.76

0.78

0.8

0.82

0.84

Apr-16 Oct-16 Apr-17 Oct-17 Apr-18

Source: Bloomberg.

Figure 6: M2 Growth 3m/m Annualized

0

2

4

6

8

10

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18

%

M2 Growth 3m/m Annualized 12 per. Mov. Avg. (M2 Growth 3m/m Annualized )

Source: Fed, SISR Research.

UPDATE

• Inflation data reported in the quarter continued to indicate rising cost pressures. Headline inflation reported above 2% in Canada, Germany, France, the United Kingdom and the United States. Higher commodity prices were the main driver but the story appears broader in North America where core inflation figures are now at long-term central bank targets. In Canada, the average of the Bank of Canada’s (“BoC”) core inflation figures reached a six-year high. In the United States, core inflation data should continue moving higher as base effects drop out of year-over-year data.

• Low unemployment rates and rising inflation all point to a continuation of the tightening cycle by the BoC. The introduction of tariffs between the U.S. and Canada have added an element of economic uncertainty to low GDP growth rates, but it appears that the BoC will wait for further data before any decision to alter policy. Markets have priced in one to two rate hikes from the BoC between June 30th and yearend. We believe that market expectations are fairly accurate with the balance of risks towards fewer hikes rather than more. In the United States, future implied rates from the market remain below projections from the U.S. Federal Reserve.

• The trajectory of U.S. money supply (“M2”) growth picked up pace in the second quarter. M2 measures the supply of cash, checking deposits, savings deposits, money market securities, money market mutual funds and other time deposits. Traditionally, an increase in the money supply is driven by credit creation; however, deficit spending and borrowing from governments can also increase M2 levels. This quarter’s increase in money supply is of interest as U.S. deficits are increasing with tax reform, and increases in the money supply are historically connected with rising inflation. The U.S. dollar has appreciated versus the Canadian loonie on expectations that the BoC will continue to lag the U.S. Federal Reserve with respect to monetary policy tightening.

WATCH FOR... ■ Upward movement in U.S. money supply

■ Extent of real GDP slowdown from tariffs and BoC response




FTSE TMX Canada Universe Bond Index 0.5 0.8 2.0 3.5 4.5

Canadian Bonds

Figure 7: Canadian 10-Year Bond Yield

0

1

2

3

2012 2013 2014 2015 2016 2017 2018

%

Source: Bloomberg.

Figure 8: Bond Volatility and Central Banks Tapering

0

2

4

6

8

10

1240

50

60

70

80

90

100

110

120

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

US

D T

rilli

on

(BP

S)

Move Index (LHS) Fed+ECB Balance Sheet (RHS)

Source: Pavilion Global Markets. MOVE (Merrill Lynch Option Volatility Estimate) Index.

WATCH FOR... ■ Refinancing of senior debt with bail-in issuance from Canadian banks, which is

expected to begin this fall

■ Timing of future interest rate hikes from the European Central Bank

January 2012 - June 2018

Volatility could rise with balance sheet

unwind

UPDATE

• Historically, flat yield curves have tended to precede recessions and, as a result, recent movements in the bond market have found their way into headlines. The shape of the yield curve is often measured as the difference in yield from longer-term bonds and shorter-term bonds. For example, a flattening of the yield curve in recent quarters indicates that the spread between 30-year bonds and two-year bonds is lower than it has been at any time since the financial crisis.

• In our view, the current flattening is a natural function of central banks raising rates and is not yet a cause for concern. There is still a positive differential between short-term and long-term yields, while we have traditionally observed a lag of 6-24 months from the moment a yield curve flattens until the next recession.

• Given this view, we still advocate for fixed income positioning that defends against higher interest rates. We believe interest rates, as measured by 10-year bonds, are approximately 50 basis points below fair value for this cycle. Cost pressures and inflation are also at risk of surprising to the upside, which would negatively impact bond prices. While tariffs and emerging market stresses may cause a slowdown in global growth, we think greater bond market risks reside in the unwinding of central bank balance sheets and increased bond supply from U.S. government deficits.

• While we see a continuation of late economic cycle growth, we are cognizant of expensive valuations and high levels of issuance in credit markets. With central banks moving away from accommodative monetary policy, we are also expecting higher volatility in financial markets. As a result, our bias is for neutral credit exposure with the opportunity to tactically buy if and when the premium for corporate bonds moves higher. Within corporates, we see good relative value within pipelines, which have witnessed wider spreads from increased supply. For yield enhancement, we have advocated for private debt markets over global credit markets. The benefits were witnessed in the second quarter as U.S. investment grade credit and emerging market debt struggled with widening spreads.




Greystone Mortgage Benchmark* 0.4 0.7 1.6 3.0 4.5

* FTSE TMX Cda Mid Term Overall 40% + FTSE TMX Cda Short Term Overall 60% + 50bps per annum.

Commercial Mortgages

Figure 10: Vacancy Rates in Urban Centres Across Canada

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2

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6

8

10

Vancouver Winnipeg Toronto Montreal Ottawa

Dow

nto

wn

Cla

ss '

A' O

ffic

e V

acan

cy (

%)

National Average

Source: CBRE Ltd. Mar 31, 2018.

UPDATE

• Stemming from an active market with a high level of available lending capital, commercial mortgage spreads relative to Government of Canada bond yields continued to compress slightly in the second quarter. Five-year and 10-year commercial mortgage spreads ended the quarter at 140 and 150 basis points (“bps”), respectively, which reflects a decrease of approximately 5 bps since the start of the year. We anticipate spreads to remain relatively flat throughout the summer months as lending activity tends to slow. Although investment grade corporate bond spreads have widened year to date, commercial mortgages continue to provide an attractive yield enhancement relative to publicly traded bonds.

• In order to reduce the risk profile of commercial mortgages, it is important for lenders to adhere to a disciplined underwriting process in order to ensure long-term capital preservation for clients. Focusing on high-quality real estate, such as properties that are located in urban centres and are transit-linked, results in a portfolio of high-quality mortgages secured by strong collateral.

• When partnering with borrowers, in addition to analyzing financial stability, it is prudent for lenders to consider a borrower’s reputation in the market and capacity to execute effectively. This is particularly important when participating in construction and interim lending. A borrower’s ability to complete projects on time and within budget indicates an understanding of the real estate market and the ability to perform effectively.

• The loan fundamentals, which reflect the structure or characteristics of a commercial mortgage (i.e. loan to value ratio, debt service coverage ratio), are also important in determining a loan’s risk profile. By structuring a loan conservatively (i.e. loan to value ratio below 75%), lenders are better able to ensure that capital is protected in the event of a default or workout situation. Additional covenants, such as full recourse to the borrower or parent company, can be added to further reduce risk.

WATCH FOR...

■ Outperformance of mortgages relative to corporate bonds if spreads widen

■ Strong demand for commercial mortgages as they continue to add value relative to corporate bonds

Figure 9: Mortgage and Corporate Spreads

80

100

120

140

160

180

200

Jan-17 May-17 Sep-17 Jan-18 May-18

Sp

read

(b

ps)

Mortgage Corporate

Source: Greystone, CMLS Financial, Bloomberg. As at June 2018.




MSCI EAFE (Net) Index 0.8 8.2 6.7 11.2 5.5

International Equity

Figure 11: MSCI EAFE Index (Canadian Dollars)

1,000

1,400

1,800

2,200

2,600

2012 2013 2014 2015 2016 2017 2018

Source: MSCI, FactSet.

Figure 12: Trade Rhetoric is Starting to Turn Into Action

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1200

2007 2009 2011 2013 2015 2017

U.S

.$ p

er m

etri

c to

nn

e

U.S. China Western Europe

Source: Steelbenchmarker. Prices for hot-rolled band steel.

UPDATE

• Returns in local currency for developed international markets were up over the quarter, but remain slightly down year to date. The compression in the price earnings ratio reflects weakening market sentiment. Emerging markets lagged developed markets as concerns over the ripple effect of trade conflicts among leading economies are weighing on sentiment. Most of the sectors posted positive returns over the quarter with the notable exception of Financials, which were impacted by moderating economic conditions.

• The leading economic indicators are moderating from high levels in Europe and economic surprises continue to be negative in the region. As well, political risk has resurfaced recently in Italy as a new populist government has a fiscal plan that may increase conflict with other European countries. The banking sector lagged the broader EAFE Index during the first half of the year as the market effectively pushed out rate hikes. The ECB remains accommodative, although in June it laid out plans to reduce the bond program in October and further reduce it to zero in January 2019.

• The domestic Chinese equity market is significantly down over the first half of 2018, nearly neutralizing a strong run over the last year. The correction is broad based with nine of the 11 sectors having negative returns in local currency as they were impacted by negative sentiment to escalating trade rhetoric. We believe the outlook for the stock market is reasonably supported by robust earnings growth barring an outright trade war with the U.S., as the Chinese government has several policy tools at their disposal and remain committed to opening the country’s capital markets to foreign investors. May marked the first inclusion of China A-shares, or domestic shares, into the MSCI benchmarks.

• The outlook for company earnings in international markets, though moderating, still looks reasonably good and profit margins continue to remain healthy. However, the continuation of trade rhetoric is starting to turn into action and has the potential to impact the outlook for global economic growth.

WATCH FOR...

■ Signs of stabilization in leading economic indicators in Europe

■ Impacts of increasing trade tension on economic growth and company earnings

U.S. steel prices spike after tariffs on steel announced in March

April 2012 - June 2018




S&P 500 Index 5.5 15.8 13.9 18.5 13.0

U.S. Equity

Figure 14: S&P 500 Sectors - Percentage of Stocks Above 50-DMAs

0

25

50

75

100

Telecom Financials Materials Health Care Discretionary Energy All Staples Industrials Technology Reits Utilities

%

3/29/2018 6/29/2018

Source: Bloomberg, Evercore ISI.

Figure 13: S&P 500 Index (U.S. Dollars)

900

1,200

1,500

1,800

2,100

2,400

2,700

2012 2013 2014 2015 2016 2017 2018

Source: S&P. Factset.

UPDATE

• U.S. stocks posted positive second quarter performance following a somewhat volatile start to the year. Sector breadth in the U.S. improved this quarter as seven out of 11 sectors posted positive returns. This is in contrast to the first quarter, where positive returns were seen only in the Information Technology and Consumer Discretionary sectors.

• The FOMC continued on its path to normalizing interest rates this quarter as Chairman Powell signaled continued confidence in underlying domestic economic conditions. While higher rates are certainly a headwind for stocks, they remain at historically low levels and are increasing in response to what is currently a healthy economy. We believe the U.S. is in the latter stages of the business cycle, but the equity market likely has further room to advance.

• Similar to last quarter, investors remain concerned about President Trump’s nationalist posturing with respect to U.S. global trading partners, instilling fear that trade disputes would serve to offset the positive impacts that fiscal stimulus has had on corporate earnings thus far. A few companies have revised down earnings growth expectations, and some have indicated they will be making changes to their supply chains as a result of increased tariffs. Yet despite the fears of protracted trade disputes, the U.S. was the only major region to post a positive return, in local currency, this quarter.

• Healthy equity returns continue to be supported by relatively strong domestic economic conditions, and better than expected corporate earnings. Corporate buybacks, funded by repatriated offshore cash, also helped to drive equity returns this quarter.

WATCH FOR... ■ Changes in company guidance or commentary related to global trade

■ Rising cost pressures such as wages, transportation and other input costs impacting operating margins

■ Signs of global PMIs downshifting momentum into the second half of the year





S&P/TSX Composite Index 6.8 10.4 7.0 9.2 4.2

Canadian Equity

Figure 15: S&P/TSX Composite Index (Canadian Dollars)

10,000

12,000

14,000

16,000

18,000

2012 2013 2014 2015 2016 2017 2018

Source: S&P, FactSet.

Figure 16: Western Canadian Select Oil: Discount versus West Texas Intermediate (both in US$)

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0

Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18

Source: Bloomberg.

UPDATE

• Canadian stocks experienced a rebound in the second quarter and moved into positive territory for 2018. Despite headline noise regarding trade tariffs, the TSX received a boost from energy stocks and quietly reached new highs in June.

• With restricted global supply and robust demand, it was not surprising to see the significant jump in oil prices for immediate delivery. The increase was more muted for future prices where oil remains in the mid-$60 range for delivery next year. This reflects the expected increase in supply from both OPEC and U.S.-based shale producers. Still, oil prices have come a long way from a year ago when the price of a barrel stood at $45.

• Pipeline politics has been a theme this year, mainly focused on the Trans Mountain Pipeline expansion between Edmonton and Burnaby. This resulted in the federal government having to buy the project for $4.5 billion from Kinder Morgan. However, another significant pipeline project received preliminary approval recently with Enbridge’s Line 3 replacement receiving the green light from a Minnesota commission. Enbridge currently runs about half of the original 760,000 barrels per day capacity. The discount for Canadian heavy oil still remains wide versus benchmark prices, but could narrow if we continue to see more positive pipeline news.

• Fundamentally, Canadian stocks remain relatively attractive. TSX earnings growth for 2018 is still expected to be in the 15-20% range, which would finally move earnings above the previous peak set in 2007. Given this outlook for earnings, valuation levels continue to be reasonable.

• Despite the recent strong showing from Canadian stocks and the outlook for earnings, the overhang of global trade tariffs remains a headwind. While announced tariffs are still relatively small, further escalation would be a negative for Canada where over 30% of GDP is driven by exports. President Trump may continue with his stance as we move towards U.S. mid-term elections. After that, there will likely be greater clarity on what the end game might look like and the knock-on impact for Canadian stocks.

WATCH FOR... ■ Strong reported earnings growth from energy companies that are

benefitting from higher commodity prices

■ Impact of a weak Canadian dollar, which would be a tailwind for companies with foreign revenues and a headwind for companies with foreign input costs


Further positive news on pipeline capacity may help

narrow the discount for Canadian crude


Rates of Return Periods ended March 31, 2018 (Annualized Compound C$)


REALPAC/IPD Canada Quarterly Property Index - All Assets* 1.4 7.3 7.1 7.7 8.0

* Most recently reported period.

Real Estate

UPDATE

• The Canadian office market continues to exhibit positive fundamentals and strong leasing demand. While the Alberta office market faces long-term structural supply challenges, the overall Canadian office vacancy rate has been trending downwards since late 2016 and is once again lower than the U.S. office vacancy rate. Toronto and Vancouver have the lowest downtown office vacancy rates in North America at 2.9% and 4.7%, respectively.1

• Despite the growth of e-commerce, online retail sales only accounted for approximately 7.5% of total retail sales in 2017.2 Moreover, retailers continue to face profitability challenges through the online channel due to the increased percentage of online purchases that end up getting returned. As a result, omni-channel retailers are currently best positioned to meet evolving consumer behaviours.

• The demand for industrial space continues to outpace supply as the national availability has declined for seven consecutive quarters.3 Heading into the second half of 2018, transportation, distribution, storage and e-commerce tenants comprise the vast majority of users seeking industrial space to fulfill last mile logistic needs. Similar to the downtown office market segment, Toronto and Vancouver have the lowest availability rates in North America.

• Despite the ongoing discussions and concerns over elevated prices within the single family and private condominium markets, the multi-unit residential space continues to exhibit low vacancy and stable income streams across Canada. Demand for multi-family residential continues to be supported by increasing international migration, housing affordability, and continued aging of the Canadian population. Most major cities across Canada experienced a rise in occupied purpose-built rental units over the past year, while demand continues to outstrip new supply.4

1 CBRE Limited.2 Ibid.3 Ibid.4 Canada Mortgage & Housing Corporation.

WATCH FOR...

■ Rental rate growth within the Toronto and Vancouver office and industrial markets

■ Rising demand for distribution and warehousing industrial space

Figure 18: Office Tenants Actively Seeking Space

20.6%

9.9%

5.2%

13.7%6.5%

3.0%

11%

5.7%

24.5%

Technology

Business Services

Telecommunications

Financial Services

Insurance

Government

Retail

Creative Industries

Other

Source: CBRE Research, Q1 2018.

Figure 17: Canada and United States Overall Vacancy Rate

Q1-14

U.S. Canada Canada excluding Alberta

Source: CBRE Research and CBRE Econometric Advisors, Q1 2018.


Infrastructure

Rates of Return Periods ended June 30, 2018 (Annualized Compound US$)


Infrastructure Fund Benchmark (in US$) * 1.9 8.0 8.0 n/a n/a

* Current benchmark is 8% gross return rolling over four year period.

Figure 19: Sector Activity by Value

4%

25%

16%44%

1%

2%

8%

6%

24%

18%

40%

3%2%

7%

Social Infrastructure

Renewables

Transport

Power

Environment

Other

Telecoms

Q1-17

Q1-18

Source: Inframation Deals 1Q18 Project Finance League Table and Trend Report - Global, Infra Deals, 2018.

Figure 20: Deals by Type and Project Finance

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5

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Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18

US

D b

illio

n

Brownfield Greenfield Refinancing

Source: Inframation Deals 1Q18 Project Finance League Table and Trend Report – US & Canada, Infra Deals, 2018. WATCH FOR... ■ Newly elected Ontario Premier, Doug Ford to increase local infrastructure

funding and explore highway expansion across Ontario6

■ The Trump administration will likely have to wait until after this year’s midterm elections to roll out its infrastructure agenda. The plan includes US$200 billion in federal funding meant to encourage US$1.5 trillion in overall investment from states, municipalities and private entities7

UPDATE

• In Q1-2018, 286 transactions totaling US$72.3 billion closed globally with the power, renewables and transportation sectors accounting for 40%, 24% and 18% of deal value, respectively. The number of Greenfield transactions increased from 19 transactions valued at US$7.5 billion in Q1-2017 to 29 transactions valued at US$11.0 billion in Q1-2018.1 The increase in Greenfield transactions highlights good investment opportunities, investor confidence in sector performance and stability despite global geopolitical uncertainty.

• The global solar market grew by 26% last year with 99 gigawatts (“GW”) of grid-connected photovoltaic (“PV”) capacity installed. 2018 is expected to have 106 GW of PV coming online, which would be the first-ever triple-digit year for the global solar market.2 Investors in the U.S. are planning to take advantage of the federal solar investment tax credit before it drops permanently to 10% after 2021. Total planned U.S. solar capex is expected to be US$9.7 billion in 2018, US$10.7 billion in 2019 and US$9.5 billion in 2020.3

• Meridiam’s recent acquisition of Allego, an electric vehicle (“EV”) charging solution provider, sparked interest in Europe’s growing EV market. By 2030, Europe expects 30-40% of new car sales to be electric vehicles.4 Accompanying this growth is the need for greater electric storage, which is undergoing a similar boom and is supported by a remarkable 79% drop in lithium-ion battery prices from 2010 to 2017. Further cost reduction, better efficiency, and continued government policy support are likely to lead to significant growth in the market uptake of EVs, resulting in growing institutional investor interest in the sector over time. 5

1 Inframation Deals 1Q18 Project Finance League Table and Trend Report, Infra Deals, 2018.2 10 Trends That Will Shape the Global Solar Market in 2018, Greentechmedia, 2018.3 Power Transactions and Trends, EY, 2018.4 Meridiam bolsters Ecological transition strategy with the acquisition of Allego, a leading independent European Electric Vehicle (EV) charging solution provider, Meridiam, 2018.5 Electric Vehicle Outlook 2018, BloombergNEF, 2018.6 For The People, Ontario PC, 2018.7 Trump pushes infrastructure plan, but says it will likely have to wait until after the midterms, CNBC, 2018.


Asset Class Rates of Return

Figure 21: Annual Compound C$ (Periods Ending June 30, 2018)

Total Returns (%) Annualized Rates of Return

Major Asset Class Indices & Greystone Pooled Funds* 2nd Quarter YTD 1 Year 2 Years 3 Years 4 Years 5 Years

Balanced Funds

Greystone Balanced Fund 2.3 3.1 8.8 9.9 6.6 8.1 9.9

Balanced Benchmark1 3.0 2.6 7.2 8.3 6.4 7.0 9.0

Greystone Balanced Plus Fund 2.1 3.0 8.7 9.7 6.7 n/a n/a

Balanced Plus Fund Benchmark2 3.0 3.1 7.6 8.5 6.4 n/a n/a

Fixed Income Funds

Greystone Canadian Fixed Income Fund 0.6 0.6 1.0 1.1 2.2 3.0 3.5

FTSE TMX Canada Universe Bond 0.5 0.6 0.8 0.4 2.0 3.0 3.5

Greystone Long Bond Fund 0.9 0.9 1.9 1.7 4.2 5.6 6.1

FTSE TMX Canada Long Term Overall Bond 0.9 0.9 1.8 1.1 4.0 5.5 5.9

Greystone High Yield Bond Fund 1.1 1.5 3.4 5.7 4.3 4.1 5.3

High Yield Fund Benchmark3 0.7 -0.3 2.5 8.0 5.8 4.0 5.8

Greystone Real Return Bond Fund 1.9 3.3 4.0 0.7 2.2 3.0 4.0

FTSE TMX Canada Real Return Bond 2.0 3.4 4.0 0.6 2.1 3.0 4.0

Greystone Bond Plus Fund 0.7 1.0 1.7 1.7 2.8 3.6 n/a

FTSE TMX Canada Universe Bond 0.5 0.6 0.8 0.4 2.0 3.0 n/a

Greystone Corporate Bond Fund 0.6 1.1 2.1 2.9 3.3 3.6 4.1

FTSE TMX Canada All Corporate Bond 0.4 0.7 1.2 1.9 2.8 3.3 3.9

Greystone Short Bond Fund 0.4 0.6 0.8 0.8 1.0 n/a n/a

FTSE TMX Canada Short Term Overall Bond 0.3 0.5 0.4 0.3 0.7 n/a n/a

Greystone Short Bond Plus Fund 0.6 1.2 2.0 1.8 2.1 n/a n/a

FTSE TMX Canada Short Term Overall Bond 0.3 0.5 0.4 0.3 0.7 n/a n/a

Greystone Money Market Fund 0.4 0.7 1.2 0.9 0.8 0.9 0.9

FTSE TMX Canada 91 Day T-Bill 0.3 0.6 1.0 0.7 0.6 0.7 0.7

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses.1 Current Balanced Fund Benchmark: FTSE TMX Cda 91 Day T-Bill 3%, FTSE TMX Cda Universe 37%, S&P/TSX Composite 24%, S&P 500 18%, MSCI EAFE (Net) 18%. Prior to April 1, 2014 benchmark was FTSE TMX Cda 91 Day T-Bill 3%, FTSE TMX Cda Universe 37%, S&P/TSX Composite 35%, S&P 500 12.5%, MSCI EAFE (Net) 12.5%. 2 Please refer to the Disclosures page for the benchmark details. 3 Current High Yield Fund Benchmark: 50% ML US HY Master II Trust Hedge to CAD + 50% ML CAD and USD HY Canadian Issuers Hedge to CAD.






Duration Funds

Greystone 3 Year Duration Fund** 0.3 0.5 0.4 0.4 1.0 1.7 2.0



Greystone 20+ Year Duration Fund** 1.5 1.1 4.2 1.1 6.1 8.8 8.7

Canadian Equity Funds

Greystone Canadian Equity Fund 5.2 2.5 9.0 10.3 3.8 4.3 8.6

S&P/TSX Composite 6.8 1.9 10.4 10.7 7.0 4.9 9.2

Greystone Canadian Equity Income & Growth Fund 5.5 -0.5 6.2 8.2 4.5 3.4 7.3

Canadian I&G Fund Benchmark4 (Primary) 6.4 1.2 8.7 9.4 7.0 5.2 9.2

S&P/TSX Composite (Secondary) 6.8 1.9 10.4 10.7 7.0 4.9 9.2

Greystone Canadian Equity Small Cap Fund 6.2 -6.6 0.6 5.8 4.7 -0.3 7.3

S&P/TSX SmallCap 6.6 -1.7 5.4 4.6 6.3 0.1 6.5

U.S. Equity Funds

Greystone U.S. Equity Fund 5.7 8.8 21.1 20.2 15.9 19.1 20.3

Greystone U.S. Income & Growth Fund 5.5 8.0 19.0 16.8 14.5 18.1 18.8

S&P 500 5.5 7.8 15.8 16.9 13.9 16.8 18.5

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses.** Name change effective January 1, 2018. 4 Current Canadian I&G Fund Benchmark: S&P/TSX Capped Composite 80%, Telecommunication Services 5%, Utilities 5%, Oil & Gas Storage & Transportation 5%, Equity Real Estate Investment Trusts 5%. Prior to April 1, 2014 the benchmark was S&P/TSX Capped Composite 70%, Financials 10%, Telecommunication Services 10%, Utilities 10%.






International Equity Funds5

Greystone International Equity Fund -1.4 2.5 11.5 16.2 9.1 11.6 14.4

MSCI EAFE (Net) 0.8 2.1 8.2 14.1 6.7 8.1 11.2

Greystone International Income & Growth Fund -1.9 1.4 10.2 15.1 8.4 9.0 11.9

International I&G Fund Benchmark6 (Primary) 0.8 2.1 8.2 14.1 6.7 6.2 10.5

MSCI EAFE (Net) (Secondary) 0.8 2.1 8.2 14.1 6.7 8.1 11.2

Greystone China Income & Growth -5.1 -0.4 20.6 33.2 13.8 n/a n/a

CSI 300 (Net) -11.9 -9.3 1.2 8.4 -6.5 n/a n/a

Global Equity Funds5

Greystone Global Equity Fund 2.9 7.1 16.2 18.0 12.0 16.1 n/a

Greystone Global Income & Growth Fund 1.4 3.8 13.9 16.3 11.4 13.0 15.0

MSCI World (Net) 3.8 5.4 12.5 15.3 10.4 12.5 14.9

Real Estate and Mortgages

Greystone Real Estate Fund Inc. 2.5 4.7 11.0 10.4 9.0 8.2 8.3

Greystone Real Estate LP Fund 1.6 2.9 7.6 7.3 6.1 n/a n/a

Greystone Mortgage Fund 1.0 2.1 4.0 3.4 3.9 4.5 4.7

Mortgage Fund Benchmark7 0.4 0.7 0.7 0.5 1.6 2.5 3.0

Infrastructure

Greystone Infrastructure Fund (Canada) LP** 2.8 2.3 14.7 20.7 23.1 n/a n/a

Infrastructure Fund Benchmark8 1.9 3.9 8.0 8.0 8.0 n/a n/a

* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses. ** The Greystone Infrastructure Fund (Canada) LP and the Greystone Infrastructure Fund (Canada) LP II (the “Feeder Funds”) invests in units of a master fund, the Greystone Infrastructure Fund (Global) LP (the “Master Fund”). The Master Fund invests in the allowable infrastructure investments outlined in its Investment Policy. Master: The Master Fund is priced monthly in USD and includes any working capital within the Master Fund, as well as the current USD value of the most recent valuation of the underlying investments. Valuations of the investments held in the Master Fund are done semi-annually in the local currency of the investment. Interim valuations may be done as the result of special situations. At each monthly pricing period, the investment valuations are converted to USD at the rate in effect at the pricing date. Feeder: The Feeder Funds are priced monthly in U.S. dollars and reported to clients in Canadian dollars and include working capital held within the Feeder Funds as well as the updated monthly value of the units held in the Master Fund. The value of the Feeder Funds’ investment in the Master Fund is determined based on the updated monthly price of the Master Fund. 5 International Equity and Global Equity funds and MSCI EAFE and World indices performance is net of foreign dividend withholding taxes. 6 Current International I&G Fund Benchmark: MSCI EAFE (Net). From April 1, 2008 to June 30, 2015 the benchmark was MSCI EAFE High Dividend Yield (Net). 7 Current Mortgage Fund Benchmark: FTSE TMX Canada Short Term Overall 60%, FTSE TMX Canada Mid Term Overall 40% + 0.5% per annum. From October 1, 2007 to September 30, 2009 the benchmark was FTSE TMX Canada Conventional Mortgage. 8 Infrastructure Fund Benchmark is an absolute gross return of 8% USD over a rolling four year period for comparison purposes.






Target Date Funds

Greystone Retirement Plus Fund 1.5 3.2 7.1 7.7 5.9 n/a n/a

Retirement Plus Benchmark9 2.5 3.0 6.3 7.0 5.8 n/a n/a

Greystone 2020 Target Date Plus Fund 1.6 3.1 7.1 7.7 5.9 n/a n/a

2020 Target Date Plus Benchmark9 2.4 2.9 6.2 7.0 5.7 n/a n/a















* Greystone Pooled Fund returns are calculated gross of investment management fees and includes administrative, trading and custodian expenses. 9 Target Date Plus Fund benchmarks are determined on a quarterly basis based on the strategic asset mix for the subsequent quarter. Details regarding changes to the Target Date Funds benchmark compositions is available upon request.


Glossary of TermsAbsorption Absorption: The rate at which available properties are sold in a specific real estate market in a given time period.

Bearish/Bullish Bearish: A sentiment that the performance of the market, a specific security, or an industry will fall moving forward.Bullish: A sentiment that the performance of the market, a specific security, or an industry will rise moving forward.

BoC The Bank of Canada: The Bank of Canada is the central bank of Canada. (Related terms - See central bank rate and monetary policy.)

BoE The Bank of England: The Bank of England is the central bank of the United Kingdom. (Related terms - See central bank rate and monetary policy.)

BoJ The Bank of Japan: The Bank of Japan is the central bank of Japan. (Related terms - See central bank rate and monetary policy.)

Bond market rally/sell-off Bond market rally: A period of sustained increases in the price of bonds, typically following a period of flat or declining prices.Bond market sell-off: A period of increased selling of bonds, which leads to decreases in the price of bonds and yields increasing.

Bond yield curve Yield curve: A line that plots the interest rates of bonds at a set point in time. The bonds have equal credit quality, but differing maturity dates.Steepening of the yield curve: An increase in the gap between the yields on short-term bonds and long-term bonds, which will make the curve appear steeper.Flattening of the yield curve: A decrease in the gap between the yields on short-term bonds and long-term bonds, which will make the curve appear flatter.Inverted yield curve: A situation in which a yield curve flattens to the point that short-term rates are higher than long-term rates. An inverted yield curve typically precedes a period of recession.

Bond yield Real yield: An investment return that has been adjusted to account for inflation.Nominal yield: Also referred to as the nominal rate, coupon yield, or coupon rate; it is the interest rate that a bond issuer is obligated to pay to the bond purchaser. This rate is fixed and applies to the life of the bond.Back-up in bond yields: A term for the movement in bond yields which makes bonds more expensive to issue. A back-up is characterized by an increase in bond yields and a decrease in price.

bps Basis points: One hundredth of one percent, used for describing small changes in figures such as interest rates.

Brownfield Brownfield: An infrastructure asset that is fully operational.

Cap rate Capitalization rate: A rate of return on a real estate investment property based on the expected income that the property will generate.

CBRE Limited CBRE Limited: A Fortune 500 and S&P 500 company headquartered in Los Angeles that is the world’s largest commercial real estate services firm. CBRE Limited offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.

Central bank rate – in U.S. Fed Funds rate, in Canada Overnight rate

Central bank rate: The rate of interest the central bank charges on the loans and advances to a commercial bank.Federal funds rate: The interest rate at which a depository institution lends funds maintained at the U.S. Federal Reserve to another depository institution overnight. The federal funds rate is generally only applicable to the most creditworthy institutions. Overnight rate: The interest rate at which a depository institution lends funds to another depository institution (short term) or the interest rate the central bank charges a financial institution to borrow money overnight. The overnight rate is the lowest available interest rate and, as such, it is only available to the most creditworthy institutions.

China’s City Tier System First Tier cities: Refers to China’s “Big Four” cities: Beijing, Shanghai, Shenzhen, and GuangzhouSecond Tier cities: Refers to capital cities of each province or coastal cities such as Tianjin, Chongqing, Chengdu, Wuhan, Xiamen; cities tend to be located primarily in Central ChinaThird Tier cities: Refers to mid-tier cities from more developed provinces and some cities within less developed provinces (mostly in central or western China); cities tend to lag behind first and second tier cities in terms of economic growth and development, although many of them are still considered to be very significant economically and historicallyFourth Tier cities: Refers to less developed cities from more developed provinces and more developed cities from less developed provinces; cities tend to represent the majority of China’s urban population and combined income


Class A Office Class A Office: The most prestigious commercial real estate buildings competing for premier office users with rents above average for the area.

CMHC Canadian Mortgage and Housing Corporation: A Crown corporation of the Government of Canada, through the 1944 National Housing Act.

CMLS Financial CMLS Financial: One of Canada’s largest independently owned mortgage companies, providing a wide range of commercial lending services, residential mortgages, and institutional services.

CMBS Commercial mortgage-back securities: A type of fixed-income security that is collateralized by commercial real estate loans.

Commercial mortgage Commercial mortgage: A mortgage loan that is secured by commercial property.

Commercial real estate Commercial real estate: Property that is used solely for business purposes, usually classified into the following categories: office, retail, industrial, multi-family, land and miscellaneous.

Consensus expectations Consensus expectations: A figure or prediction based on the combined estimates of the analysts covering a specific company, marketing or economic event. Common consensus expectations include earnings per share and gross domestic product.

Contagion Contagion: A situation where a shock in a particular economy or region spreads out and affects others. Contagion can cause economic crises or booms at a global level.

CRB Index Commodity Research Bureau Index: An index that measures the overall direction of commodity sectors. The CRB was designed to isolate and reveal the directional movement of prices in overall commodity trades.

Credit risk Credit risk: The risk that a borrower will default on any type of debt by failing to make required payments.

Credit spread Corporate credit spread: The difference in yield of investment grade corporate bond relative to a risk-free rate, usually measured in basis points (bps)High yield credit spread: The difference in yield of non-investment grade corporate bond relative to a risk-free rate, usually measured in basis points (bps) Option Adjusted Spread (OAS): The difference in yield of a corporate bond relative to a risk-free rate, which is adjusted to take into account an embedded option, usually measured in basis points (bps)

Cyclical/Defensive sectors Cyclical sectors: Sectors where performance will rise and fall with the stages of the business cycle. These sectors tend to perform well when the economy is in expansion, and poorly when the economy is in recession. Cyclical sectors include: Materials, Technology, and Industrials. Defensive sectors: Sectors that remain stable during various stages of the business cycle. These sectors tend to perform better than the market during recessions and worse than the market during expansions. Defensive sectors include: Telecom, Utilities, and Consumer Staples.

DJIA The Dow Jones Industrial Average: The DJIA is a price-weighted average of 30 significant stocks traded on the NYSE and the NASDAQ.

Dovish/Hawkish Dovish: A sentiment that generally favours low interest rates in order to encourage growth within an economy. Hawkish: A sentiment that generally favours relatively high interest rates in order to keep inflation in check. (Related term - See Monetary Policy.)

Duration Duration: Degree of sensitivity of the market value of a fixed income instrument (e.g. mortgage, bond) to changes in interest rates.

Earnings Analysts’ earnings estimates: An estimate for a company’s future quarterly or annual earnings. Used in company valuation.Earnings per share (EPS): The portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability.

ECB The European Central Bank: The central bank of the European Union. (Related terms - See central bank rate and monetary policy.)

EU The European Union: A group of European countries that participates in the world economy as one economic unit and operates under one official currency, the euro.

Emerging markets Emerging markets: A nation’s economy that is progressing towards becoming advanced, as shown by some liquidity in local debt and equity markets and the existence of some form of market exchange and regulatory body.

Expansion/Recession Expansion: A period when business activity surges and gross domestic product expands until it reaches its peak.Recession: A period of significant decline in activity across the economy, lasting longer than a few months.


Fed U.S. Federal Reserve: The central bank of the United States. (Related terms - See central bank rate and monetary policy.)

Flight to quality Flight to quality: The action of investors moving their capital away from riskier investments to the safest possible investment vehicles.

FOMC The Federal Open Market Committee: The branch of the Federal Reserve Board that determines the direction of monetary policy.

G8 The Group of Eight: The G8 refers to the group of eight highly industrialized nations that hold annual meetings to foster consensus of global issues. Members: France, Germany, Italy, U.K., Japan, U.S., Canada, and Russia.

GDP Real gross domestic product: A macroeconomic measure of the value of economic output adjusted for inflation/deflation.Nominal gross domestic product: A macroeconomic measure of the value of economic output at current market prices.

GoC bond yield Government of Canada bond yield: The amount of return an investor will realize on a Government of Canada bond.

Greenfield Greenfield: An infrastructure asset under development (prior to being operational).

GTA Greater Toronto Area: The city of Toronto and the four regional municipalities that surround it: Durham, Halton, Peel, and York.

Hard/Soft landing Hard landing: An economic state wherein the economy is slowing down sharply or is tipped into outright recession after a period of rapid growth.Soft landing: A term used to describe a rate of growth high enough to avoid recession, but slow enough to avoid high inflation.

Headwind/Tailwind Headwind: A condition or situation that will make growth more difficult.Tailwind: A condition or situation that will help move growth higher.

High beta stocks/low beta stocks

High beta stocks: A stock with a market beta of greater than one, meaning that the security will be more volatile than the market.Low beta stocks: A stock with a market beta of less than one meaning that the security will be less volatile that the market.

IMF International Monetary Fund: The IMF is an international organization created for the purpose of promoting global monetary and exchange stability, facilitating the growth of international trade, and assisting in the establishment of multilateral system of payments for current transactions.

Inflation/Deflation Inflation: A general increase in prices and fall in the purchasing value of money.Core inflation: A measure of inflation that excludes items that face volatile price movements, such as energy and food products.Headline inflation: The raw inflation figure as reported through the Consumer Price Index.CPI: The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services such as transportation, food, and medical care.Core PCE: Core Personal Consumption Expenditures is a measure in the change of price of consumer goods and series excluding food and energy prices.Deflation: The reduction of the general level of prices in an economy.

IPD All Property Index Investment Property Databank All Property Index: The most common benchmark for Canadian real estate funds.

Leasing activity Leasing activity: Refers to both the expiry of existing leases and the new leases signed at a property.

LIBOR London Interbank Offered Rate: A benchmark rate that some of the world’s leading banks charge each other for short-term loans.

Market correction/Market pullback

Market correction: A reverse movement, usually negative of at least 10% in a stock, bond, commodity, or index to adjust for an overvaluation.Market pullback: A falling back of a price from its peak. This price movement might be seen as a brief reversal of the prevailing upward trend.

Margin Pressure Margin Pressure: A term for the effect of certain internal or market forces on a company’s operating, gross or net margins.

Market valuation Market valuation: The process of determining the current worth of the overall market.Market price-to-earnings (P/E) ratio: A market valuation technique that divides the total value of all the market’s constituents by their combined earnings. The resulting ratio gives insight into whether the market may be over or under priced.Cheap market valuation: A statement about the pricing of financial assets within a market. Cheap would imply a market P/E ratio lower that it has historically been, meaning that investors are paying less for each dollar of earnings than in the past.Expensive market valuation: A statement about the pricing of financial assets within a market. Expensive would imply a market P/E ratio higher than it has historically been, meaning that investors are paying more for each dollar of earnings than in the past.


Monetary policy Monetary policy: Monetary policy is used by a central bank of a country to control the circulation and value of a nation’s currency.Quantitative easing: A monetary policy in which a central bank purchases government or other securities from the market in order to lower interest rates and increase the money supply.Quantitative tightening: Tight monetary policy is a course of action undertaken by a central bank to constrict spending in an economy that is seen to be growing too fast, or to curb inflation when it is rising too quickly.

MSCI EAFE Index The MSCI EAFE Index: A stock market index designed to measure the equity market performance of developed markets outside of the U.S. and Canada. The acronym stands for Europe, Australasia and Far East.

MSCI World Index The MSCI World Index: A stock market index of over 1,600 global stocks, it is commonly used as a benchmark for world or global stock funds.

Multiples Multiples: A term for a measure of some aspect of a company’s financial position, determined by dividing one metric by another metric.

New construction New construction: Construction of entirely new structures and/or significant extensions to existing structures whether or not the site was previously occupied.

OECD Organisation for Economic Cooperation and Development: OECD is a group of 30 democratic countries that support free market economies; they discuss and develop economic and social policy.

Oil price Brent Oil: A major trading classification of sweet light crude oil, which serves as a major benchmark price of oil worldwide.Western Canadian Select (WCS): One of North America’s largest heavy crude oil streams used as a benchmark for emerging heavy, high acidic crudes. West Texas Intermediate Oil (WTI): WTI, also known as Texas light sweet, is a grade of oil used as a benchmark in oil pricing.

OPEC Organization of the Petroleum Exporting Countries: OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, with the hopes of avoiding fluctuations that may affect both oil purchasing and producing economies.

P/E Ratio Price-to-earnings ratio: A valuation ratio of a company’s current share price compared to its per-share earnings. (Related term - See market valuation.)

PBOC The People’s Bank of China: The central bank of the People’s Republic of China. (Related terms - See central bank rate and monetary policy.)

Purpose-built rental properties

Purpose-built rental properties: Multi-unit residential properties constructed for the purpose of renting out the units in the rental housing market; these properties include apartment buildings.

REITS Real Estate Investment Trust: A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

Rental rate Rental rate: A periodic charge per unit for the use of a property; the period may be a month, quarter or year.

Risk-on/Risk-off Risk-on/Risk-off: An investment setting in which price behavior responds to, and is driven by, changes in investor risk tolerance. Risk-on/Risk-off refers to changes in investment activity in response to global economic patterns. A risk-on situation occurs during a period of low perceived financial risk, thus encouraging investors to take on risk. A risk-off situation occurs during periods of high perceived financial risk, thus encouraging investors to reduce risk.

S&P 500 Index The S&P 500 Index: The S&P 500 is an American stock market index made up of the 500 largest companies by market capitalization, listed on the NYSE and NASDAQ.

S&P/TSX Index The S&P/TSX Index: An index of the stock prices of the largest companies on the Toronto Stock Exchange.

Sovereign credit risk Sovereign credit risk: The credit rating of a country or sovereign entity. This rating provides insight into the level of risk associated with a particular country.

Stock market volatility Stock market volatility: The vigorous fluctuation of share prices within the stock market.

TMX FTSE 91-day Treasury Bills

TMX FTSE 91-day Treasury Bills: A benchmark used to track the performance of Government of Canada Treasury Bills.

TMX FTSE Canada Bond Universe

TMX FTSE Canada Bond Universe: A benchmark which is designed to track the performance of the Canadian bond market.

Top-line revenue growth Top-line Revenue Growth: A reference to the growth in the gross sales or revenues of a company.

Vacancy rates Vacancy rate: A numerical value calculated as the percentage of all available units in a rental property that are vacant or unoccupied at a particular time.

World Bank World Bank: The World Bank is a United Nations international financial institution that provides loans to developing countries for capital programs.


This report is provided for informational purposes only, is not meant as investment advice and should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any predictions or projections made will occur. Past performance is not indicative of future results.

Commentary contained in this report reflects the opinions of Greystone Managed Investments Inc. at the date of the report. It was developed from sources that Greystone believes to be reliable. Greystone does not guarantee the accuracy or completeness of such information. Greystone’s opinions and viewpoints may change over time. Likewise, holdings may change by the time you receive this report. The securities discussed do not represent all of the portfolio’s holdings and may represent only a small percentage of a strategy’s holdings.

Figures shown in this report are in Canadian dollars except as noted, and may be subject to rounding error. Returns are gross of investment management fees.

Greystone claims compliance with the Global Investment Performance Standards (GIPS®). A GIPS® compliant presentation is available upon request. Greystone has been independently verified for the period January 1, 2000 to December 31, 2017. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS® standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS® standards. Verification does not ensure the accuracy of any specific composite.

Indices & BenchmarksCurrent benchmark weights and indexes are noted on each asset class page. Benchmark returns reflect any index and weighting changes made since inception. Index returns include reinvestment of dividends, if applicable, but not the deduction of any fees or expenses, which would reduce returns.Indices used in Greystone reporting are copyrighted by and used with the permission of their respective providers: Standard & Poors, TMX Inc., Russell Investments, Merrill Lynch & Co. Inc., BMO Capital Markets, Investment Property Databank Limited; ©IPD 2015 and its licensors (IPD), and Morgan Stanley Capital International (MSCI). Index use will vary by Greystone client and not all indices or index providers may be cited in this report.

MSCI disclosure: neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing, or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

For clients with benchmarks that blend two or more indices (e.g. FTSE TMX Canada 91 Day T-Bill 3%, FTSE TMX Canada Universe Bond 37%, S&P/TSX Composite 35%, S&P 500 Composite 12.5%, MSCI EAFE (Net) 12.5%): Our reporting system rebalances your benchmark to its stated asset mix on a daily basis. Consequently, there may be discrepancies between benchmark returns presented in this report and those calculated with a monthly or quarterly rebalancing.

For clients who hold fixed income: FTSE TMX Global Debt Capital Markets Inc. is the source for credit ratings. If a particular security is not identified by FTSE TMX Global Debt Capital Markets Inc., an equivalent, recognized, independent rating agency is used. Greystone does not rate securities.

FTSE TMX Global Debt Capital Markets Inc(“FTDCM”), FTSE International Limited (“FTSE”), the London Stock Exchange Group companies (the “Exchange”) or TSX INC. (“TSX” and together with FTDCM, FTSE

and the Exchange, the “Licensor Parties”). The Licensor Parties make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE TMX Canada Universe Bond and sub-indices (“the Index”) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTDCM and all copyright in the Index values and constituent lists vests in FTDCM. The Licensor Parties shall not be liable (whether in negligence or otherwise) to any person for any error in the Index and the Licensor Parties shall not be under any obligation to advise any person of any error therein.

Current Balanced Plus Fund benchmark: FTSE TMX Canada Universe Bond 24%, Mortgage Fund benchmark 8%, S&P/TSX Composite 21.5%, S&P 500 10.7%, MSCI EAFE (Net) 10.7%, MSCI World (Net) 10.7%, IPD All Property 10%, Infrastructure benchmark 4.4%. History:

• Dec 13, 2016 – Jan 24, 2017: FTSE TMX Canada Universe Bond 24.6%, Mortgage Fund benchmark 8%, S&P/TSX Composite 22%, S&P 500 11%, MSCI EAFE (Net) 11%, MSCI World (Net) 11%, IPD All Property 10%, Infrastructure benchmark 2.4%.

• Apr 1, 2016 – Dec 12, 2016: FTSE TMX Canada Universe Bond 25.4%, Mortgage Fund benchmark 8%, S&P/TSX Composite 22.7%, S&P 500 11.3%, MSCI EAFE (Net) 11.3%, MSCI World (Net) 11.3%, IPD All Property 10%.

• Mar 1, 2016 – Mar 31, 2016: FTSE TMX Canada Universe Bond 26.1%, Mortgage Fund benchmark 8%, S&P/TSX Composite 23.3%, S&P 500 11.6%, MSCI EAFE (Net) 11.6%, MSCI World (Net) 11.6%, IPD All Property 7.8%.

• Feb 1, 2016 – Feb 29, 2016: FTSE TMX Canada Universe Bond 27%, Mortgage Fund benchmark 8%, S&P/TSX Composite 24%, S&P 500 12%, MSCI EAFE (Net) 12%, MSCI World (Net) 12%, IPD All Property 5%.

• Jan 5, 2016 – Jan 31, 2016: FTSE TMX Canada Universe Bond 27.9%, Mortgage Fund benchmark 8%, S&P/TSX Composite 24.7%, S&P 500 12.3%, MSCI EAFE (Net) 12.3%, MSCI World (Net) 12.3%, IPD All Property 2.5%.

• Apr 24, 2015 - Jan 4, 2016: FTSE TMX Canada Universe Bond 28.7%, Mortgage Fund benchmark 8%, S&P/TSX Composite 25.32%, S&P 500 12.66%, MSCI EAFE (Net) 12.66%, MSCI World (Net) 12.66%.

• Apr 1-23, 2015: FTSE TMX Canada Universe Bond 36.7%, S&P/TSX Composite 25.32%, S&P 500 12.66%, MSCI EAFE (Net) 12.66%, MSCI World (Net) 12.66%.

IPD returns are not immediately available at quarter-end; therefore, the prior quarter’s index return is used in this report.

The Infrastructure fund is priced semi-annually at the end of June and December in U.S. dollars. Interim valuations may be done as the result of special situations. Performance is calculated based on the last available price obtained from the semi-annual or interim valuation and daily FX movement. Net of investment management fees.

No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient without the prior written consent of Greystone.

Greystone is registered as a portfolio manager and exempt market dealer in all provinces and in the Northwest Territories and is registered as an investment fund manager in Saskatchewan, Ontario, Quebec and Newfoundland and Labrador. Greystone is also registered as an investment adviser with the Securities and Exchange Commission in the US.

© Greystone Managed Investments Inc. All rights reserved. Strategist and the Greystone Strategist are registered trademarks of Greystone Capital Management Inc. and licensed to Greystone Managed Investments Inc. ISSN 1201-4613.

Disclosures


Investment Management

Robert Vanderhooft, CFA1

Chief Executive Officer & Chief Investment Officer

FIXED INCOME PUBLIC EQUITIESQUANTITATIVE RESEARCH/RISK MANAGEMENT & PORTFOLIO RISK SOLUTIONS

CHAIR, ESG Committee & UNPRI INITIATIVES

Blaine Pho, CFA1

Chief Investment Officer, Fixed Income

Jeff Tiefenbach, CFA1

Chief Investment Officer, Public Equities(Lead, Global Equity & International Equity)

Jonathan Jacob, CFA, FSA, FCIA1

Senior Vice-President, Quantitative Research/Risk Management & Head of Portfolio Risk Solutions3

Scott Linner, CFAVice-President, Research

Chad Toews, CFA, CMTSenior Vice-President

Curtis Schimmelmann, CFAVice-President

Neil Schell, CFA, CPA, CMASenior Portfolio Manager

Michael Geng, CFA, MBA, CPA, CMAPortfolio Manager

Jennifer Melcher, CFAPortfolio Manager

Rankin Jaworski, CFAPortfolio Manager

Max Moore,CFATrader

Mark RumpelTrader

Client Portfolio Managers (Fixed Income)

Jafer Naqvi, CFA1

Vice-President, Fixed Income & Multi-Asset

David Tallman, CFAClient Portfolio Manager,Fixed Income & Multi-Asset

Alou Koumare, MFRMAnalyst,Fixed Income & Multi-Asset

Zahra Ahanchian, MEconAnalyst,Fixed Income & Multi-Asset

Portfolio Management

Himanshu Sharma, CFA, MBASenior Vice-President & Lead, Canadian Equity & Head of Fundamental Research

James Baldwin, CFA1

Senior Vice-President & Co-Lead, Canadian Equity

Grant Stahl, CFA1

Senior Vice-President & Lead, U.S. Equity

Alfred Li, CFA, MBA, FRMSenior Vice-President & Co-Lead, International Equity

Blair Ledingham, CFASenior Director & Co-Lead, U.S. Equity

Fundamental Research

Himanshu Sharma, CFA, MBASenior Vice-President & Lead, Canadian Equity & Head of Fundamental Research

James Baldwin, CFA1

Senior Vice-President & Co-Lead, Canadian Equity

Travis Wetsch, CFAVice-President

Blair Ledingham, CFASenior Director & Co-Lead, U.S. Equity

Michael Brown, CFASenior Director

Heather Greenman, CFA2

Senior Director

Mark Scollan, CFASenior Director

Terence Chung, CFA, MBA Director

James Alder, CFA, MBA4 Director

Ivo Ciurlizza, CFASenior Analyst

Paula Brinton, CFA Senior Analyst

Solo Zhang, M.Sc., FRMSenior Analyst

Raymond ChanSenior Analyst/Trader

Client Portfolio Managers & Market Research

Lisa Moen, CFAVice-President, Market Research, Public Equities

Chirag Patel, CFAVice-President, Client Portfolio Manager

Stuart Morrow, CFA5

Client Portfolio Manager

Graeme CaswellAnalyst, Market Research

Shirley Zheng6

Analyst

Public Equities Trading

Craig Martin, CFA1

Vice-President

Amanda Reich, CFASenior Director

Janeen Snell, CFADirector

Presley GiblerEquity Trader

Jeff Evans, CFA, LLMVice-President, Quantitative Research/ Risk Management

Kelvin Nan, M.Eng, PhDSenior Analyst, Quantitative Research/ Risk Management

Chantal Laplante, CFA, M.Sc.Director, Portfolio Risk Solutions

Carlin Pohl, CFADirector, Portfolio Risk Solutions

1 Asset Strategy Team Member.2 On leave.

3 Quantitative Research/Risk Management reports to Jeff Tiefenbach and Portfolio Risk Solutions reports to Robert Vanderhooft.4 New hire as at April 9.5 New hire as at May 22.

6 New hire as at June 27.


Alternative Investments

Robert Vanderhooft, CFA1

Chief Executive Officer & Chief Investment Officer

Ted Welter1

Managing Director & Chief Investment Officer, Alternative Investments

Jeff Tripp, CFA, MBASenior Vice-President, Real Estate Investments

Greg ZahorskiSenior Vice-President, Real Estate & Mortgage Investments

Luke Schmidt, CFA, M.Sc.Vice-President, Real Estate Investments

Peter-Paul Bloeman, MBAVice-President,Real Estate Asset Management

Jimmy Buzaglo, CFASenior Portfolio Manager, Real Estate Investments

Matt Sych, CFA, CPA, CMASenior Portfolio Manager, Real Estate Investments

Mark Cooksley, MBASenior Director, Real Estate Investments

Sandy Ardern, CPA, CASenior Director Finance, Real Estate Asset Management

David Struthers, MBASenior Director, Real Estate Asset Management

Garrett Meier, CFA, M.Sc.Portfolio Manager, Real Estate Investments

Michael Ostrander Analyst, Real Estate Investments

Jeff Kennedy4

Research Analyst, Real Estate Asset Management

Tom Harder, CFASenior Vice-President, Mortgage Investments

Viktor Mosiy, CFASenior Portfolio Manager, Mortgage Investments

Myles Routly, CFA, MBASenior Analyst, Mortgage Investments

Tyler NguyenSenior Analyst, Mortgage Investments

Karolyn KarpinsSenior Manager, Mortgage Investments

Shan Jin5

Research Analyst,Mortgage Investments

Jeff Mouland, P.Eng., MBAExecutive Director / Head of Infrastructure, Infrastructure Investments

Matthew Press, MBAVice-President, Infrastructure Investments

Adam ThouretSenior Director, Infrastructure Investments

Natalie Sekiritsky, CFASenior Analyst, Infrastructure Investments

Tony GuoAnalyst, Infrastructure Investments

Connie Ashton, CFA, CPA, CGAChief Operating Officer, Alternative Investments

Brad Vance, LLB2

Senior Vice-President & Legal Counsel

Shane Lewis, CFA Senior Portfolio Manager, Alternative Investments

David Steffensen, CPA, CADirector of Finance, Alternative Investments

Blake Zimmer, CFASenior Analyst, Alternative Investments

Joëlle Guilbault, CFASenior Analyst, Alternative Investments

Val Marie Sikorski Senior Administrator, Alternative Investments

Andrew Croll, CFA, CAIAVice-President, Alternative Investments

Elina Betman, CFAClient Portfolio Manager, Alternative Investments

Alexandra Katz, CIMClient Portfolio Manager, Alternative Investments

Monish Arora, CFAClient Portfolio Manager, Alternative Investments

Carl Elia, CFA, MBA3

Client Portfolio Manager, Alternative Investments

Hiranga Jayawardana, CFA, CAIA, MFinSenior Analyst, Alternative Investments

Emily Williams, MFinAnalyst, Alternative Investments

Nicole Templeton,Analyst, Alternative Investments

James PlazaResearch Analyst, Alternative Investments

1 Asset Strategy Team Member.2 Indicates shared resource.

3 New hire as at June 18.4 New hire as at May 7.

5 New hire as at May 14.


Marketing & Operations Management

Jeff Robertson, CFA President, Managing Director & Chief Operating Officer

Marketing

Nazmin GuptaChief Marketing Officer

Human Resources

Shelly Antill Manager

Legal & Compliance

Jacqueline Hatherly, LLBChief Compliance Officer & Senior Legal Counsel

Jared Hein, CPA, CAAssistant Vice-President, Compliance

Investment Operations

Jackie AlbanoSenior Vice-President

Tana CameronDirector

Lisa NagyManager

Michelle KrenbrinkManager

Marnie PerepelukManager

Performance Analytics

Derek Bissonnette, CFASenior Specialist

Finance, Information Technology

Tom Mamic, CPA, CAManaging Director & Chief Financial Officer

Finance

Kristen Schneider, CPA, CGA1

Controller,Corporate Accounting

Brendan Bailey, CPA, CASenior Manager,Fund Accounting

Information Technology

Steven Engel, MBA, CMCSenior Vice-President

James GoodchildVice-President & Chief Information Security Officer

Jonathan SalgadoAssistant Vice-President

John TimmonsAssistant Vice-President

Bruce ChernoffSenior Architect

Chad MerkSenior Manager

Jaime HartProject Director

Executive Office Initiatives

Frank Hart, FCMCVice Chair, Managing Director & Chief Risk Officer

Colin Lynch, MBASenior Vice-President, Strategy & Growth

Client Strategy & Innovation

Louis Martel, CFA, FSA, FCIA, ICD.D Managing Director & Chief Strategist

Executive Office

Peggy HoganDirector & Secretary to the Board

Institutional Relationships

Sean Collins, CFASenior Vice-President

Michael GillisSenior Vice-President

Frank GrecoVice-President

Jay Wiltshire, CFAVice-President

Loren Gee, CFA, MBAVice-President

Elizabeth Marr, CFAVice-President

Chris Chernecki, CFAVice-President

Simon Segall, MA, ASA Vice-President

David Blyth, CFAVice-President

Bruno Saintonge, CFADirector

Branding & Communications

Anne Bilczuk, CPA, CGASenior Vice-President

Lenn McDonaldDirector

Karl HamblinDirector

Lorrie WrightManager

Marketing Intelligence & Services Shari LavaVice-President

Chris MacLean Senior Manager Marketing Intelligence & Services

Denise Fray ThompsonManager

Nicole Lomax, CFAManager

1 On leave.

THE POWER OF DISCIPLINED INVESTING®

Our investment management looks to the long term, and our process doesn’t vary across the years. Ultimately, we aren’t satisfied until we give our clients the finest in investment performance and service.

Robert L. Vanderhooft, CFAChief Executive Officer & Chief Investment OfficerGreystone Managed Investments Inc.

““

Headquartered in Regina, with additional offices in Winnipeg, Toronto and Hong Kong, Greystone Managed Investments Inc. is a Canadian-based institutional asset manager, providing investment management services to its broad client base since 1988.

Greystone.ca

(7/2018) Union

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The Greystone Strategist€¦ · The Greystone Strategist | Summer 2018 2 Summer Overview Figure 1: Asset Class Total Returns Benchmarks S ... deploying capital in direct infrastructure