Investment Funds 2019 - Everyone can make a difference - IFIC.ca

 
Investment Funds 2019 - Everyone can make a difference - IFIC.ca
Investment
   You r G u i d e To                                         2019

  Funds

Mutual funds and
ETFs offer a wealth
of choice
                          PLUS:
A refresher on
                          investment
       (RRSPs and more)   boundaries
                          Explore the potential of a global
                          multi-asset approach

Investment funds make     Responsible investing:
it easy to get started     Everyone can make a difference

                                                                     Sponsored by:
Investment Funds 2019 - Everyone can make a difference - IFIC.ca
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          program
          of its kind
          in Canada.
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®
  Registered trademarks of The Bank of Nova Scotia, used under licence. ScotiaFunds® are managed by 1832 Asset Management
L.P., a limited partnership the general partner of which is wholly owned by The Bank of Nova Scotia. ScotiaFunds are available
through Scotia Securities Inc. and from other dealers and advisors. Scotia Securities Inc. is wholly owned by The Bank of Nova
Scotia and is a member of the Mutual Fund Dealers Association of Canada. Commissions, trailing commissions, management fees
and expenses may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are
not guaranteed or insured by the Canadian Deposit Insurance Corporation or any other government deposit insurer, their values
change frequently and past performance may not be repeated.
Investment Funds 2019 - Everyone can make a difference - IFIC.ca
Canadian investors have
access to financial markets
                                                                           CONTENTS
that are among the most
developed and best regu-
lated in the world.
      There are unparalleled
                                                                           Quantitative investing:
investment options and access                                              Not all solutions are alike .............. 5
to a diverse range of products, services,
investment strategies and distribution channels.
  When it comes to saving and investing to achieve
your financial goals, there is a wealth of choice – how
                                                                           A refresher on registered
you want to invest, what you want to invest in, when                       savings plans ............................................... 7
and where you want to invest, and how you wish to pay.
    The investment funds industry is committed to
being a leading resource for Canadians to make                             New to investing?
informed choices about their investments. The industry
continues to be on the front line of financial literacy                    Investment funds make it
efforts, producing a host of materials, programs
                                                                           easy to get started .................................. 8
and online resources for Canadians of all ages, and
actively partnering with educators, government and
other groups.
    We’ve created Your Guide to Investment Funds
                                                                           Responsible investing:
to help you navigate your financial journey.                               Everyone can make a
    If you’re new to investing, you’ll learn how to get                    difference ........................................................ 11
started with good savings habits and good advice. You
can also explore how mutual funds and exchange-
traded funds are evolving and offering greater choice
for investors. Learn how you can make a difference with                    Mutual funds and ETFs offer
responsible investing, including a new metric being
used to measure the quality of these investments.
                                                                           a wealth of choice .................................... 13
Discover how human and computer minds are working
together in quantitative investing, and how Canadian
investment portfolios can reach out globally to expand                     The informed investor
your investment boundaries even further.
                                                                              Learning more about your statements,
 No matter what level of investing knowledge you may
                                                                              reports and fees ............................................... 15
have or what life stage you are at, we hope you find
Your Guide to Investment Funds helpful.

                                                                           MSCI ESG Quality Score a
                                                                           reliable new metric for
Paul Bourque                                                               RI investors ................................................... 16
Paul C. Bourque, Q.C., ICD.D is president and CEO of The Investment
Funds Institute of Canada (IFIC). He is the former executive director of
the British Columbia Securities Commission and a member of the Law
Societies of British Columbia and Ontario.
IFIC is the voice of Canada’s investment fund industry and brings
                                                                           Expand your investment
together 150 organizations, including fund managers, distributors and
industry service organizations, to foster a strong, stable investment      boundaries
sector where investors can realize their financial goals.

IFIC.CA
                                                                              Explore the potential of a global
                                                                              multi-asset approach .................................... 18

                                                                                                              Your Guide to Investment Funds    3
Investment Funds 2019 - Everyone can make a difference - IFIC.ca
Investment Funds in Canada
                                                      Quick Facts
                                                      Strengthening Canada’s Economy
                                                                                 In November 2018, Canada had 111
                                                            $1.47                fund companies offering more than
                                                            TRILLION             3,400 unique mutual fund products.
                                                                                 Mutual fund assets amounted to
                                                                                 $1.47 trillion.1

                                                            $161                 In November 2018, Canada had
                                                                                 33 fund companies offering more
                                                            BILLION              than 650 unique ETF products. ETF
                                                                                 assets amounted to $161 billion.2

                                                      Building Personal Financial Wealth

                                                            59%                   59% of RRSP assets are in the form
                                                                                  of investment fund units.3

                                                                                  Investment funds account for 38%
                                                            38%                   of Canadians’ personal financial
                                                                                  wealth.4

                                                      Providing Valuable Financial Advice

                                                            95%
                                                                                  95% of mutual fund investors are
                                                                                  satisfied with their advisors.5

                                                        1
                                                          IFIC, 2018
                                                        2
                                                          IFIC, 2018
                                                        3
                                                          Strategic Insight, 2017
                                                        4
                                                          Strategic Insight, 2017
                                                        5
                                                          Pollara, 2018

                                             YOUR GUIDE TO INVESTMENT FUNDS
                                                               IS PUBLISHED BY BRIGHTS ROBERTS INC.

                                                                   Brights Roberts Inc.
                                            Ian Roberts                                                               Brights Roberts Inc.
                                            ian@brightsroberts.com                                               2200 Yonge St., Suite 608
                                                                                                                 Toronto, Ontario M4S 2C6
                                            Andy Gawenda                                                          For advertising/editorial
                                            andy@gawenda.com                                                   inquiries call 416-485-0103

                                                                                                              www.brightsroberts.com
                                         Your Guide to Investment Funds©
                                         © Copyright 2019 Brights Roberts Inc. All Rights Reserved
                                         The statements and statistics contained in this publication were obtained from sources believed to be reliable, but
                                         we cannot represent that they are accurate or complete. This material is published for general information only. The
                                         publishers assume no liability for financial or other decisions based on this information. Readers should obtain
                                         professional advice before applying any ideas mentioned to their own personal situation to ensure their individual
                                         circumstances have been properly considered. E&OE JANUARY 2019

4   Your Guide to Investment Funds   5
Investment Funds 2019 - Everyone can make a difference - IFIC.ca
Quantitative investing:
     Not all solutions are alike
                          Quantitative investing − also known as factor investing or smart beta −
                          can be a highly effective tool for producing specific outcomes that enhance
                          portfolio performance. The computer-based models doing the buying and
                          selling have more than earned their place in modern portfolios.

                           But behind those algorithms,                    A single-factor strategy is       why you are investing in them.”
                         it takes human expertise.                     designed to target only one               A research report on factor-
                         There are many kinds of styles,               outcome. “That could be divi-         based investing by Fidelity
                         strategies and factors that go                dends, it could be momentum,          Investments recommends that
                         into a wide range of quantitative             it could be value or quality,         “investors should use a due
                         strategies, and the devil is in               for example,” Clee explains.          diligence process similar to
                         the details.                                  “Multi-factors take more than         what they might use for actively
                             “Quantitative investment                  one of these approaches               managed funds.” This diligence
                         strategies can be very versatile              and ‘marry’ them. They might          is important, says Clee, because
                         and effective investing tools,”               combine low volatility with           while most quant strategies
                         says Andrew Clee, vice-president              dividends, for example, to try        are nominally passive in their
                         of Exchange-Traded Funds                      and take down the volatility of       execution, they are designed
                         (ETFs), Fidelity Investments                  a single-factor dividend strategy,”   upfront by active managers.
                         Canada. The first thing to                    he says. “Or you might combine            “The way that Fidelity builds
                         consider is the difference be-                value and growth, so that             a quant strategy may be entirely
                         tween single-factor and multi-                you end up with growth at a           different than the way another
                         factors strategies.                           reasonable price.”                    asset manager builds one,”
                                                                           While most factors tend to        Clee says. In other words, the
                                                                       perform according to economic         initial design can make major
                                                                       cycles, individual factors are        differences in performance.
                                                                       generally not closely correlated          Fidelity puts a large focus
                                                                       with one another − so combining       on the portfolio construction
                                                                       two or more factors brings the        aspect in designing its factor
                                                                       benefits of diversification.          funds. It tracks the performance
                                                                           “The basic idea is to main-       of tailor-made indices con-
                                                                       tain an investment discipline,”       structed by Fidelity Manage-
                                                                       says Robert Mark, invest-             ment & Research Company
                                                                       ment strategist at Raymond            (FMR Co., Inc.), and deploys
                                                                       James Ltd. Private Client             rules-based methodologies
Investors benefit from an approach which marries the best of           Solutions. “Quant strategies          designed to provide exposure
both active and passive investing styles, says Andrew Clee of
                                                                       are basically ‘rules-based’           to targeted factors that may
Fidelity Investments Canada.         GLENN LOWSON/THE GLOBE AND MAIL
                                                                       investing and can range from          outperform over the long term.
                                                                       very simple to very com-                  Clee says there’s a
                                                                       plicated. It’s important to           tension between the computer
                                                                       know what you are investing
                                                                       in and more importantly,                       Continued on page 6

                                                                                                                Your Guide to Investment Funds   5
Investment Funds 2019 - Everyone can make a difference - IFIC.ca
Quantitative investing: Not all solutions are alike
                         Continued FROM page 5               we should view it more as              “They have active managers
                                                             active and passive, active and     whose job it is to deliver
                        model-based approach of quant        factor, active and quantitative    returns through stock selec-
                        investing and the tendency           strategies, rather than pit them   tion and their quantitative
                        of human managers to want to         against each other. All are very   programs to deliver targeted
                        intervene based on their own         useful tools in constructing a     outcomes, as well as their
                        expertise and insights.              complete portfolio.”               passive strategies to track
                            But Fidelity’s experts don’t         Fidelity Canada’s six          broad indices,” he says. “We’d
                        worry a lot about the distinction    new ETFs include a range of        like to see that type of port-
                        between active and passive           dividend-focused Canadian,         folio management from the
                        management. There’s a place          U.S. and international prod-       institutional and pension side
                        for both, Clee says. Actively        ucts. A seventh ‘single-ticket’    passed on to the retail sector.
                        managed funds are designed           mutual fund is also available,     Because at the end of the day,
                        for managers to review the           designed to generate monthly       you can’t put all your eggs
                        concentration risks and sector       income by tactically allocating    in one basket.”
                        bets they’ve taken and               among all the Fidelity Dividend        It’s true that in a rising
                        adjust them manually, while          Factor ETFs.                       or volatile market an active
                        quants try to stick to the script.       With these factor funds,       manager might outperform a
                            In fact, investors should        “we’re targeting an outcome.       quant strategy, because skilled
                        also reconsider the distinction      We’re targeting dividends          managers can pick promising
                        between active and passive           while remaining diversified.       stocks and respond quickly to
                        investment, he adds. “I think        We don’t want to take the risks    market dips, twists and turns.
                                                             that other indexed products        “But I think you also have to
                                                             may take, say, at the level of     complement active with a
            What are the factors that are used in            individual company bets or         targeted outcome approach,”
            a quantitative strategy?                         sector bets. An active manager     Clee says. Combining factors
              •   Value                                      might decide to go signifi-        such as dividends, quality and
              •   Dividend Yield                             cantly overweight in one sec-      low volatility can help insulate
              •   Momentum Quality                           tor, after doing the research,”    portfolios against difficult
              •   Low Volatility                             Clee says. “With quantitative,     markets, he explains.
              •   Company Size
                                                             it’s important to stick to the         “If you use a combination,
                                                             model to deliver the outcome       you can isolate different fac-
            A multi-factor strategy will combine two         we’ve targeted to its fullest      tors in building a quantitative
            or more of these factors and test them
            against several questions, to fine-tune
                                                             extent.”                           strategy and complement this
            exposure to risk:                                    Clee notes that major          with active management. That
                                                             institutional investors, such      gives you the best of both.”
              • What is the strategic exposure of the
                investment?                                  as pension funds, use all
              • How does it figure into the overall          the tools at their disposal to
                portfolio’s construction?                    make decisions, combining          Content produced by The Globe and
              • Where does the investment fit into the       the human touch with quant-        Mail Custom Content Studio
                market/business cycle?
                                                             itative analysis wherever it’s
                                                             appropriate.

         Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with
         investments in ETFs. Please read the ETF’s prospectus, which contains detailed investment information, before
         investing. ETFs are not guaranteed. Their values change frequently. Past performance may not be repeated.

6   Your Guide to Investment Funds
Investment Funds 2019 - Everyone can make a difference - IFIC.ca
A refresher on registered
savings plans

   A registered savings plan is a type of savings plan that is registered with the Canadian government
and offers special tax advantages. Registered savings plans can be opened at various financial institu-
tions including mutual fund dealers, investment dealers, banks, credit unions and insurance companies.
A broad range of investment options is available including mutual funds, ETFs, stocks and bonds.
   Registered savings plans give you a tax incentive to save money, which can help you reach your
financial goals. The Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings
Account (TFSA) are two of the most common types of registered plans.

 Registered Retirement Savings Plan (RRSP)                     common law partner. For each program, funds must be
                                                               returned to your RRSP over time to avoid tax consequences.
     An RRSP is a savings plan that allows you to make tax
 deductible contributions to save towards your retirement.
                                                               Tax-Free Savings Account (TFSA)
 The income you earn in your RRSP is usually tax exempt,
 as long as it remains in the plan. Tax is generally payable       A TFSA is a savings account that can be used to
 when you take money out of your RRSP.                         save toward any goal. Contributions to a TFSA are not
     You can contribute the lower of 18% of your income        tax deductible but investments in your TFSA are allowed
 from the previous year or the annual RRSP limit for the       to grow tax-free. You do not pay tax when you take money
 current year; which is $26,500 for 2019. If you are a         out of your TFSA.
 member of a pension plan, contributions to your pension           Starting in 2009, TFSA contribution room accu-
 plan will reduce the amount you can contribute to your        mulates each year based upon the annual limits set by
 RRSP. Unused contribution room can be carried forward         the government; the TFSA limit for 2019 is $6,000.
 to use in the future. In some circumstances, it may be
 beneficial for your spouse or common-law partner to           Other Registered Plans
 make contributions to your RRSP using their RRSP              • The Registered Retirement Income Fund (RRIF)
 contribution room.                                            gives you a steady stream of retirement income and is
     RRSPs offer unique programs, such as the Home             opened by transferring money from your RRSP.
 Buyers’ Plan which allows first-time homebuyers to with-
 draw up to $25,000 from their RRSP to help build or buy       • The Registered Education Savings Plan (RESP)
 a home, and the Lifelong Learning Plan which allows           helps you save for a child’s post-secondary education and
 you to withdraw amounts from your RRSP to finance             allows the government to supplement your contributions
 full-time training or education for you, your spouse or       through education savings grants or learning bonds.

   Your investment advisor can work with you to decide what registered accounts and investment options
might be suitable for you.
   The Government of Canada also offers useful information about how RRSPs and TFSAs work, as well
as their associated contribution limits and deadlines.

                                                                                             Your Guide to Investment Funds   7
New to investing?
    Investment funds make it easy
     Start by developing some smart
money habits – budgeting, setting up
a savings account with regular auto-
matic contributions so you never ‘miss’
the money withdrawn, and sticking to
a plan that reflects your own financial
goals and needs today and throughout
your lifetime.

     Investment funds can be an effective
way to help you save towards your
financial future, and you don’t need a
lot of money to begin.

         What are                    fund and an investment fund       3,400 mutual funds avail-        ment fund options can offer
     investment funds?               manager who oversees the          able for modest, moderate        investors access to invest-
                                     day-to-day operations of the      and affluent investors with      ment opportunities, diver-
    An investment fund is            fund.                             a range of investment            sification and professional
a pool of money collected               Investment fund man-           objectives.                      investment     management
from many individual inves-          agers, portfolio managers           Exchange-traded funds          at a shared and, therefore,
tors that is used to invest in       and in some cases, invest-        (ETFs) are a growing             lower cost than they could
stocks, bonds or other sec-          ment advisors who provide         investment fund option in the    access on their own.
urities. Individual investors        advice to individual investors,   marketplace, with approxi-
                                                                                                         How much money do
in the fund don’t make deci-         are paid by the investment        mately 650 ETFs currently
                                                                                                          you need to invest?
sions about which securities         fund before the remaining         available in Canada. ETFs
the fund purchases or when           investment income is distrib-     combine diversification with         To get started, invest
to buy or sell the securities.       uted to investors.                the trading characteristics      what you can afford and try
    Each fund has a portfolio           The most common type           of a stock. They are often       to increase the size of your
manager who selects securi-          of investment fund is a           structured to mirror an index,   contributions regularly. As
ties for the fund based on the       mutual fund. In Canada,           commodity or currency.           a guideline, you may want
investment objectives of the         there are approximately               Generally, both invest-      to invest the annual percent-

8   Your Guide to Investment Funds   5
The “Know Your Client” rule

to get started
                                                                     Securities rules and regulations require investment advi-
                                                                  sors to ensure each of their recommendations and trade in
                                                                  your account is appropriate for you, in relation to your spe-
                                                                  cific personal circumstances. To meet this requirement, your
                                                                  investment advisor needs to understand your personal
                                                                  financial situation, investment objectives and your tolerance
                                                                  for investment risk. This is known as the “Know Your Client”
                                                                  (KYC) rule. The KYC rule requires your investment advisor
                                                                  to obtain the following information from you:

                                                                  Age – your date of birth
                                                                  Income – your annual income from all sources, including
                                                                  employment income and investment income
                                                                  Net Worth – an estimate of your total assets less your
                                                                  total liabilities
                                                                  Risk Tolerance – your willingness to accept investment
                                                                  risk and your ability to withstand financial losses
                                                                  Investment Objectives – why you are investing or what
                                                                  you intend to use your investments for
                                                                  Investment Knowledge – your level of knowledge about
                                                                  investing, investment products and their associated risks
                                                                  Time Horizon – how long you expect to keep the majority
                                                                  of your account invested

                                                                     Your investment advisor will need to know whenever
                                                                  you have a change in your personal circumstances, such
                                                                  as a meaningful change in employment, income, assets,
                                                                  liabilities, marital status or family situation.
                                                                     Ensuring that your KYC information accurately reflects
                                                                  your current personal situation will help your investment
                                                                  advisor provide you with suitable advice.

 age increase of your income.    be investing over a much   vestors choose to make deci-         about what investments are
 Deciding how much to in-        longer period.             sions on their own, and others       right for you.
 vest involves thinking about        Most investment funds  prefer to work with an invest-           Investing is a lifelong
 how much money you have         have a minimum initial invest-
                                                            ment advisor, who serves             process. There is plenty of time
 saved, how much you are         ment ($100-$500) but no    as a coach and guide. An             and help available to begin
 earning, and your current       minimum on additional invest-
                                                            investment advisor can help          today and, over time, become
 and future financial needs.     ments. In some cases, thereyou assess your financial            a confident and informed
 Think about when you will       is a lower minimum ($25)   needs and goals. An invest-          investor.
 need to withdraw your mon-      if you are making regular  ment advisor can also                    To learn more, visit IFIC’s
 ey. Are you saving for a car    investments through an     help you build a portfolio           online Investor Centre at
 that you hope to purchase       automatic purchase plan.   by recommending suitable             IFIC.ca.
 next month? For a rainy day                                investments for you. The
                                       Getting help
 fund that you might have to                                more you understand about
                                       and making                                                      The Mutual Fund Dealers Association of
 access quickly? Or, are you                                your investments, the bet-            Canada (MFDA) has created a fact sheet that
                                    informed choices                                              outlines all of the information your investment
 saving for your children’s                                 ter equipped you will be to           advisor needs from you to open your account.
                                                                                                  The fact sheet is available on the MFDA web-
 education or for your retire-      Understanding your in- have effective discussions             site at www.mfda.ca/wp-content/uploads/
 ment, which means you will      vestments is key. Some in- with your investment advisor          ClientInfoSheet.pdf

                                                                                                 Your Guide to Investment Funds                 9
Invest in a level
   playing field

The Desjardins SocieTerra Positive Change Fund brings
out the good in the money we invest.
By partnering with a bank that believes in equal access to financial
services, we’re giving low-income individuals and entrepreneurs the
stability and resources they need, while seeking to deliver potentially
long-term investment returns you can feel good about.

letsthinkri.com

The Desjardins Funds are not guaranteed, their value fluctuates frequently and their past performance is not indicative of
their future returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual
fund investments. Please read the prospectus before investing. The Desjardins Funds are offered by registered dealers.
Responsible investing:
 Everyone can make a difference
                                        According to a recent      published since 1970,        opment Goals (SDGs)
                                    SOM survey 1 conducted         factoring in ESG crite-      in the UN 2030 Agenda
                                    on behalf of Desjardins,       ria was shown to have a      for Sustainable Devel-
                                    72% of Canadians said they     neutral or positive im-      opment. Some goals in-
           Denis Dion               were somewhat or very          pact on returns in 90%       clude gender equality,
              CFA, SIPC             interested in responsible      of cases.2 The RI sector     affordable and clean en-
                                    investing (RI). However,       is continuing to experi-     ergy, and quality educa-
                                    only 8% of respondents         ence rapid growth and        tion. From these 17 goals,
                                    said they knew exactly         now represents 50.6% of      169 targets and 232 indi-
                                    what RI is. Even though        Canada’s investment in-      cators were established;
                                    RI has been around             dustry, up from 37.8% in     they were revised in
                                    for over 20 years and          2016.3                       March 2017 to measure
                                    Canadian investments                                        the impacts of RI.
                                                                    A global movement
                                    managed with RI strat-
                                                                                                   Real and inspiring
                                    egies total $2 trillion,          In 2006, the United
                                                                                                        impacts
                                    the general public isn’t       Nations launched the
                                    familiar with it. RI is a      Principles for Responsible      Of course it may be
                                    form of investing that         Investment (PRI) to en-      difficult to measure the
                                    considers environmental,       courage major investors      impacts of RI. Even
                                    social and governance          to collaborate on RI prac-   though there may be
                                    (ESG) issues while still       tices. The PRI encour-       challenges, it’s important
                                    focusing on financial          age investors to learn       to assess the impacts of
                                    returns for the investor. It   more about sustainable       RI to show investors that
                                    uses the same evalua-          development goals and        company activities have
                                    tion criteria as traditional   commit to incorporating      positive social and envi-
                                    investing, but also incor-     them into their invest-      ronmental impacts.
                                    porates ESG criteria for       ment decisions. The aim         For example, the
                  Denis Dion        selecting and managing         of the PRI was to send a     Desjardins SocieTerra
    Denis Dion is a Responsible
 Investment Product Manager at      investments.                   message to the market        Positive Change Fund
Desjardins. Wealth Management
   expert for more than 30 years,     Responsible investments      and influence companies      helps meet 13 of the UN’s
   he has been product manager
                      since 2007.   perform just as well as        to take ESG issues into      SDGs and clearly dem-
        www.desjardins.com
                                    traditional investments        consideration.               onstrates the strength
                                    – and sometimes they do            In September 2015,       and influence of RI. The
                                    even better. In a recent       countries adopted the        fund’s portfolio includes a
                                    analysis of 2,200 studies      17 Sustainable Devel-              Continued on page 12

                                                                                                Your Guide to Investment Funds   11
Responsible investing: Everyone can make
     a difference
                                          Continued FROM page 11                    up 81%. The Desjardins               • Save billions of litres
                                                                                    SocieTerra Positive Change             of water
                                         company that provides                      Fund contributes to the              • Eliminate tonnes of
                                         distance education to more                 goals of ensuring that                 waste
                                         than 900,000 Brazilian                     everyone has access to                  As an investor, it’s
                                         students with a monthly                    quality education, and               important to choose
                                         household income of                        promoting decent work                opportunities that suit
                                         under US$1,000. It’s                       and economic growth.                 your investment horizon
                                         been proven that after                        The Desjardins Socie-             and risk profile. With RI,
                                         completing their edu-                      Terra Positive Change                you can also help build
                                         cation, these students’                    Fund also helps:                     a sustainable world for
                                         average income went                        • Reduce CO2 emissions               future generations.

                                               Here are the 13 Sustainable Development Goals targeted
                                                 by the Desjardins SocieTerra Positive Change Fund

     The Desjardins Funds are not guaranteed, their value fluctuates frequently, and their past performance is not indicative
     of their future returns. Commissions, trailing commissions, management fees and expenses all may be associated with
     mutual fund investments. Please read the prospectus before investing. The Desjardins Funds are offered by registered
     dealers.

     Notes:
     1
         2018 survey of Canadians on responsible investing, presented to Desjardins Investments Inc. A Web survey conducted on behalf of Desjardins Wealth
         Management (September 2018). (Survey of 2,212 Canadians. The margin of error was ±2.6%, 19 times out of 20.).
     2
         ESG and Financial Performance: Aggregated Evidence from More than 2000 Empirical Studies, Gunnar Friede, Timo Busch & Alexander Bassen (2015).
     3
         Statistics from the 2018 Canadian Responsible Investment Trends Report, available at riacanada.ca.

12       Your Guide to Investment Funds
Mutual funds and ETFs
offer a wealth of choice

 If you’re wondering what investment fund type to choose to achieve
 your financial goals – mutual funds or exchange-traded funds (ETFs) –
 the answer can be both.
  Mutual funds and ETFs     similarities than differ-     money      markets     to     more mutual fund prod-
can co-exist in a well-     ences.                        equities and bonds, and       uct choices. Today, there
diversified portfolio of       ETFs and mutual            across domestic and           are more than 3,400
investments, and hav-       funds are both pro-           international markets.        Canadian mutual funds
ing both products as        fessionally managed,              The boundaries be-        available. There are
investment options offers   pooled investments with       tween ETFs and mutual         currently approximately
investors unparalleled      built-in diversification      funds are blurring some-      650 ETFs listed in Can-
choice.                     and liquidity. They are       what; fund companies          ada, and more products
   The key is under-        also regulated under          are combining ETFs in         are coming on stream at
standing the similarities   the same rules. Both          mutual fund structures,       a rapidly increasing rate.
and differences between     vehicles offer a full range   making them accessible        In fact, the number of
ETFs and mutual funds       of investment strategies,     to more investors.            ETFs has more than dou-
and how these products      including pure passive,           Here’s where they         bled in the past five years
can each play a role in     smart beta, active man-       differ. Mutual funds have     alone. There is a greater
helping you to achieve      agement, and highly           been around longer,           variety of passive index
your financial objec-       differentiated      active    so some funds have a          strategies in ETFs and a
tives. You can work with    management strategies         very long performance         greater variety of active
your advisor to create a    with minimum con-             track record, compared        investing strategies in
portfolio that best meets   straints.                     with the majority of          mutual funds.
your needs.                    They both offer ac-        ETFs, which is a newer           ETFs offer greater
   In terms of product      cess to a full range          product type.
structure, there are more   of asset classes, from            There are currently           Continued on page 14

                                                                                      Your Guide to Investment Funds   13
Mutual funds and ETFs offer a wealth of choice
 Continued FROM page 13                good news is that there              fluctuate.                            distribution and advice.
                                       are a growing number of                  ETFs generally have               This structure currently
 flexibility in trading.               purchase options now                 lower management fees                 accounts for almost
 Because they trade                    offered for ETFs, from               than mutual funds,                    85% of all fund assets
 on an exchange, they                  robo-advisors to online              largely because the                   in Canada. For ETFs, the
 offer investors the same              brokerages with pre-                 majority of ETFs are                  cost of distribution and
 trading flexibility offered           authorized contribution              passively managed and                 any advice received is
 by stocks, including the              plans.                               the majority of mutual                generally paid as a sepa-
 ability to time trades,                  Mutual funds and                  funds are actively man-               rate fee.
 and to set limit orders               ETFs both have ongo-                 aged. While low-cost,                    Investment       funds
 and stop-loss orders.                 ing costs in the form of             passive funds still domi-             continue to play a valu-
    For the most part, it is           management expense                   nate the ETF landscape,               able role in helping
 easier to make smaller                ratios, comprising man-              there are a growing                   Canadians to build
 purchases of mutual                   agement costs, operat-               number of actively man-               wealth and financial
 funds on a regular basis.             ing costs, administrative            aged ETFs in Canada –                 security. Having access
 Because of brokerage                  costs and taxes; and                 again blurring the lines              to both ETFs and mutual
 commissions, buying                   trading expense ratios.              to some degree between                funds provides a wider
 ETFs with smaller dollar              When trading ETFs, you               the two fund types.                   range of products and
 amounts every couple of               also have to be aware of                The management fees                investment strategies to
 weeks or every month                  the potential costs as-              of the majority of mutual             choose from than ever
 can be inefficient and                sociated with the fund’s             fund assets include fees              before.
 costly. However, the                  trading costs, which can             that represent the cost of

      Glossary                                 Exchange-traded fund (ETF): An ETF
                                               is an investment fund that trades like a
                                               common stock on an exchange. ETFs are
                                                                                               Mutual fund: The most common type of
                                                                                               investment fund. The investments held in a
                                                                                               mutual fund are based upon the objectives of
                                               often structured to mirror a stock index, a     the fund as described in the fund facts docu-
     Benchmark: A standard against             commodity or currency.                          ment, prospectus or other offering document.
     which to compare the performance                                                          Mutual funds do not trade on an exchange.
     of an investment, investment fund or      Investment dealer: A company that is
     portfolio to help evaluate how invest-    registered to distribute a variety of invest-   Mutual fund dealer: A company that is
     ments have performed.                     ments, including stocks, bonds, investment      registered to distribute investment funds to
                                               funds and other securities to investors.        investors.
     Diversification: The process of
     investing in a variety of investments     Investment fund: A pool of money col-           Net asset value (NAV): The NAV of an
     to help reduce the risks inherent in      lected from many individual investors that      investment fund is the total value of the fund’s
     investing. Diversification should con-    is used to invest in stocks, bonds or other     assets, less it’s liabilities, divided by the num-
     sider types of securities, companies,     securities. Investment funds offer inves-       ber of units outstanding. NAV is the standard
     industries and geographic locations.      tors access to investment opportunities,        method of pricing an investment fund.
                                               diversification and professional investment
     Dividends: A payment made by a                                                            Portfolio: A group of financial assets belong-
                                               management at a shared cost.
     company to its shareholders, usually                                                      ing to an investor. The investor could be a
     from thecompany’s profits.                Investment fund manager: A company              person, a company or an investment fund.
                                               that is registered to oversee the day to day
     Emerging market: An economy                                                               Portfolio manager: An individual who selects
                                               operation of investment funds.
     (usually of a country) that is growing                                                    securities for a portfolio based upon the
     rapidlyand becoming more advanced         Market value: The price at which an             investment objectives of the portfolio. The
     but does not have all of the character-   investment can be sold in an open and           portfolio manager decides when to buy and
     istics of a developed market.             unrestricted marketplace.                       sell securities and in what quantities.

14   Your Guide to Investment Funds
The informed investor
Learning more about your statements, reports and fees

    As an investor, it’s important to play an active and engaged role in your investment portfolio. One
of the best ways to learn more about investing and your own investment portfolio, is to make sure you
read and understand the statements and reports you receive from your investment advisor.

Quarterly, you should receive statements that have detailed information about:
  •   the investments you hold, and
  •   the transactions that took place in your account during that quarter.

At least annually, you should receive additional reports that tell you:
   •   how well your investments have performed, and
   •   how much your dealer or investment advisor was paid in relation to your investment account,
		     either directly from you or indirectly from third parties.

   These documents contain a wealth of information that can help deepen your knowledge, facilitate
more effective conversations with your investment advisor and give you greater peace of mind
throughout your financial journey.

   The timing of when you receive this information can also be a catalyst to keep in touch with your
investment advisor. At least once a year, you should meet to review your investments and your
statements. You can ask your investment advisor about anything you don’t understand. Throughout
the year, be sure to keep your investment advisor up-to-date on any changes that might affect your
financial situation.

   The Canadian investment funds industry is committed to providing detailed information to help
investors better understand the costs and performance of their investments.

   Now it’s your turn. By taking the time to read your statements and reports, you’ll gain a better
understanding of your investments, which will help you work towards your financial goals and greater
investment confidence.

                                                                               Your Guide to Investment Funds   15
MSCI ESG Quality Score a reliable
new metric for RI investors
                                                       It’s no secret that environmental, social, and governance                is an aggregation of the ESG
                                                                                                                                ratings in the underlying hold-
                              (ESG) factors are becoming top of mind for a growing
                                                                                                                                ings of a fund. Larry Lawrence,
                              number of investors, particularly Millennials. Bloomberg                                          Executive Director, ESG Products
                                                                                                                                at MSCI says, “by providing the
                              reports a 37% increase in the assets of ESG investment funds,
                                                                                                                                ESG scores and metrics for more
      Reid Baker              to $445 billion in 2017, citing issues such as energy efficiency,
        CERA, ASA                                                                                                               than 30,000 mutual funds and
                              water scarcity, safety, and diversity as key areas of interest                                    ETFs, ESG Research offers the
                                                                                                                                critical look-through tools to evalu-
                              for investors. But a key question for investors in this space                                     ate and analyze a fund’s underlying
                              is how to measure the ESG quality of a given investment                                           holdings and make more informed
                                                                                                                                ESG investment decisions.”
                              fund. Until recently, that meant intensive, time consuming                                             Looking at these ESG scores
                              research into the individual holdings of a fund at any given time.                                allows investors and advisors to
                                                                                                                                see what the fund managers are
                                            But now, the MSCI ESG Quality Score, a service provided                             doing from an ESG perspective, re-
                                                                                                                                gardless of whether or not the fund
                              by Fundata Canada, provides a reliable metric for investors.
                                                                                                                                is managed with an ESG mandate.
                                                                                                                                Using these scores can also shed
                                 The growing demand for ESG-                             long-term sustainability implica-      some light on the ESG outlook for
                             screened investments has had a                              tions that come with strong man-       the fund universe as a whole.
                             trickle-down effect as retail advi-                         agement in the environmental,               The average ESG Quality
                             sors, asset managers, and insti-                            social, and governance areas. The      Score has risen across equity
                             tutional players have all started                           effects are also noticeable among      funds in each of the past 15
                             dedicating more resources to the                            mutual funds, with a positive up-      months with an average monthly
                             ESG space in order to meet client                           ward trend in the ESG Quality          increase of 0.45%. The increase
                             demand. Pension funds too are                               Score since April 2017.                in average ESG Quality Score
                             turning to ESG analysis for the                                 The ESG Quality Score (0-10)       from August 2017 to August 2018

                                                                         MSCI ESG Quality Score - Equity Funds
                                                       5.7

                                                       5.6

                                                       5.5
                              MSCI ESG Quality Score

        © 2018 by Fund
                Library.                               5.4
      Reid Baker, CERA,
         ASA, is Director,
  Analytics and Data, at
   Fundata Canada Inc.,
                                                       5.3
 and is Chairman of the
  Canadian Investment
       Funds Standards                                 5.2
    Committee (CIFSC).
 This information is not
     intended to provide
  specific personalized                                5.1
        advice including,
       without limitation,
  investment, financial,                               5.0
legal, accounting or tax
advice. No guarantee of                                      May   Jun    Jul   Aug   Sep   Oct   Nov   Dec   Jan   Feb   Mar     Apr   May    Jun     Jul     Aug
  performance is made
              or implied.                                                         2017                                              2018        Source: MSCI & Fundata

16   Your Guide to Investment Funds
was 5.5%. The accompanying         Table 1: Scotia Private Canadian Mid Cap Pool – ESG holdings analysis
graph shows the monthly aver-                                August 2017                                                        June 2018
                                                                                                                                                  Portfolio Weight
                                   Ticker   Security Name                          Portfolio Weight   Ticker Security Name
age ESG Quality Score across
                                          Canada Government 0.00% 16-Nov-2017                  4.47   BCB      Cott Corp - Common                             4.68
equity funds in Fundata’s data-    STN    Stantec Inc - Common                                 4.32   OTEX     Open Text Corp - Common                        3.83
base.                              ECI    Enercare Inc - Common                                4.22   VET      Vermillion Energy Inc - Common                 3.71
                                   IFC    Intact Financial Corp - Common                       3.73   STN      Stantec Inc - Common                           3.55
     This overall increase in      FRU    Freehold Royalties Ltd - Common                      3.67   FTT      Finning International Inc - Common             3.49
                                   IAG    Industrial Alliance Insrnc Fncl Srvcs Inc - Common   3.64   CAR.UN   Canadian Apartment Properties REIT - Units     3.46
the scores begs the question,      NFI    New Flyer Industries Inc - Common                    3.64   MSI      Morneau Shepell Inc - Common                   3.44
Is it the mutual fund managers     OTEX Open Text Corp - Common                                3.42   ECI      Enercare Inc - Common                          3.40
                                   MSI    Morneau Shepell Inc - Common                         3.31   GEI      Gibson Energy Inc - Common                     3.37
shifting their focus and analy-    AAR.UN Pure Industrial Real Estate Trust - Units            3.28   IFC      Intact Financial Corp - Common                 3.55
sis to include ESG factors, or                                                                                                               Source: MSCI & Fundata

is it the publicly-traded com-
                                   Table 2: Ninepoint Focused U.S. Dividend Class – ESG holdings analysis
panies themselves behaving
                                                             August 2017                                                       August 2018
more responsibly?                  Ticker   Security Name                         Portfolio Weight    Ticker Security Name                        Portfolio Weight
     Without access to the         UNH   United Health Group Inc - Common                      6.33   MSFT     Microsoft Corp - Common                       4.68
scores of the individual equi-           Canadian Dollars - London                             6.22   TMO      Thermo Fisher Scientific Inc - Common         4.57
                                   CMCSA Comcast Corp - Common CI A                            5.87   SU       Suncor Enegy Inc - Common                     4.46
ties, I looked at the holdings     BAM.A Brookfield Asset Management Inc - Common CI A         4.84   CSX      CSX Corp - Common                             4.41
                                   GOOG Alphabet Inc - Common CI C                             4.69   AAPL     Apple Inc - Common                            4.36
from some of the funds that        V     Visa Inc - Common CI A                                4.65   BA       Boeing Co - Common                            4.33
have had the biggest increase      WCN   Waste Connections Inc - Common                        4.60   CVX      Chevron Corp - Common                         4.32
                                   RTN   Raytheon Co - Common                                  4.49   GOOG     Alphabet Inc - Common CI C                    4.21
in ESG Quality Score. I started          US dollar - London                                    4.38   MA       MasterCard Inc - Common                       4.10
                                   MA    MasterCard Inc - Common                               4.33   V        Visa Inc - Common CI A                        4.08
by screening out only the
                                                                                                                                             Source: MSCI & Fundata
funds with an ESG score of
5 or higher in order to focus
on the funds that have an          consumption.”
established ESG base to                 A second fund with a
begin with.                        significant increase in ESG
     The fund with the biggest     Quality Score is Ninepoint
increase was Scotia Private        Focused U.S. Dividend
Canadian Mid Cap Pool,             Class. The score rose 24%
which saw its ESG Quality          over the past year, to 5.42,
Score rise 26% over the past       facilitated by the addition of
year, to 5.94. Table 1 is a look   Thermo Fisher Scientific Inc.
at how the top 10 holdings         That company’s stated mis-
have changed for the fund          sion is “to enable our custom-
from August 2017 to June           ers to make the world health-
2018 (the most recent avail-       ier, cleaner and safer.” Table
able holdings).                    2 shows the fund’s holdings
     The biggest addition to       changes over the period.
the top 10 is Cott Corporation,         These are simply two
which provides “water and          examples of funds that have
coffee services.” The company      allocated significant capital to
states, “Our brands are com-       quality companies and by no
mitted to a sustainable future.    means provides insight on how
We take advantage of environ-      managers are viewing ESG
mentally friendly processes        in general. But it does show
that support the health of the     two funds, and there are many
planet. We are also committed      other examples, that don’t
to giving back to the commu-       have an ESG investing man-
nities we serve. Our success-      date that have significantly
ful sustainability programs        increased the ESG quality of
have saved money, reduced          their portfolio with some key
landfill waste, and overall fuel   additions.

                                                                                                                       Your Guide to Investment Funds                 17
Expand your investment
     boundaries
     Explore the potential of a global multi-asset approach
     Most investors are aware              China present a wide range
 of the importance of a diver-             of attractive equity and bond
 sified portfolio. But what it             opportunities. In addition to
 means to diversify is much                enhanced diversification, a
 different today than in the               carefully selected basket of
 past. At one time, owning                 international securities has
 a variety of mutual funds                 the potential to enhance a
 with Canadian equity and                  portfolio’s return profile.
 government bond exposure
 would have counted as a well-                     More choice
 diversified portfolio. With                   Looking beyond tradi-         tractive way of diversifying           For this reason, many
 financial markets becoming                tional asset classes has a        your fixed-income exposure.        investors choose actively
 more interconnected and                   variety of potential benefits.    These bonds typically offer        managed mutual funds for
 complex, diversification now              For example, with conven-         a higher interest payment          their    global multi-asset
 means expanding your port-                tional bonds, rising interest     than Canadian government           needs. Rather than own the
 folio’s boundaries to include             rates can cause significant       bonds, and tend to perform         entire market for a region or
 a wider range of regional and             price depreciation. One po-       well when the overall econ-        asset class, active manag-
 asset class opportunities.                tential way of countering this    omy is stable or growing.          ers use research and a va-
                                           limitation of traditional fixed   Another benefit of high-yield      riety of analytical tools to
          Going global
                                           income – and increasing your      bonds is that they tend to be      identify select areas with the
     Greater exposure to for-              return potential – is to invest   less sensitive to rising inter-    best potential for generating
 eign equity and debt markets              in funds that provide expo-       est rates than government          attractive returns while man-
 allows you to participate in              sure to floating rate debt.       bonds – an appealing feature       aging risk. This approach can
 a broader array of invest-                This type of debt is issued       in the current rising interest     be especially well-suited to
 ment themes. For example,                 by corporations – many of         rate environment.                  an environment where ris-
 by 2025, two-thirds of the                them household names – to                                            ing market volatility makes
                                                                                      Get active                careful investment selection
 world’s economic growth                   help finance a wide variety
 is expected to come from a                of business activities, includ-        Global multi-asset invest-    especially critical.
 group of 600 cities, with over            ing expansions and acquisi-       ing has many potential bene-
 400 of them in developing                 tions. Unlike the fixed return    fits, but it is a highly complex    iA Clarington Investments
 countries.1 By 2050, 60%                  on conventional bonds, the        undertaking that requires a        specializes in high-conviction
 of middle-class consumption               return on floating rate debt      wide range of specialties and      active management and
 is projected to come from                 fluctuates as central banks       skills. One of the most im-        offers a variety of global
 emerging countries.2 The                  raise or lower interest rates.    portant is the ability to make     multi-asset solutions for
 expanding consumer sec-                   This means rising interest        informed decisions on which        a wide range of investor
 tors that cater to the grow-              rates improve, rather than        regions, asset classes and         needs.
 ing middle class in emerging              diminish, the performance of      strategies to allocate invest-
 countries such as India and               floating rate debt.               ment dollars to, and when to
                                               High-yield corporate bonds    make adjustments based on
 Data source: McKinsey Global Institute.
 1

 Data source: World Bank.
 2                                         also offer a potentially at-      changing market conditions.

The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any
investment decision. The information presented herein may not encompass all risks associated with mutual funds. Unless otherwise stated,
the source for information provided is IA Clarington Investments Inc. Statements that pertain to the future represent current views regarding
future events. Actual future events may differ. iA Clarington does not undertake any obligation to update the information provided herein.
Please read the prospectus for a more detailed discussion on specific risks of investing in mutual funds.

18   Your Guide to Investment Funds        5
MORE ASSET CLASSES.
MORE REGIONS.
MORE OPPORTUNITIES.
Explore iA Clarington’s suite of actively managed global solutions:

Global Fixed Income                    ETF Series available

• IA Clarington Global Bond Fund
• IA Clarington Emerging Markets Bond Fund                                               Speak with your
                                                                                         financial advisor to
Global Balanced                                                                          learn how iA Clarington
• IA Clarington Global Allocation Fund                                                   mutual funds can help
• IA Clarington Global Multi-Asset Fund                                                  meet your global
• IA Clarington Global Yield Opportunities Fund                                          investing needs.

Global Equity
• IA Clarington Global Equity Fund
• IA Clarington Global Value Fund
• IA Clarington Global Opportunities Fund

                                                                                                         INVESTED IN YOU.

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Services Inc. and are used under license.
THE
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            INCOME.
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             fidelity.ca/ETFs

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Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in mutual funds and ETFs.
Please read the mutual fund or ETF’s prospectus, which contains detailed investment information, before investing. Mutual funds and ETFs are not
guaranteed. Their values change frequently. Past performance may not be repeated.
Fidelity Investments is a registered trademark of Fidelity Investments Canada ULC.                                               90551-v20181031
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