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We're ready to go, Mr. Chair. Thank you very much.

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So welcome, everyone, to this special meeting of the one

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joint investment board and the purpose of this meeting is

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to do the last of our three part series on.

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Alternative investments conducted by Eckler and this part of. The

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education session will focus on portfolio construction. So we'll start

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with Oman. Acknowledgement we recognize that our work is the

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one joint investment board and the worker municipalities take place

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on traditional indigenous territories across Ontario. We recognize and we

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respect the history, languages and cultures of the first Nations.

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Mati, Inuit, and all indigenous peoples whose presence continues to

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enrich our communities. Are there any members of one jib

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who have a conflict to declare due to a monetary

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interest on any item on today's agenda. So, looking at

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my screen here, seeing none, we'll move on. We have

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staff from Eckler. Joining us again this morning. So, Jenny,

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I think you can invite them in. We'll just wait

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for Brad and Kyle to join us. There. I see.

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Let's see. I see kyle there. And I see Brad.

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Great. Welcome, gentlemen. Thank you for being with us again

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this morning. We're looking forward to the presentation. I think

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we've really appreciated the last two, and we're looking forward

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to this one, so we're ready to go whenever you

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are. Sounds great. So we'll kick it off, star Sharon,

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as always, if there's any questions that come up, we'll.

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Keep our eyes open. We're going to just share. Presentation

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here. Share that one. Okay. Let's do.

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Screen load. All right, I'll maybe just confirm you can

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see that and move to the next slide. A thumbs

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up. Okay. Thumbs up. Thank you. Okay. Obviously. Thanks so

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much having us back. This one is. We've gone through

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different asset classes, obviously. We've been through private, public, some

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different things, and this is really portfolio construction and monitoring.

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So this is like us, how? You would put it

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all together and then check in to see. If it's

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working long term. So we just wanted to kick off

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with portfolio. It is. Portfolio construction. I think there's a

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quote there by Blackrock, right? The world's largest investment manager.

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And really what it is, is, yeah, it's putting together

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the different. Asset classes and strategies in your portfolio and

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understanding how that kind of builds up to a whole

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strategy, right? For a lot of groups. Again, this is

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how you approach. This is probably somewhat similar, whether you're

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a pension plan, a trust fund, an endowment, probably similar

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structure, no matter what you are. Kind of starts with

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really objectives. Right? So when we talk to most of

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our clients, what are the key objectives you're trying to

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do. So give you the idea some groups may be

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very focused on capital protection. So if you were an

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endowment and you had 50 million given to you that

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says, listen, you can't spend anything if it takes me

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below the initial amount. You're going to. Be very cognizant

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of losing any capital. Right. We have other groups where

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really it's about generating returns. So you might have a

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pension plan that's maybe underfunded. And it needs to move

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to a certain position they might be willing to take.

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A little more risk because of that. Again, there's a

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lot of different goals that you can have. And what

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I would always say in the portfolio construction piece is

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that it tends to be a teeter totter, right? If

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you have one goal, that you push on something else.

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Has to move in the system, right? If you push

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on return, you have to accept the risk. That comes

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with that. If you really want capital protection, then you

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may have. To sacrifice some level of return to increase

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that. Right. So all of these are going to be

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competing at some level, right? So what a lot of

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groups talk about is, what are the pain? Points. And

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that second part of the process is there's really a

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risk budget. So what are the things that you really

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want to avoid. So there's the goals of what you

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would like to do. That's great. What's the other side

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of it? What's the thing that you can't. Stand. Right?

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So is it a capital impairment again? Is it corrective

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action? Is it decreasing spending? Is it going back to

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the beneficiaries or the members or whoever is obviously you're?

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Managing this money on behalf and asking them to do

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something that you'd rather not ask them to do right

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because the portfolio hasn't performed the extent that you've. Looked

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at too. So that's really what we would call establishing

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the risk budget. And then from what is that thing

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that you just don't want to happen or you want

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to minimize the risk. Of take whatever that is and

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you're willing to take some amount of risk as long

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as you can minimize this outcome. And then you spend

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that risk budget on the last one, right? So go

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out and invest the portfolio consistent with those. Goals and

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understanding. What are the things that you're trying to avoid?

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So when we do this, On doing this portfolio construction

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process. There's a few things that are going to be

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inputs. To the process, which a lot of his expected

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returns and risk. Right. So for the expected returns, it's

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really the forecasting of the long term average return that

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is expected to be achieved. Most groups would use some

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amount of a 510 15 year window, right? For. Planning

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purposes for this. Reno investment. If you're using a one

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year window or a two year window, you can still

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obviously come up with investment strategies, but it's going to

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be difficult if you're using a very short time horizon

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to kind of. Use statistic processes like you see in

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the industry, because realistically, It's harder. A one year. What's

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going to happen in twelve months is actually. More difficult

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to predict than what will happen in the next ten,

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because in the next ten there's the law of averages

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that come into it, which is something you'll see in

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this process. Right. So the variability of returns is really

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noting that you have an expectation. What's? The degree at

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which you think it'll be above or below. So give

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an example. If you have a gic. What do you

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think the return is going to be next year? It's

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almost guaranteed you. Now, there's no variability to that return,

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but what's? Canadian equity. You assume it might be 10%,

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but you're saying there's. A very good chance it could

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be 20 or minus ten. Right. Obviously around that expectation

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that's. Going to have a lot of variability. And again,

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it's trying to provide you the. Probability of what is

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the chance that your expected return is your actual return.

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Right. And a lot of what you see in these

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kind of processes. It talks about the correlation of expected

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returns, right? So not all asset classes perform the same,

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and they don't all perform the same during. The same

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events or at the same time and use Covid as

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examples. One of the most recent. Events. So canadian equities

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in the first three months of 2020, down 21% right

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far. Below the long term average. Right? So if anyone

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said, what do you think equities learn? 8%. So in

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three months, you lost 21. That would be an outsized

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event. Right. So. That was below what you thought would

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happen by quite a bit. Bonds on the other side,

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federal bonds. Were up five. Actually. That's above what you

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think they would have made over the long term. And

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again, the way they did that. Is quite interesting. Ones

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going up, one's going down at the same time. So

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correlation measures. The tendency. At which returns tend to be

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above or below their expectations at the same time. So

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on. Slide. Five. And again, this one's a bit busy.

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Sorry to kind of cram a few. Things in this

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one. Really? What we talk about at the top is

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expressing correlations, right? So. One of the things that you'll

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see is correlation is a measure from minus one to

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plus one, right? So. Perfect negative correlation. When one moves

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up, the other one moves down by the exact same.

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Obviously, frequency and amount at any given time. Perfect. Positive

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is the other way you're moving. Together perfectly. Right. Go

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up. Tang go up. Tan go down. Tan go down.

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Ten at the same. Time and then uncorrelate it. There

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is foreseeability, no correlation to how these two things move.

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They seem to be disconnected. Right. So there's no relationship

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that you can draw. So in designing a diversified portfolio,

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so. Most groups when we talk about diversification, Most groups

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strive to create a diversified portfolio. So to create a

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portfolio that doesn't have any. We're going to talk about

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unnecessary risks that you could diversify away. Right? So. When

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you're talking about that, you would typically want to see

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lower negatively correlated asset classes. Or patterns of returns together

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when you put things together. And we're just showing you

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an example. And in that first quarter of Covid, if

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you were an all canadian equity portfolio, You're down -21

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but if you were half and half, half ball and

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half canadian. Equity, you'd be down ten. Right. So obviously

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those bonds provided somewhat of an offsetting. Risk right to

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being an equity portfolio because they didn't behave the same

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way. The same event. So if you take that one

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step further, if you took a sampling of our client

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base, which is very good portfolio. Portfolios, pension plans, insurance

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portfolios, foundations announcements, trust funds. They would have been down

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about minus seven or actually better during that same period,

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because again, they're even moving beyond just being half equities,

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half bonds, but have alternatives as well invested in them.

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Again, those asset classes. Really behaved in a way to

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dampen that volatility during a very. Extreme event, which is

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what you would have seen at the beginning of Covid.

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So the last bullet point there is interesting because all

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of this, all of this portfolio design is built upon

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the fact of you're using what you think is going

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to happen. And that's based on class performance and how

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capital market theory would tell you things will behave, but

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typically what you see. In very volatile periods is what

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we call market contagion. So you have events like the

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2008 financial crisis was a big one, where all of

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a sudden asset classes that didn't. Have a strong correlation

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become correlated all of a sudden during a market event,

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and hugely negatively when the market's down. And that can

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be just a factor that when panic sets. In on

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the market. Sometimes everyone gets it at once, right? All

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asset classes can be impacted and it can spread across.

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Markets quickly. So even it starts in the US and

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it hits Europe quickly, when typically you wouldn't think that

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those two different areas would necessarily be impacted by the

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same event. So a lot of modeling that you see

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in the portfolio world when somebody comes to you. And

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helps you design a portfolio. A lot of the times

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those models have what's built. In it is like a

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two stage model or a two event where there's a

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lot of view that. If you're testing the stress of

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a poor, if you're stress testing a portfolio, trying to

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see what will happen to it. In a very negative

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event, they tend to increase the correlation. So there's like

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a regime switch, is what it would be called, where

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you go. To correlations that are probably not as favorable

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as they once would have been in a normal market

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environment again, that just. Adds another complexity to these kind

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of processes. But fundamentally, understanding that these kind of contagions

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happen. Over the long term. Most correlations tend to hold

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true to some extent over the long term. And can

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help you build a portfolio that has diversification. And at

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the bottom there, this process really is about. What is

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that secret formula, right, that you're using to create a

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portfolio? That's going to minimize those risks, right? After fees,

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that's the other consideration. You potentially could create a very

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sophisticated portfolio. At some point, you have to measure against

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what's. It going to cost me, right, to do this?

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So when you look at it graphically, this is very

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simple. On this chart, if you move to the right.

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You're becoming more risky. If you move up, you're getting

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more return, right? So. If you started with just 100%

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bonds. And you look from that portfolio to the one

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with 20% equity, it's the next. One up. You've actually

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reduced your risk and increased your return by doing that.

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Anyone who's an investor would take that realistically because it's

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telling you it's less force, more return. Because even adding

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a small amount of equities and equities as it says

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at the top, most investment ris. Risk in a portfolio

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can be very tightly tied to how much equity exposure

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you have. But taking some equities when you're all fixed

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income will actually assist you because it's. Going to give

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you that uncorrelated source of return that the equities. Can

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offer. But you can see as you increase your equity

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amount quickly, You start becoming more risky, right? You start

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moving further to the right, because the equities. Are now

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dominating the portfolio right now. There's those two question mark

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portfolios that's what you're trying to get to. If you

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could be 40% bonds, 60%. Equity. That one in the

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middle, that's a balance fund. That's the bogey. In the

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industry for most investors. You can buy those. You can

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just go to someone and say, give me a balance

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fund, and. Balance fund is assumed to be a medium

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00:12:36,620 --> 00:12:39,900
term investment. Rise in some bonds, some equities that other

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00:12:39,900 --> 00:12:42,780
portfolio with the question mark is making you more money,

240
00:12:42,780 --> 00:12:46,300
and it essentially has less risk. Right. So you would

241
00:12:46,300 --> 00:12:49,220
take that if you could. You've got to figure out

242
00:12:49,220 --> 00:12:51,743
what is. That portfolio. Right. And obviously you can see

243
00:12:51,743 --> 00:12:54,663
by the number of pies in that thing, it obviously

244
00:12:54,663 --> 00:12:57,303
has. More and more asset classes than just bonds and

245
00:12:57,303 --> 00:13:00,063
equities. Right? So it's showing you. There's more diversification that

246
00:13:00,063 --> 00:13:03,143
you can get to inside of a portfolio like that.

247
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And fundamentally, that's this whole process is trying to figure

248
00:13:05,983 --> 00:13:08,663
out how can you get to those two question mark

249
00:13:08,663 --> 00:13:12,908
type portfolios again. From a fee perspective and then liquidity

250
00:13:12,908 --> 00:13:15,188
and other issues that you might want to try to

251
00:13:15,188 --> 00:13:18,188
manage. So on size seven. This is slide that we

252
00:13:18,188 --> 00:13:20,548
show quite often. And what this is, is. Every one

253
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of these boxes in this chart is. And you can

254
00:13:23,428 --> 00:13:26,505
see. The yellow is the emerging market return. And this

255
00:13:26,505 --> 00:13:30,958
is annually over the last 24 years, basically. You've got

256
00:13:30,958 --> 00:13:34,158
the EC index, international equities, you got small cap equities.

257
00:13:34,158 --> 00:13:38,318
Canadian equities bonds us and then a balance fund. And

258
00:13:38,318 --> 00:13:42,038
what we've done is we've just traced the SPSX and

259
00:13:42,038 --> 00:13:44,478
the red line. And you can see what's? Happening is

260
00:13:44,478 --> 00:13:46,718
there's many times it's near the top and then the

261
00:13:46,718 --> 00:13:48,878
next year. It's near the bottom, right? And then it

262
00:13:48,878 --> 00:13:51,796
goes back near the top and. It's constantly moving up

263
00:13:51,796 --> 00:13:54,316
and down in that chart, canadian equities on whether they're

264
00:13:54,316 --> 00:13:57,036
the best or the worst asset class, right? And again,

265
00:13:57,036 --> 00:14:00,036
that's the equity roller. Coaster that you're in if you

266
00:14:00,036 --> 00:14:03,396
could call all of those peaks and sell off and.

267
00:14:03,396 --> 00:14:05,436
Buy back in at the bottom. You'd be an amazing

268
00:14:05,436 --> 00:14:08,636
investment manager. It's difficult. To do that. Right. So, what,

269
00:14:08,636 --> 00:14:11,588
the balance fund is that gray? Line and goes through

270
00:14:11,588 --> 00:14:17,224
the gray boxes. That's 40% bonds, 30% canadian equity, 30%

271
00:14:17,224 --> 00:14:20,304
global equity. So that's. A balanced strategy and you can

272
00:14:20,304 --> 00:14:24,807
see. It's tops and bottoms, it's peaks and trows are

273
00:14:24,807 --> 00:14:28,487
much more muted than the pure equity portfolio is because,

274
00:14:28,487 --> 00:14:30,767
again, it's hedging some of the risk off. With the

275
00:14:30,767 --> 00:14:34,287
bonds, and it's got more diversification than just canadian equities

276
00:14:34,287 --> 00:14:36,607
and we show you the results over 24 years on

277
00:14:36,607 --> 00:14:39,727
the bottom. So 24 years in canadian equities. With all

278
00:14:39,727 --> 00:14:43,251
the ups and downs would have averaged. A 6.6% a

279
00:14:43,251 --> 00:14:47,451
year. Right. Volatility of 15 points. So the standard deviation.

280
00:14:47,451 --> 00:14:52,091
Of 15.6%. So that's a pretty high volatility right around

281
00:14:52,091 --> 00:14:54,691
that. Mean of 6.6. So if you look at the

282
00:14:54,691 --> 00:14:58,571
balance fund, it's made a percent less. So ultimately, yes.

283
00:14:58,571 --> 00:15:01,011
If you knew you had a full 24 years and

284
00:15:01,011 --> 00:15:02,989
you never had to check in on this. Money, you're

285
00:15:02,989 --> 00:15:05,509
never going to need it. 100% equity would have got

286
00:15:05,509 --> 00:15:07,869
you better, but. We're only got. You better buy a

287
00:15:07,869 --> 00:15:10,509
better percent a year. But the volatility. Of the balance

288
00:15:10,509 --> 00:15:15,029
fund is significantly lower. Like half, right, 8.6%. So when

289
00:15:15,029 --> 00:15:17,549
you look at the risk adjusted ratio. So that's just

290
00:15:17,549 --> 00:15:21,549
the return by the risk, right? The balance. Fund, technically,

291
00:15:21,549 --> 00:15:24,774
is a more efficient. Portfolio. So for every unit of

292
00:15:24,774 --> 00:15:27,414
risk or every unit of return you're taking or. Sorry.

293
00:15:27,414 --> 00:15:29,654
For every unit risk you'd in zero point 65 in

294
00:15:29,654 --> 00:15:32,254
return, or the canadian equity for every unit of risk.

295
00:15:32,254 --> 00:15:35,174
You're getting zero point 42 and return back to you.

296
00:15:35,174 --> 00:15:38,014
Right. So. Again. Equities would have made you more, but

297
00:15:38,014 --> 00:15:40,494
would have taken you on that ride to get you

298
00:15:40,494 --> 00:15:44,497
that through the whole period, right? So portfolio modeling, all

299
00:15:44,497 --> 00:15:47,217
of this stuff, all of these inputs and this correlation,

300
00:15:47,217 --> 00:15:51,057
this all comes into a portfolio modeling process, which, again,

301
00:15:51,057 --> 00:15:54,057
if you're in a board position, this is typically what

302
00:15:54,057 --> 00:15:57,057
you're being shown as somebody's showing you. These are different

303
00:15:57,057 --> 00:16:00,457
portfolios and different expectations we've come up with, and they

304
00:16:00,457 --> 00:16:03,623
all tend to come out of a stochastic. Model. Like

305
00:16:03,623 --> 00:16:07,772
this. What this is. Pretty. This would be the industry

306
00:16:07,772 --> 00:16:10,772
standard today of what most groups would do is you

307
00:16:10,772 --> 00:16:15,372
look at driving probability distributions out of these asset classes.

308
00:16:15,372 --> 00:16:18,532
So for canadian equities, you forecast them out. Over again.

309
00:16:18,532 --> 00:16:20,332
I'm going to show you in this example, could be

310
00:16:20,332 --> 00:16:23,932
30 years, and that path you build is based on

311
00:16:23,932 --> 00:16:27,423
all the expectations of how you think canadian equ. Equities

312
00:16:27,423 --> 00:16:31,010
might perform. In different environments. Maybe a high inflationary environment.

313
00:16:31,010 --> 00:16:33,770
Maybe an environment where you have an equity market. Correction.

314
00:16:33,770 --> 00:16:37,250
So you make this probability distribution, and again, you can

315
00:16:37,250 --> 00:16:39,370
do a single asset class, but what? Typically you do,

316
00:16:39,370 --> 00:16:42,490
you start putting different asset classes together. So a portfolio

317
00:16:42,490 --> 00:16:46,570
of bonds, equities. May be real estate infrastructure. Again, it

318
00:16:46,570 --> 00:16:50,793
considers the past, but. Focus considers future expectations. If you're

319
00:16:50,793 --> 00:16:53,953
in a very low interest rate environment, statistically interest rates

320
00:16:53,953 --> 00:16:56,473
will probably increase in the future because they, like, won't

321
00:16:56,473 --> 00:17:00,934
go below zero unless maybe Japan. But most economies, you

322
00:17:00,934 --> 00:17:04,225
would assume. What's the chance of interest rates going up

323
00:17:04,225 --> 00:17:06,945
or down? Pretty much depends on where they're at today,

324
00:17:06,945 --> 00:17:09,305
right? A lot of the modeling, at least the way

325
00:17:09,305 --> 00:17:11,505
Eckler would approach it is, you would assume that if

326
00:17:11,505 --> 00:17:14,865
active management would pay for its fees, so you typically

327
00:17:14,865 --> 00:17:17,665
wouldn't build in a premium that your investment managers are

328
00:17:17,665 --> 00:17:19,225
going to beat the market, that might be a bit

329
00:17:19,225 --> 00:17:21,025
of grass. Step to assume that over the whole way

330
00:17:21,025 --> 00:17:24,564
you could again. Active management might be the cherry on

331
00:17:24,564 --> 00:17:27,964
top, but realistically, we'd assume almost passive is really what

332
00:17:27,964 --> 00:17:30,404
this is saying to you. So you model the expected

333
00:17:30,404 --> 00:17:33,324
risk return of the various asset. Classes. So, again, someone

334
00:17:33,324 --> 00:17:35,764
showed you three portfolios. You could take each portfolio and

335
00:17:35,764 --> 00:17:37,444
put it through. This kind of process and see what

336
00:17:37,444 --> 00:17:40,124
the outcomes look like. So what we would do here

337
00:17:40,124 --> 00:17:41,844
in the example I'm going to show you is modeling

338
00:17:41,844 --> 00:17:45,335
5000. Possible outcomes a year. And we do this over

339
00:17:45,335 --> 00:17:47,695
ten to 15 plus year horizon. And what we end

340
00:17:47,695 --> 00:17:51,255
up with is an enormous set of returns. Right? And

341
00:17:51,255 --> 00:17:52,815
what we try to do is we look. Well, what's

342
00:17:52,815 --> 00:17:56,415
the expected return? And it's really the median outcome in

343
00:17:56,415 --> 00:17:59,015
that. Universe. So if you're on the prices, right, and

344
00:17:59,015 --> 00:18:02,393
you had to bet, you would bet. The media. The

345
00:18:02,393 --> 00:18:05,673
middle one. You'd be the least wrong again. What's the

346
00:18:05,673 --> 00:18:09,153
chance? It's exactly that number. Almost zero, to be honest

347
00:18:09,153 --> 00:18:11,553
with you. But it's the closest want out of what

348
00:18:11,553 --> 00:18:14,433
you think the outcomes would be, and then the risk

349
00:18:14,433 --> 00:18:18,593
for most groups. Is about? What's that? Lowest fifth percentile

350
00:18:18,593 --> 00:18:21,553
return. What's the chance that things go really bad. Most

351
00:18:21,553 --> 00:18:23,984
group. Groups aren't concerned with what's the chance everything becomes

352
00:18:23,984 --> 00:18:26,864
amazing, we end up in the very 95th. That's great.

353
00:18:26,864 --> 00:18:28,384
That probably means you got more money than you think.

354
00:18:28,384 --> 00:18:31,424
You would have. And that's just usually, you probably don't

355
00:18:31,424 --> 00:18:33,384
have to be concerned. About that one ahead of time.

356
00:18:33,384 --> 00:18:36,624
Unless you've got kind of any. Some clients we have.

357
00:18:36,624 --> 00:18:39,024
Maybe in negotiation positions, or maybe that would be an

358
00:18:39,024 --> 00:18:40,824
issue if they had too much money, but. Most groups

359
00:18:40,824 --> 00:18:43,600
are in a position. Of too much money is not

360
00:18:43,600 --> 00:18:45,800
really the thing we're worried about. It's what if we

361
00:18:45,800 --> 00:18:48,320
lose a lot. Right? And this is what these processes

362
00:18:48,320 --> 00:18:51,960
get you, which is slide nine. This is an actual

363
00:18:51,960 --> 00:18:54,880
output from this kind of model. This is assuming if

364
00:18:54,880 --> 00:18:57,160
you had a balance fund. Right. So that again, what

365
00:18:57,160 --> 00:18:58,960
have you had? Kind of a middle of the road

366
00:18:58,960 --> 00:19:02,558
investment strategy? So in the one year that first. Column

367
00:19:02,558 --> 00:19:06,478
in this chart. What that's telling you is that 5.9%

368
00:19:06,478 --> 00:19:10,262
is the median of. That 5000 outcomes in the first

369
00:19:10,262 --> 00:19:13,462
year, 5.9 is right in the middle at the very

370
00:19:13,462 --> 00:19:16,702
top. It says 19.2 at the very top of that

371
00:19:16,702 --> 00:19:20,742
chart. That's the 95th. Percentile. So what that means is

372
00:19:20,742 --> 00:19:25,302
95% of the time you'd be making 19% or less.

373
00:19:26,556 --> 00:19:28,676
There's only 5% of outcomes where they would ever be

374
00:19:28,676 --> 00:19:31,956
above 19% the same. Thing at the bottom. The minus

375
00:19:31,956 --> 00:19:35,356
eight. That's the bottom fifth. So instead of telling you

376
00:19:35,356 --> 00:19:38,196
95% of the time, you should be better than that.

377
00:19:38,196 --> 00:19:41,196
5% of the time it could be worse, right? So

378
00:19:41,196 --> 00:19:42,916
if you ask me, in a given year, what do

379
00:19:42,916 --> 00:19:45,556
I think you'll? Make. I could go. Well, 90% of

380
00:19:45,556 --> 00:19:47,666
the time you're between. 19 and minus eight. And you'd

381
00:19:47,666 --> 00:19:49,746
say, that's not very helpful to me, that's. A very

382
00:19:49,746 --> 00:19:52,826
big window, and I would say that's the difficulty. If

383
00:19:52,826 --> 00:19:55,346
you tried to guess one year out, right. But what

384
00:19:55,346 --> 00:19:58,106
you see is if you move across 510, 15 is

385
00:19:58,106 --> 00:20:01,306
that that distribution becomes much tighter. Right. So maybe we'll

386
00:20:01,306 --> 00:20:03,506
look at the ten years or. Sorry. The 15 one

387
00:20:03,506 --> 00:20:06,266
I have in the middle that's highlighted that 15 still

388
00:20:06,266 --> 00:20:09,211
has. A median return of about 5.9, but the fifth

389
00:20:09,211 --> 00:20:11,891
percentile, instead of being minus eight, is now minus is

390
00:20:11,891 --> 00:20:15,491
1.8. So that's a big change. So the reason why

391
00:20:15,491 --> 00:20:18,331
these models work for a lot of groups, and planning

392
00:20:18,331 --> 00:20:21,491
over the long term is the chance of you experiencing?

393
00:20:22,756 --> 00:20:26,803
A one in 5000 event. Every year for 15 years

394
00:20:26,803 --> 00:20:31,789
is statistically insignificant. It's basically very unlikely you would have

395
00:20:31,789 --> 00:20:34,509
these multiple, like, seven COVIds back to. Back to back

396
00:20:34,509 --> 00:20:36,869
to back to back for eight years. So what this

397
00:20:36,869 --> 00:20:39,069
can do is when you use this kind of modeling

398
00:20:39,069 --> 00:20:41,389
is it can help you over the longer time get

399
00:20:41,389 --> 00:20:43,869
a sense of well, what is the expected return? And

400
00:20:43,869 --> 00:20:46,469
what's that bottom return risk that I'm going to have.

401
00:20:46,469 --> 00:20:49,269
And you can use this through multiple asset classes. So

402
00:20:49,269 --> 00:20:52,762
as you add. Infrastructure you could see. Does infrastructure increase

403
00:20:52,762 --> 00:20:55,522
the medium? But what's it doing to the fifth? Percentile.

404
00:20:55,522 --> 00:20:58,162
Am I seeing a better result because of these different

405
00:20:58,162 --> 00:21:00,842
asset classes? And this is what you will likely see

406
00:21:00,842 --> 00:21:04,602
as somebody showing you portfolio modeling in different asset classes.

407
00:21:04,602 --> 00:21:07,402
Is this kind of analysis over the time periods that

408
00:21:07,402 --> 00:21:11,599
you want to plan over, right? So all this leads

409
00:21:11,599 --> 00:21:13,719
into kind of the goal setting, which is really from

410
00:21:13,719 --> 00:21:15,919
a board's perspective. What are you trying to do? And

411
00:21:15,919 --> 00:21:19,599
what are you trying to probably tell your ocio? Manager,

412
00:21:19,599 --> 00:21:21,999
your consultant. Like, what are the goals that we're trying

413
00:21:21,999 --> 00:21:26,039
to set that will influence that portfolio modeling. Right? So

414
00:21:26,039 --> 00:21:27,799
a lot of it. I mean, we'd ask groups, why

415
00:21:27,799 --> 00:21:29,519
are you here? What are you trying to achieve? You're

416
00:21:29,519 --> 00:21:33,596
obviously investing a port. Portfolio for some purpose. What are

417
00:21:33,596 --> 00:21:36,716
your measurable goals like? What is the success for the

418
00:21:36,716 --> 00:21:39,476
portfolio? What do you hope? To achieve. If you can

419
00:21:39,476 --> 00:21:42,036
answer some of these high level questions, that should again

420
00:21:42,036 --> 00:21:44,796
set the foundation. For your decision making, right? About what

421
00:21:44,796 --> 00:21:47,596
are the asset classes? So again, if you said, listen,

422
00:21:47,596 --> 00:21:50,756
we. Really need to prioritize liquidity. We might need to

423
00:21:50,756 --> 00:21:53,988
spend 20% of this portfolio. At any given. Year because

424
00:21:53,988 --> 00:21:56,588
our liability of what we're trying to do is, could

425
00:21:56,588 --> 00:21:59,948
be variable that would tell you. Maybe I have significant

426
00:21:59,948 --> 00:22:02,588
liquidity requirements, and I don't think I would look. At

427
00:22:02,588 --> 00:22:04,708
infrastructure or real estate as an asset class, because I

428
00:22:04,708 --> 00:22:06,428
don't know if they'll have the liquidity I need, but

429
00:22:06,428 --> 00:22:09,228
you could say, listen, long term, I think we know.

430
00:22:09,228 --> 00:22:11,348
The liquidity of the portfolio. We're only going to need

431
00:22:11,348 --> 00:22:13,228
to draw a few percent. So we think we can.

432
00:22:13,940 --> 00:22:17,660
Take on some of those risks and hopefully be compensated

433
00:22:17,660 --> 00:22:20,300
for that. Right. But again, one thing we would always

434
00:22:20,300 --> 00:22:23,620
say is that goals and objectives here that you sat

435
00:22:23,620 --> 00:22:26,300
typically might set them independent of the investment strategy because

436
00:22:26,300 --> 00:22:28,300
you're kind of thinking of them first, right? What are

437
00:22:28,300 --> 00:22:29,940
the things? You're trying to achieve, but they should be

438
00:22:29,940 --> 00:22:32,900
consistent. And when we give you an example, is, some

439
00:22:32,900 --> 00:22:35,939
groups may have es. ESG beliefs. So environmental, social, governance

440
00:22:35,939 --> 00:22:39,227
concerns, where they say, listen. We want to have a

441
00:22:39,227 --> 00:22:43,267
fossil fuel free portfolio, or you want to have no,

442
00:22:43,267 --> 00:22:45,867
say, arms or anything like that, or tobacco or anything

443
00:22:45,867 --> 00:22:49,379
in our portfolio. But then you're going to implement the

444
00:22:49,379 --> 00:22:52,579
strategy and pooled funds. We're an investment manager selling a

445
00:22:52,579 --> 00:22:54,859
pool fund that already exists. You may have an example

446
00:22:54,859 --> 00:22:58,379
where the ESG believe can't be implemented through the process

447
00:22:58,379 --> 00:23:02,099
of, obviously, the pool funds that you've chosen. So when

448
00:23:02,099 --> 00:23:03,819
you think of how your goals are going to be

449
00:23:03,819 --> 00:23:06,819
structured, sometimes the tail does wag the dog back and

450
00:23:06,819 --> 00:23:08,676
that you'll have to make sure that if. You have

451
00:23:08,676 --> 00:23:11,676
a goal that it's likely implementable based on the size

452
00:23:11,676 --> 00:23:15,076
of your portfolio. Based on what's available to you, right?

453
00:23:15,076 --> 00:23:16,996
So a lot of what we have is you. Make

454
00:23:16,996 --> 00:23:19,676
goals smart. This is actually what we do for everybody

455
00:23:19,676 --> 00:23:21,716
in Eckler when they set their goals for the year

456
00:23:21,716 --> 00:23:24,676
in terms of performance management is try to use this

457
00:23:24,676 --> 00:23:30,170
right, which is specific, measurable, attainable, realistic. Time down. And

458
00:23:30,170 --> 00:23:31,610
really a good example. So an example we'd have for

459
00:23:31,610 --> 00:23:35,090
a portfolio would be achieve a ten year annualized gross

460
00:23:35,090 --> 00:23:37,850
rate return of 6% to sport, a real spending target

461
00:23:37,850 --> 00:23:40,570
of four while limiting capital impairment. So just give you

462
00:23:40,570 --> 00:23:43,777
an idea. So it's specific. That goal is giving you

463
00:23:43,777 --> 00:23:47,125
a pretty specific thing. It isn't. Just let's make some

464
00:23:47,125 --> 00:23:49,885
money. That would be pretty vague, right? This is giving

465
00:23:49,885 --> 00:23:52,245
a very specific goal that you're trying to do. It's

466
00:23:52,245 --> 00:23:54,925
measurable. Because you've given exactly what you're hoping to do

467
00:23:54,925 --> 00:23:58,565
and you can measure the amount of return you make

468
00:23:58,565 --> 00:24:03,188
attainable. That's probably a little harder to assess, but ultimately,

469
00:24:03,188 --> 00:24:06,108
are you willing to invest in asset classes that could

470
00:24:06,108 --> 00:24:08,428
get you that kind of return. So that would maybe

471
00:24:08,428 --> 00:24:12,628
be obtainable. Realistic. So. Realistic. I'll come back to time

472
00:24:12,628 --> 00:24:15,948
bound. It's obviously ten years. The realistic one. In the

473
00:24:15,948 --> 00:24:18,908
obtainable is the one most groups get probably thinking about

474
00:24:18,908 --> 00:24:22,741
is. Do we think that this is realistic for what

475
00:24:22,741 --> 00:24:25,261
we're willing to take on for risk? And again, the

476
00:24:25,261 --> 00:24:28,341
last bullet point. There is this goal that this group's

477
00:24:28,341 --> 00:24:30,821
and again, to be honest, it is a realistic goal

478
00:24:30,821 --> 00:24:33,701
that we would have somebody make. Satisfies most of those

479
00:24:33,701 --> 00:24:37,541
criteria, but may not be realistic depending on what happens

480
00:24:37,541 --> 00:24:39,261
in the first few years. So you can set a

481
00:24:39,261 --> 00:24:41,580
goal and it might be realistic in year. One. But

482
00:24:41,580 --> 00:24:44,820
by year three, it's not anymore. Again. Any example? You

483
00:24:44,820 --> 00:24:47,420
might not want any. Capital impairment. But what if you

484
00:24:47,420 --> 00:24:50,100
set this goal in 2019 and then you walk into

485
00:24:50,100 --> 00:24:52,260
the Covid environment, and you might have to sit there

486
00:24:52,260 --> 00:24:55,060
and go, wow. I think that goal now has become

487
00:24:55,060 --> 00:24:58,260
unrealistic for us to achieve based on what's happened in

488
00:24:58,260 --> 00:25:01,768
the market and you may have to reassess. Right. So

489
00:25:01,768 --> 00:25:05,408
the risk management framework that really you build around this

490
00:25:05,408 --> 00:25:08,688
process and your goals, typically when we go through it

491
00:25:08,688 --> 00:25:11,528
is try to identify the risks that are most significant.

492
00:25:13,011 --> 00:25:15,331
And greatest impact on you to achieve your goals. Call

493
00:25:15,331 --> 00:25:18,371
that like a risk ranking? Again, that's? Really that idea

494
00:25:18,371 --> 00:25:23,171
of capital impairment, liquidity risk. Can you take that? All

495
00:25:23,171 --> 00:25:27,491
of these ideas not making enough money. Inflation, obviously. If

496
00:25:27,491 --> 00:25:31,116
you're worried about maintaining spending in real terms, For most

497
00:25:31,116 --> 00:25:33,956
institutional investors in that second bullet point, you have to

498
00:25:33,956 --> 00:25:36,516
accept some level of investment risk. If you're going to

499
00:25:36,516 --> 00:25:39,796
support the goals of the portfolio. So most groups acknowledge

500
00:25:39,796 --> 00:25:42,036
at some level, we have to accept some amount of

501
00:25:42,036 --> 00:25:44,716
risk to invest. Right? Or else we're just. Holding cash.

502
00:25:45,918 --> 00:25:47,358
And again, that comes with a risk in and of

503
00:25:47,358 --> 00:25:51,591
itself. We're not even going to maintain spending at inflation

504
00:25:51,591 --> 00:25:54,391
levels if we're not willing to take at least some

505
00:25:54,391 --> 00:25:56,911
amount of return. Right? And then you decide on how

506
00:25:56,911 --> 00:25:59,791
to approach eat. Risk. So this is a pretty standard

507
00:25:59,791 --> 00:26:02,911
process in risk management is identify the risk. Obviously, you

508
00:26:02,911 --> 00:26:04,271
want to try to identify the risk that are out

509
00:26:04,271 --> 00:26:08,751
there. Sometimes. You can only identify or mitigate the risk

510
00:26:08,751 --> 00:26:10,751
you know about, right? There may be risk out. There

511
00:26:10,751 --> 00:26:13,551
that you just can't even think about and can't assess

512
00:26:13,551 --> 00:26:15,511
and there's. Not a lot you can do about that,

513
00:26:15,511 --> 00:26:18,151
but you identify it, you assess the risk and then

514
00:26:18,151 --> 00:26:20,551
you either assume the risk and monitor it or avoid

515
00:26:20,551 --> 00:26:23,031
it and mitigate it, which is really in the next

516
00:26:23,031 --> 00:26:26,791
piece, right? So risk realistically for most groups can be

517
00:26:26,791 --> 00:26:29,387
class. Classified as rewarded, so you're rewarded for the risk.

518
00:26:29,387 --> 00:26:32,027
You're unrewish. I'll give you an example. A rewarded risk

519
00:26:32,027 --> 00:26:35,747
could be like illiquidity risk, right? By investing in private

520
00:26:35,747 --> 00:26:37,467
markets. Right. So that's a risk you're not going to

521
00:26:37,467 --> 00:26:38,987
be able to get your money back quickly if you

522
00:26:38,987 --> 00:26:42,947
need it. But typically there's an illiquidity premium that's paid

523
00:26:42,947 --> 00:26:45,507
to you for investing in those asset classes. You accept

524
00:26:45,507 --> 00:26:49,167
that risk, and you're. Being rewarded for. You're being paid

525
00:26:49,167 --> 00:26:52,527
unrewarded. Risk could be like idiosyncratic. Risk in a stock,

526
00:26:52,527 --> 00:26:55,887
right? So you invest your entire canadian equity portfolio in

527
00:26:55,887 --> 00:27:00,228
RBC, right? That comes with a big risk. What if

528
00:27:00,228 --> 00:27:03,899
something happens to that one company? You're going to be.

529
00:27:04,847 --> 00:27:08,287
Very impacted by it. You could diversify across all the

530
00:27:08,287 --> 00:27:12,766
banks if you wanted to. So again, idiosyncratic or concentration

531
00:27:12,766 --> 00:27:16,246
risk typically is not rewarded because you can easily not

532
00:27:16,246 --> 00:27:19,286
have that risk and be diversified and not take it.

533
00:27:19,286 --> 00:27:22,686
So again, only risk that should be rewarded. Technically are

534
00:27:22,686 --> 00:27:24,766
the ones you want to take, the ones that are

535
00:27:24,766 --> 00:27:26,966
not rewarding you. You want to try to mitigate or

536
00:27:26,966 --> 00:27:29,966
remove. And again, you may want to hedge them. Right.

537
00:27:29,966 --> 00:27:32,354
So. Insure against the risk. So for a lot of

538
00:27:32,354 --> 00:27:35,945
groups, currency risk is one you can hedge. There is

539
00:27:35,945 --> 00:27:38,865
a risk to being a canadian investor and assuming other

540
00:27:38,865 --> 00:27:43,091
currencies, because, again, When you invest in Canada in an

541
00:27:43,091 --> 00:27:45,451
equity, what you get is the return of the equity

542
00:27:45,451 --> 00:27:47,331
that's what impacts your return. But if you invest in

543
00:27:47,331 --> 00:27:49,731
the United states, there's the return of the equity and

544
00:27:49,731 --> 00:27:51,611
the return of the US dollar to you as a

545
00:27:51,611 --> 00:27:54,851
Canadian, that now adds a different risk to it. So

546
00:27:54,851 --> 00:27:57,171
you can hedge that you can easily mitigate it or

547
00:27:57,171 --> 00:27:59,651
sometimes you can't hedge your risk, right? Something might be

548
00:27:59,651 --> 00:28:02,365
harder for you to hed. Hedge away and whether or

549
00:28:02,365 --> 00:28:05,965
not you should hedge it or unhedge it typically involves

550
00:28:05,965 --> 00:28:09,233
the risk. What are you getting for not hedging it?

551
00:28:09,233 --> 00:28:10,713
What's the return? You're going to get and how much

552
00:28:10,713 --> 00:28:12,913
is it going to cost you to hedge it? So,

553
00:28:12,913 --> 00:28:15,433
again, currency. Is a good example. Some groups currency heads,

554
00:28:15,433 --> 00:28:18,753
some groups don't because they view long term they just

555
00:28:18,753 --> 00:28:21,753
think that there's not enough there to justify the costs

556
00:28:21,753 --> 00:28:24,313
that are involved in maintaining the hedges, right? They think

557
00:28:24,313 --> 00:28:27,393
you're better off not paying that cost. And assuming that

558
00:28:27,393 --> 00:28:29,447
risk because they don't. Feel that the risk is material

559
00:28:29,447 --> 00:28:32,407
enough to wear it. And again, some risks are simply

560
00:28:32,407 --> 00:28:35,647
unforeseen or unavoidable, like we get political regulatory. Obviously, it's

561
00:28:35,647 --> 00:28:39,526
a very recent political one that's happened. Could you have

562
00:28:39,526 --> 00:28:42,006
hedged against that? It would be hard for you to

563
00:28:42,006 --> 00:28:44,806
assume how to hedge. Against that? What are the things

564
00:28:44,806 --> 00:28:47,966
you're going to hedge against that outcome? And so some

565
00:28:47,966 --> 00:28:50,949
things. You have to assume them, and you can't necessarily

566
00:28:50,949 --> 00:28:52,909
know what the risk or the outcome. Of that risk

567
00:28:52,909 --> 00:28:56,229
is ahead of time, right? So I think that's really

568
00:28:56,229 --> 00:28:59,749
the portfolio construction. Process. I don't see any questions to

569
00:28:59,749 --> 00:29:02,549
lay that out for you. That's really. About, I think,

570
00:29:02,549 --> 00:29:06,269
goal setting, trying to arrive at what's the purpose of

571
00:29:06,269 --> 00:29:09,589
the funds, why? Are you investing and then understanding that?

572
00:29:09,771 --> 00:29:12,451
When somebody's coming and showing you different portfolios that are

573
00:29:12,451 --> 00:29:16,051
trying to achieve the goals that you've outset. What are

574
00:29:16,051 --> 00:29:20,617
the inputs to that process? Obviously, the expected returns, variability,

575
00:29:20,617 --> 00:29:22,977
all those things you saw, and then the risk part

576
00:29:22,977 --> 00:29:26,377
of it, which is, how can different portfolios potentially help

577
00:29:26,377 --> 00:29:29,177
you mitigate some of those risks that you've. Had and

578
00:29:29,177 --> 00:29:31,857
understanding that some level of risk likely has to be

579
00:29:31,857 --> 00:29:36,387
taken to achieve a return. Right, or else. You're likely

580
00:29:36,387 --> 00:29:39,867
not going to invest. There for 1 second and see

581
00:29:39,867 --> 00:29:42,587
if there's any questions before we move on to implementation.

582
00:29:44,995 --> 00:29:53,413
Board member giles. Thank you, chair Hughes. Yeah. A few

583
00:29:53,413 --> 00:29:56,813
questions and or comments. So far, so good. Thanks, Kyle.

584
00:29:58,439 --> 00:30:01,279
We have to be careful about treating bonds and equities

585
00:30:01,279 --> 00:30:06,823
as monoliths. You can adjust. The risk profile of your

586
00:30:06,823 --> 00:30:11,648
bond portfolio. Quite a lot. And the correlations will change

587
00:30:11,648 --> 00:30:14,638
in your risk profile will change. And one thing you

588
00:30:14,638 --> 00:30:16,878
have to think about is what type of bond portfolio

589
00:30:16,878 --> 00:30:19,598
do you want to get the total risk for the

590
00:30:19,598 --> 00:30:23,595
portfolio that you're looking for. So if you have a

591
00:30:23,595 --> 00:30:26,555
bond portfolio with fairly low quality, like a lot of

592
00:30:26,555 --> 00:30:29,675
double b's, it's going to react a lot more like

593
00:30:29,675 --> 00:30:33,568
the equities do. The economic considerations will be more important.

594
00:30:35,097 --> 00:30:37,497
I would agree, Cole. I think for purposes of this,

595
00:30:37,497 --> 00:30:41,568
I think we've kind of just given. Again, 10,000 foot

596
00:30:41,568 --> 00:30:44,728
view of government bond and a canadian equity, but I

597
00:30:44,728 --> 00:30:48,528
agree 100%. Some bonds look more like equities, and how

598
00:30:48,528 --> 00:30:52,568
you define that, that probably gets into the implementation very

599
00:30:52,568 --> 00:30:54,728
tightly on. You got the strategy, how you're going to

600
00:30:54,728 --> 00:30:58,601
implement it. Yeah. There's a huge spectrum of strategies you

601
00:30:58,601 --> 00:31:02,618
could pick. I 100% agree. And the last comment you

602
00:31:02,618 --> 00:31:06,381
made about currency hedging? To me, it's not so much.

603
00:31:08,684 --> 00:31:12,644
Where the security trades, but what its underlying business is.

604
00:31:12,644 --> 00:31:16,523
So if you have a canadian listed company, But it

605
00:31:16,523 --> 00:31:21,040
does most of its business. In Chile, for example. You

606
00:31:21,040 --> 00:31:24,316
may have chile. And currency exposure, which is not easy

607
00:31:24,316 --> 00:31:28,516
to either know about or hedge. So hedging is not

608
00:31:28,516 --> 00:31:31,356
as easy as just looking at where the current the

609
00:31:31,356 --> 00:31:35,493
security trades and hedging that. Yeah, 100%. I think there's

610
00:31:35,493 --> 00:31:37,733
almost two ways to think about that. Yeah, you could.

611
00:31:37,733 --> 00:31:40,773
Invest in a business and it has exposure. So again,

612
00:31:40,773 --> 00:31:42,653
a lot of people, you could say, do you have

613
00:31:42,653 --> 00:31:46,253
emerging market securities in your portfolio, right? And you might

614
00:31:46,253 --> 00:31:49,453
say, oh, I only invested United. States. I don't. Arguably,

615
00:31:49,453 --> 00:31:51,413
there's a ton of companies in the United States that

616
00:31:51,413 --> 00:31:54,975
drive revenue from emerging markets. So you're getting. That exposure

617
00:31:54,975 --> 00:31:57,095
through those companies, I think for a lot of groups,

618
00:31:57,095 --> 00:31:59,735
and they think are currency, hedging I think it's more

619
00:31:59,735 --> 00:32:03,295
about what's the security denominated in. Because I think that

620
00:32:03,295 --> 00:32:06,523
carries. A very clear, like, canadian dollar to us that's

621
00:32:06,523 --> 00:32:09,243
traded every day, and it's posted. And to that point,

622
00:32:09,243 --> 00:32:11,163
you can know exactly what it is in hedge it.

623
00:32:13,174 --> 00:32:16,534
Exactly. You can't necessarily go to, like, for example, Michelin

624
00:32:16,534 --> 00:32:18,614
and try to hedge away. The fact that they're trying

625
00:32:18,614 --> 00:32:21,694
to drive more business in China by selling more tires

626
00:32:21,694 --> 00:32:23,934
and there's a risk to that. I will say the

627
00:32:23,934 --> 00:32:27,574
last piece is a lot of companies. Internally, maybe doing

628
00:32:27,574 --> 00:32:29,774
currency hedging on their own. So if you're Michelin and

629
00:32:29,774 --> 00:32:32,854
you're selling a bunch of contracts in China, you may

630
00:32:32,854 --> 00:32:35,043
already. Be trying to hedge out that currency risk inside

631
00:32:35,043 --> 00:32:38,323
of your own business, not necessarily thinking about what investors

632
00:32:38,323 --> 00:32:42,299
are doing when they buy your stock, right? It's probably

633
00:32:42,299 --> 00:32:44,099
a russian doll. You know what I mean? That you

634
00:32:44,099 --> 00:32:45,939
could open up and. There's like ten more that come

635
00:32:45,939 --> 00:32:50,193
out. Yeah. So all I'm trying to say is currency.

636
00:32:50,193 --> 00:32:53,643
How are you going to do complicated? We could have

637
00:32:53,643 --> 00:32:58,906
a two hour run on that easily. Okay, thanks. No,

638
00:32:58,906 --> 00:33:04,641
great points. Anything else? So if everyone's good, we can

639
00:33:04,641 --> 00:33:09,776
talk a little bit about the implementation. Think everyone's good.

640
00:33:09,776 --> 00:33:14,968
Yeah. No, thanks. We'll jump into that. Okay, you got

641
00:33:14,968 --> 00:33:17,648
your policy. You've designed these asset classes. You've gone through

642
00:33:17,648 --> 00:33:20,728
this. Risk budgeting. You're tired now. Again, how are you

643
00:33:20,728 --> 00:33:23,597
going to go and. Put it to youth. Right. So

644
00:33:23,597 --> 00:33:26,037
the idea of the investment policy is really the blueprint,

645
00:33:26,037 --> 00:33:28,917
right? Like you design a house, you're probably very much

646
00:33:28,917 --> 00:33:31,917
concerned about whether it's got five bathrooms or one kitchen

647
00:33:31,917 --> 00:33:34,357
or the rest. That's probably what you want to know.

648
00:33:34,357 --> 00:33:37,157
What? Color the floor is might be interesting to you,

649
00:33:37,157 --> 00:33:39,877
but probably less material. Right, but this is really. I

650
00:33:39,877 --> 00:33:41,957
think, kind of how you think about this a bit,

651
00:33:41,957 --> 00:33:44,688
the policy. Piece is really good. The portfolio construction is

652
00:33:44,688 --> 00:33:46,728
going to be whether you have gym sport where they

653
00:33:46,728 --> 00:33:48,728
have corporate bonds, high yield bonds, some of these other

654
00:33:48,728 --> 00:33:51,088
things, whether you have equities at all that's coming into

655
00:33:51,088 --> 00:33:54,789
the. Portfolio. The implementation now is how you're putting that

656
00:33:54,789 --> 00:33:57,709
plan into action. Right? So one of the first. Again,

657
00:33:57,709 --> 00:34:00,869
not that you wouldn't be concerned about it, but again,

658
00:34:00,869 --> 00:34:03,389
what tends to drive. The biggest risk profile of your

659
00:34:03,389 --> 00:34:06,829
portfolio is what asset classes you pick less so exactly

660
00:34:06,829 --> 00:34:09,709
who's implementing them. So one of the first things you

661
00:34:09,709 --> 00:34:12,876
typically look at is active or passive. Management, right? And

662
00:34:12,876 --> 00:34:15,156
we've shown you this year passive management with that little

663
00:34:15,156 --> 00:34:18,636
arrow there's going to be a narrow range of results.

664
00:34:18,636 --> 00:34:21,796
Active management is huge, right? So passive management is trying

665
00:34:21,796 --> 00:34:24,076
to replicate an index. So you can just buy the

666
00:34:24,076 --> 00:34:26,956
S and P TSX index and RBC. Will be the

667
00:34:26,956 --> 00:34:29,556
biggest holding you have, and everyone else is just based

668
00:34:29,556 --> 00:34:31,636
on what their weight is. In the index for most

669
00:34:31,636 --> 00:34:34,966
market weighted inde. Indexes. If you go to active management,

670
00:34:34,966 --> 00:34:38,526
you now hired someone that says, listen, I think I

671
00:34:38,526 --> 00:34:42,246
can outperform the market. Let me outperform it for you.

672
00:34:42,246 --> 00:34:45,326
There's going to be a fee to that. Typically, active

673
00:34:45,326 --> 00:34:48,726
management costs more than passive because passive is very easy.

674
00:34:48,726 --> 00:34:52,806
To implement active management requires more effort. Right? So the

675
00:34:52,806 --> 00:34:56,349
buy. And sell decisions. Passive management is constantly trading just

676
00:34:56,349 --> 00:34:59,828
to match the index. There's no forethought to trying to

677
00:34:59,828 --> 00:35:04,588
do it. Asterisks is a lot of fixed income. Passive

678
00:35:04,588 --> 00:35:08,061
management does require a little more. Decision making because you

679
00:35:08,061 --> 00:35:10,861
can't perfectly replicate a bond index the way you can

680
00:35:10,861 --> 00:35:14,581
an equity. Index. But that's another point. Active Management now

681
00:35:14,581 --> 00:35:17,181
is about the investment manager having the decision. On what

682
00:35:17,181 --> 00:35:19,541
to buy and sell and how to wait again, there's

683
00:35:19,541 --> 00:35:24,907
multiple approaches at the bottom right, like fundamental. The Warren

684
00:35:24,907 --> 00:35:27,963
Buffett approach of trying to determine. Do I think this

685
00:35:27,963 --> 00:35:30,163
company is going to make money? What are their suppliers

686
00:35:30,163 --> 00:35:32,483
saying? Do I think they know something about this business

687
00:35:32,483 --> 00:35:37,156
that other people don't. Quantitative is usually more driven. On.

688
00:35:38,068 --> 00:35:41,508
You have statistical models now analyzing the price of stocks

689
00:35:41,508 --> 00:35:43,668
and the trading of them and the behavior and trying

690
00:35:43,668 --> 00:35:48,028
to make decisions based on that. Right. So equity style,

691
00:35:48,028 --> 00:35:50,348
so quickly, just a few things. You'll see in your

692
00:35:50,348 --> 00:35:53,994
life when you're looking at the implementation. There's 100 ways

693
00:35:53,994 --> 00:35:57,409
to skin a cat in the investment industry. There's many

694
00:35:57,409 --> 00:35:59,649
ways. The first one being value managers are a big

695
00:35:59,649 --> 00:36:01,809
one that have existed. For a long time. That's the

696
00:36:01,809 --> 00:36:05,369
idea that you're looking to buy stocks at bargains realistically.

697
00:36:05,369 --> 00:36:08,289
So stock trading below its fair price right has the

698
00:36:08,289 --> 00:36:12,049
market miscalculated. The value of this stock. So typically, these

699
00:36:12,049 --> 00:36:15,209
managers look for low price to earnings ratios, low price

700
00:36:15,209 --> 00:36:18,640
to book ratios. They're really concerned about the valuation of

701
00:36:18,640 --> 00:36:22,240
the stock relative to the merits of the business. Right.

702
00:36:22,240 --> 00:36:24,200
Growth managers are at the other end of the spectrum.

703
00:36:24,200 --> 00:36:27,040
They tend to care less about those Matt tricks what

704
00:36:27,040 --> 00:36:29,280
they're really concerned about. So if you invest in a

705
00:36:29,280 --> 00:36:32,240
company like Apple, Apple can have at times, like, pe

706
00:36:32,240 --> 00:36:35,680
ratios of, like, 80, which would be like. That basically

707
00:36:35,680 --> 00:36:37,731
means what you're paying for the stock. Would take you

708
00:36:37,731 --> 00:36:40,651
80 years to get your money back. Based on current

709
00:36:40,651 --> 00:36:43,371
price to earnings, how much? The stocks worth based on

710
00:36:43,371 --> 00:36:45,971
what you're paying on it. So in that scenario, that

711
00:36:45,971 --> 00:36:48,611
manager is less concerned about today, but very much focused

712
00:36:48,611 --> 00:36:51,611
on what is this company doing into the future. And

713
00:36:51,611 --> 00:36:54,771
they're going to increase revenue and increase growth at kind

714
00:36:54,771 --> 00:36:57,846
of exponential levels, potentially. That will pay you. For that

715
00:36:57,846 --> 00:37:00,686
investment back. A growth manager and a value manager not

716
00:37:00,686 --> 00:37:02,606
going to agree with each other. On what is the

717
00:37:02,606 --> 00:37:04,846
right way to run a portfolio, and they likely will

718
00:37:04,846 --> 00:37:07,366
not hold the same. Stocks and a core or a

719
00:37:07,366 --> 00:37:10,246
blended portfolio could be mixture of both. And what we

720
00:37:10,246 --> 00:37:12,086
say on the second one is. It's usually not that

721
00:37:12,086 --> 00:37:15,006
clear cut. There's a lot of growth managers that do

722
00:37:15,006 --> 00:37:18,391
things that are called growth, quality growth, where they're. Saying,

723
00:37:18,391 --> 00:37:20,511
okay, I'm a growth manager, but I'm not going to

724
00:37:20,511 --> 00:37:23,071
outpay. For what I'm buying. I'm still very much focused

725
00:37:23,071 --> 00:37:26,191
on some of these fundamental metrics. You can have value

726
00:37:26,191 --> 00:37:29,191
investors that tend to be deep, deep value. And now

727
00:37:29,191 --> 00:37:31,391
you're. Looking at like they're going to be very volatile.

728
00:37:31,391 --> 00:37:33,271
They might look more like a growth manager in terms

729
00:37:33,271 --> 00:37:35,911
of the return profile, but they're focused on different kinds

730
00:37:35,911 --> 00:37:39,565
of companies. All right, so. Capitalization approach at the bottom.

731
00:37:41,374 --> 00:37:44,898
Again. Classifications can be different here. 's kind of view

732
00:37:44,898 --> 00:37:48,768
of it, I guess. So company capitalization is really, again,

733
00:37:48,768 --> 00:37:51,288
is there share price by number of shares outstanding? Right?

734
00:37:51,288 --> 00:37:54,528
So. Some managers are small cap managers. They're focused on

735
00:37:54,528 --> 00:37:58,248
smaller companies in the index. Their view is that small

736
00:37:58,248 --> 00:38:02,128
companies are less researched and tend to be areas where

737
00:38:02,128 --> 00:38:04,608
you can add value because the market is not covering

738
00:38:04,608 --> 00:38:06,986
them as well. If you think of a company. Like

739
00:38:06,986 --> 00:38:11,346
again, Microsoft. There are thousands of analysts looking at Microsoft

740
00:38:11,346 --> 00:38:12,906
and trying to come up with what's the fair value

741
00:38:12,906 --> 00:38:14,946
of Microsoft. Do you think you're going to figure out

742
00:38:14,946 --> 00:38:17,426
something that everyone else hasn't. But again, if you're a

743
00:38:17,426 --> 00:38:20,266
very small company, right, and. You have one or two

744
00:38:20,266 --> 00:38:23,506
bank analysts following you. There might be something getting missed

745
00:38:23,506 --> 00:38:26,346
at investment manager. Can pick up, right? So small cap

746
00:38:26,346 --> 00:38:28,553
mid. Cap. Now you're coming up, you're a bit bigger

747
00:38:28,553 --> 00:38:31,713
and then into large cap. Companies. And there's also mega

748
00:38:31,713 --> 00:38:36,021
cap today, so some companies. That can really, once talk

749
00:38:36,021 --> 00:38:38,901
alone, can move the index based on its performance, based

750
00:38:38,901 --> 00:38:42,341
on how big it gets right. So one thing that

751
00:38:42,341 --> 00:38:45,541
you'll often see when you look at different strategies again,

752
00:38:45,541 --> 00:38:48,181
correlation. So even though you've talked about correlation of different

753
00:38:48,181 --> 00:38:51,021
asset classes, you can see correlation of different investment managers,

754
00:38:51,021 --> 00:38:52,981
different strategies. And what we've done here is you can

755
00:38:52,981 --> 00:38:55,351
have two investment managers say a value. And a growth

756
00:38:55,351 --> 00:38:57,911
manager in the same portfolio, and they're going to be

757
00:38:57,911 --> 00:39:00,391
going up and down at different times. Right. But what

758
00:39:00,391 --> 00:39:03,191
you can potentially try to create for yourself is that

759
00:39:03,191 --> 00:39:06,351
middle line, which is if you utilize more than one

760
00:39:06,351 --> 00:39:09,471
strategy, you can sometimes create a portfolio that actually is

761
00:39:09,471 --> 00:39:11,631
better than the sum of its parts. Right? So these

762
00:39:11,631 --> 00:39:14,071
two managers offset each other, and we'll give you some

763
00:39:14,071 --> 00:39:17,528
diversification. And when favors fall in or, sorry, when different

764
00:39:17,528 --> 00:39:19,328
equity styles fall in and out of favor of the

765
00:39:19,328 --> 00:39:23,288
market. There's many times value investing has been a hard

766
00:39:23,288 --> 00:39:26,648
place to be over the last five plus years, the

767
00:39:26,648 --> 00:39:30,155
growth managers have won. The kind of contest lately when

768
00:39:30,155 --> 00:39:33,155
you look at the US market especially, right? So the

769
00:39:33,155 --> 00:39:35,795
kind of stocks, tech stocks, these other stocks that value

770
00:39:35,795 --> 00:39:38,395
managers don't like. You might have value managers out there

771
00:39:38,395 --> 00:39:41,754
today that are just. They're pretty depressed, right? They're going

772
00:39:41,754 --> 00:39:44,314
to their client meetings, and the numbers are. All red

773
00:39:44,314 --> 00:39:46,194
and they're saying, listen, I bet you it's going to

774
00:39:46,194 --> 00:39:49,474
turn right. And it could. And if it does turn,

775
00:39:49,474 --> 00:39:51,274
they're all going to shoot to the top. Right. And

776
00:39:51,274 --> 00:39:53,594
the growth managers will crash. Right. And this is the

777
00:39:53,594 --> 00:39:56,394
thing, they both have views the value manager, a growth

778
00:39:56,394 --> 00:39:59,594
manager. It can be hard to determine who's right and

779
00:39:59,594 --> 00:40:02,748
who can see what's going to happen. Potentially, by diversifying

780
00:40:02,748 --> 00:40:05,548
across them, you can kind of get yourself some obviously

781
00:40:05,548 --> 00:40:07,868
offsetting styles and that's what. Again, we have a lot

782
00:40:07,868 --> 00:40:11,188
of clients that utilize this approach and equities. Sometimes in

783
00:40:11,188 --> 00:40:13,948
other asset classes like bonds, you may see less ability

784
00:40:13,948 --> 00:40:16,868
for managers to create these kind of profiles, but we

785
00:40:16,868 --> 00:40:19,228
won't get into that. So one of the things we

786
00:40:19,228 --> 00:40:21,491
got asked a little bit about last time. Was a

787
00:40:21,491 --> 00:40:24,171
bit about funds and how should boards look at different

788
00:40:24,171 --> 00:40:26,731
things. So we just wanted to. Really kind of recap

789
00:40:26,731 --> 00:40:29,371
a little bit in a few minutes. There's different ways

790
00:40:29,371 --> 00:40:32,891
you can approach implementing a portfolio. Right. One of the

791
00:40:32,891 --> 00:40:35,811
ways that a lot that you can do is called

792
00:40:35,811 --> 00:40:39,886
again. And the pop bullet point there. Following decisions related

793
00:40:39,886 --> 00:40:42,686
to active management and equity style. Those are typically the

794
00:40:42,686 --> 00:40:45,926
first ones you might make usually. Then you might talk

795
00:40:45,926 --> 00:40:49,126
about segregated or funds. So a segregated account or fund

796
00:40:49,126 --> 00:40:51,246
about how you want to set up the investment or

797
00:40:51,246 --> 00:40:54,488
the strategy. Both approaches here have pros and cons, which

798
00:40:54,488 --> 00:40:58,048
we'll talk about. Segregated accounts were typically years ago, really

799
00:40:58,048 --> 00:41:01,088
what most people had, that was actually the standard, a

800
00:41:01,088 --> 00:41:05,027
segregated account is where you have a custodian? And you

801
00:41:05,027 --> 00:41:07,987
own the securities directly. So if you have a canadian

802
00:41:07,987 --> 00:41:11,627
equity manager, you own every single security in your portfolio.

803
00:41:11,627 --> 00:41:14,387
And what happens is the manager has authority to trade

804
00:41:14,387 --> 00:41:17,547
in your portfolio, so. Basically, they're making the calls of

805
00:41:17,547 --> 00:41:20,667
what to buy and sell. But you hold those securities.

806
00:41:20,667 --> 00:41:24,427
Directly. Right. They're in your name. The segregated accounts can.

807
00:41:24,993 --> 00:41:27,353
Have some advantages, so they can allow you to customize

808
00:41:27,353 --> 00:41:30,233
the strategy to yourself. So if you told the manager.

809
00:41:30,233 --> 00:41:33,233
Listen, I don't want you to buy this one stock

810
00:41:33,233 --> 00:41:36,113
again. This can sometimes happen in the corporate world where

811
00:41:36,113 --> 00:41:37,873
you go. Listen, I don't want you buying any. Of

812
00:41:37,873 --> 00:41:41,273
my competitors inside of this portfolio, they can say, okay,

813
00:41:41,273 --> 00:41:43,313
I won't buy that one. Stock for you. We'll take

814
00:41:43,313 --> 00:41:45,607
it out because all the. Securities are in your name

815
00:41:45,607 --> 00:41:48,487
and they're trading in the portfolio, and you can potentially

816
00:41:48,487 --> 00:41:51,447
make securities lending income. So a lot of portfolios on

817
00:41:51,447 --> 00:41:55,567
the segregated side will lend out securities, right? For securities

818
00:41:55,567 --> 00:41:58,887
lending to managers that engage in that, you can make

819
00:41:58,887 --> 00:42:03,007
some money beyond just holding your securities. Right. The segregated

820
00:42:03,007 --> 00:42:06,455
account structures can be difficult sometimes. To implement depending on

821
00:42:06,455 --> 00:42:10,095
how much money you have and the market. Canadian equities

822
00:42:10,095 --> 00:42:15,068
simpler if you want a segregated emerging market portfolio? Your

823
00:42:15,068 --> 00:42:17,548
custodian has to open markets in all of these different

824
00:42:17,548 --> 00:42:20,668
parts of the world that are maybe more difficult to

825
00:42:20,668 --> 00:42:23,028
do, and it could be cumbersome for you to be

826
00:42:23,028 --> 00:42:25,068
able to implement it that way. So depending on the

827
00:42:25,068 --> 00:42:28,102
strategy, how big you are, A lot of investment managers

828
00:42:28,102 --> 00:42:30,862
tend to would rather have you go into their fund,

829
00:42:30,862 --> 00:42:32,982
which is the last one at the bottom. So the

830
00:42:32,982 --> 00:42:35,302
industry has moved a lot towards investment manager will make

831
00:42:35,302 --> 00:42:38,022
their own pooled fund or a mutual fund. Same idea.

832
00:42:39,369 --> 00:42:42,849
Where basically they are managing the strategy, and every investor

833
00:42:42,849 --> 00:42:45,889
buys units of the funds. So instead of owning the

834
00:42:45,889 --> 00:42:48,489
physical securities. You own units of a fund that owns

835
00:42:48,489 --> 00:42:51,729
the physical securities. It's like inception. Right. How many levels

836
00:42:51,729 --> 00:42:54,129
down? Right. Do you go before you own the thing?

837
00:42:54,129 --> 00:42:55,929
A lot. Of the pool funds that you see today

838
00:42:55,929 --> 00:42:59,249
can provide flexibility around having a custodian. You may not.

839
00:42:59,704 --> 00:43:02,024
Necessarily need a custodian. You need a custodian for a

840
00:43:02,024 --> 00:43:04,624
segregated account? You don't. Necessarily need that for a pool

841
00:43:04,624 --> 00:43:07,904
fund and can potentially reduce fees depending on the manager.

842
00:43:07,904 --> 00:43:10,344
Scale. Sometimes investment manager will charge you less on a

843
00:43:10,344 --> 00:43:13,905
pool fund than they will on a segregated account. And

844
00:43:13,905 --> 00:43:16,625
again, pool funds, they'll reduce your ability to have client

845
00:43:16,625 --> 00:43:19,465
specific constraints. So in that example, where you might not

846
00:43:19,465 --> 00:43:22,305
want to own your competitor pool fund won't allow it

847
00:43:22,305 --> 00:43:25,545
because. They can't make one decision for you that affects

848
00:43:25,545 --> 00:43:28,105
everyone else in the pool fund. The pool fund has

849
00:43:28,105 --> 00:43:30,705
its own investment policy. And you're going in on that

850
00:43:30,705 --> 00:43:34,260
policy, right? That's the way it runs. And then typically,

851
00:43:34,260 --> 00:43:37,540
trading costs and securities lending are spread across the whole

852
00:43:37,540 --> 00:43:42,300
pool, so everyone is paying together for trading. Everyone's receiving

853
00:43:42,300 --> 00:43:46,024
their share of the securities lending and again. There is

854
00:43:46,024 --> 00:43:47,624
sometimes pool funds can have additional, well, they do it.

855
00:43:47,624 --> 00:43:50,464
They have additional operating costs that may or may not

856
00:43:50,464 --> 00:43:52,544
be less than what you would pay on your own

857
00:43:52,544 --> 00:43:56,493
if you had a segregated account. We can't necessarily say

858
00:43:56,493 --> 00:43:59,133
exactly. It depends on the size of the manager, size

859
00:43:59,133 --> 00:44:01,773
of your. Portfolio and who the manager is, right? So

860
00:44:01,773 --> 00:44:05,693
that's really fundamentally kind of two approaches, right? And when

861
00:44:05,693 --> 00:44:08,413
you move over to the, that's really public markets, when

862
00:44:08,413 --> 00:44:11,533
you over the private markets. You would have to be

863
00:44:11,533 --> 00:44:14,213
very large to have a private market manager, like an

864
00:44:14,213 --> 00:44:17,916
infrastructure manager. Make you a segregated portfolio, because in this

865
00:44:17,916 --> 00:44:20,676
case, you can think they're not just putting the securities

866
00:44:20,676 --> 00:44:23,076
in your portfolio, they're buying you a bridge or a

867
00:44:23,076 --> 00:44:26,716
hospital, and they're putting it in your portfolio. Right. So

868
00:44:26,716 --> 00:44:30,436
segregated accounts on the private side really exist only at

869
00:44:30,436 --> 00:44:33,756
the mega end of the spectrum again. There's asterisks to

870
00:44:33,756 --> 00:44:36,304
that. You could potentially have kind of. Co investments with

871
00:44:36,304 --> 00:44:39,504
some managers, that would look like a segregated portfolio. But

872
00:44:39,504 --> 00:44:44,534
in general. Most investors on the institutional side exist in

873
00:44:44,534 --> 00:44:47,614
the private market through fund investment, so the manager has

874
00:44:47,614 --> 00:44:50,534
a fund has created it for you. And there's two

875
00:44:50,534 --> 00:44:54,454
main structures there's open ended and closed ended. Right. Open

876
00:44:54,454 --> 00:44:57,574
ended funds are evergreen exist forever. Right. And so the

877
00:44:57,574 --> 00:45:00,494
idea is you buy into a fund, you get ownership

878
00:45:00,494 --> 00:45:03,086
of all the assets that are already. In the fund,

879
00:45:03,086 --> 00:45:08,119
but again, typically very much on the valuation. Last meeting.

880
00:45:08,119 --> 00:45:11,079
There's talk about appraisal policies and the like. That is

881
00:45:11,079 --> 00:45:13,679
a factor. In these funds because how the assets are

882
00:45:13,679 --> 00:45:15,599
being appraised is how you're going. To move in and

883
00:45:15,599 --> 00:45:17,479
out of the fund. So an open ended fund offers

884
00:45:17,479 --> 00:45:21,199
you liquidity, but is getting that acquittal off of appraised

885
00:45:21,199 --> 00:45:23,999
values. Right? So close ended funds are the other side,

886
00:45:23,999 --> 00:45:26,839
where you have an investment manager that goes to market

887
00:45:26,839 --> 00:45:30,198
fundraises. For a strategy. And then once they put, it's

888
00:45:30,198 --> 00:45:32,438
like an auction. They put up their hand for last

889
00:45:32,438 --> 00:45:35,558
calls. You can commit, and after that it's over. They

890
00:45:35,558 --> 00:45:38,998
go and implement. The strategy. Nobody leaves or comes until

891
00:45:38,998 --> 00:45:41,198
the fund winds up at the end and it's. Fulfilled

892
00:45:41,198 --> 00:45:45,518
its investment strategy. More restrictive for redemptions you can't redeem.

893
00:45:45,518 --> 00:45:47,438
You can try. To sell your interest in the second.

894
00:45:47,252 --> 00:45:50,802
Secondary market. But again, that can be difficult. You can

895
00:45:50,802 --> 00:45:54,042
imagine. Try selling your car on Kojigi. Right? Somebody comes

896
00:45:54,042 --> 00:45:56,474
in. It looks like you drove it into a tree

897
00:45:56,474 --> 00:45:59,434
one day. Right? Imagine when you're looking. At an infrastructure

898
00:45:59,434 --> 00:46:01,754
fund and trying to sell that to someone. Right. It

899
00:46:01,754 --> 00:46:04,074
comes more difficult as you can imagine to do those

900
00:46:04,074 --> 00:46:07,234
kind of transactions. So again, what happens in the private

901
00:46:07,234 --> 00:46:09,234
space can be a little bit different than what's available

902
00:46:09,234 --> 00:46:11,434
in the traditional, and we want to drive us back

903
00:46:11,434 --> 00:46:14,154
to what's the focus for most boards, right? And I

904
00:46:14,154 --> 00:46:17,080
would say the decisions made. At the investment policy level.

905
00:46:18,195 --> 00:46:21,835
That idea of portfolio construction. They're typically the largest focus

906
00:46:21,835 --> 00:46:24,275
for most boards because they have the largest impact on

907
00:46:24,275 --> 00:46:27,075
the risk and return. The expected results of the portfolio

908
00:46:27,075 --> 00:46:29,435
are really going to be driven by the decisions you

909
00:46:29,435 --> 00:46:32,613
make at the policy level. So the second one. It's

910
00:46:32,613 --> 00:46:35,213
important to understand what you've invested in from a strategy

911
00:46:35,213 --> 00:46:38,773
perspective, but typically where if you utilize an ocio, you've

912
00:46:38,773 --> 00:46:42,973
delegated the implementation. To this third party. So again, there's

913
00:46:42,973 --> 00:46:45,493
a cost to delegation, right? You've hired. Them to do

914
00:46:45,493 --> 00:46:47,253
this for you if you've hired someone to do it.

915
00:46:47,253 --> 00:46:50,594
And then again, you hire. Somebody to come in and

916
00:46:50,594 --> 00:46:53,434
renovate your house, a general contractor. And then you're constantly

917
00:46:53,434 --> 00:46:55,994
over a shoulder. Ask them every decision he's making. You

918
00:46:55,994 --> 00:46:57,794
might not be getting the value. What you've hired this

919
00:46:57,794 --> 00:46:59,954
professional to go out and do, right? So the idea

920
00:46:59,954 --> 00:47:03,314
is most boards, especially in an ocio structure, are focused

921
00:47:03,314 --> 00:47:06,994
on the policy. But again, you want to see reporting

922
00:47:06,994 --> 00:47:10,228
on the strategies you're in, but there has to. Be

923
00:47:10,228 --> 00:47:13,228
a position of the implementation is being delegated and we're

924
00:47:13,228 --> 00:47:16,908
retaining these policy decisions. Right again because most boards can

925
00:47:16,908 --> 00:47:20,148
commit the time required to review all aspects at the

926
00:47:20,148 --> 00:47:23,428
implementation stage. There's a lot of work at the implementation

927
00:47:23,428 --> 00:47:26,252
stage that you have to consider. You may not have

928
00:47:26,252 --> 00:47:30,621
your fiduciary duty. Maybe better spent in other areas. If

929
00:47:30,621 --> 00:47:33,261
you're kind of taking effort that could be spent in

930
00:47:33,261 --> 00:47:35,501
areas where you can drive. More value because you're getting

931
00:47:35,501 --> 00:47:38,221
into the weeds. In some spots, you might determine is

932
00:47:38,221 --> 00:47:41,381
this the best outcome for us. Right? And then ongoing

933
00:47:41,381 --> 00:47:43,741
monitoring and strong governance is really what you try. To

934
00:47:43,741 --> 00:47:46,101
do. You try to have a feedback loop where obviously

935
00:47:46,101 --> 00:47:48,421
you're dictating or. Delegating to someone, they're giving you the

936
00:47:48,421 --> 00:47:52,254
reporting you need to determine. That you're satisfied that the

937
00:47:52,254 --> 00:47:56,494
implementation, that the policies being carried out. As you wanted

938
00:47:56,494 --> 00:47:58,294
to. Right? So I know we've got about another ten

939
00:47:58,294 --> 00:48:00,414
minutes for the. Last section, hopefully a little bit quicker.

940
00:48:00,414 --> 00:48:02,734
This is really the oversight and the monitoring that we

941
00:48:02,734 --> 00:48:04,294
can touch on. So I don't know if there's any

942
00:48:04,294 --> 00:48:07,014
questions through the implementation, but. This one's going to look

943
00:48:07,014 --> 00:48:10,280
a little bit about the results. Not seeing any questions.

944
00:48:15,953 --> 00:48:17,633
So keep going. So that's a mari. So, monitoring function.

945
00:48:17,633 --> 00:48:19,433
This is that feedback loop, right? I think on the

946
00:48:19,433 --> 00:48:21,393
first day, we showed you, like, a recycling sign, right?

947
00:48:21,393 --> 00:48:24,593
Like, policy implementation, monitoring. So monitoring is trying to assess

948
00:48:24,593 --> 00:48:27,433
those other two areas. Right. So an institutional and monitoring

949
00:48:27,433 --> 00:48:31,033
function in most institutional portfolios, typically monthly to quarterly. Right.

950
00:48:31,033 --> 00:48:34,313
You're getting reports sent to you on performance assets. Here's

951
00:48:34,313 --> 00:48:37,625
what's happening. All right. And then more and more probably

952
00:48:37,625 --> 00:48:41,625
in depth policy reviews are being conducted more annually, right?

953
00:48:41,625 --> 00:48:43,625
So there's kind of an annual function for most groups,

954
00:48:43,625 --> 00:48:47,385
and then quarterly or monthly, frequently. Reporting. Again, performance reporting

955
00:48:47,385 --> 00:48:49,745
should link back to the investment policy. Right. And the

956
00:48:49,745 --> 00:48:51,625
metrics benchmark set up by the board. So if you

957
00:48:51,625 --> 00:48:53,985
have the objective, if you put objectives in the policy,

958
00:48:53,985 --> 00:48:55,665
that says over the next five years, we want to

959
00:48:55,665 --> 00:48:58,890
earn. 6%. Well, the monitoring should probably be incorporating. Well,

960
00:48:58,890 --> 00:49:00,770
what has been the five year return is it meeting

961
00:49:00,770 --> 00:49:03,890
that objective. Right. So we talk about both absolute and

962
00:49:03,890 --> 00:49:07,410
relative performance assessments. So how is an invested again. If

963
00:49:07,410 --> 00:49:10,650
you're a value manager, you're underperforming the benchmark. But how

964
00:49:10,650 --> 00:49:12,930
do you look like next to other value managers? Are

965
00:49:12,930 --> 00:49:15,010
you the best? Are you the best of the worst,

966
00:49:15,010 --> 00:49:17,305
right? So those. Are things you want to see. A

967
00:49:17,305 --> 00:49:20,305
relative assessment can give you some barometer to what a

968
00:49:20,305 --> 00:49:23,145
strategy is doing right, and then qualitative assessment, we would

969
00:49:23,145 --> 00:49:26,105
say, is crucial, if not more. Important than the quantitative,

970
00:49:26,105 --> 00:49:28,105
right? So the numbers are one thing, but what's happening?

971
00:49:29,481 --> 00:49:31,980
Obviously. At the investment firms or the OCI managers that

972
00:49:31,980 --> 00:49:34,580
you've employed. Those are factors you would want to know.

973
00:49:34,580 --> 00:49:37,780
Right? Firm changes. So one of the things straight from

974
00:49:37,780 --> 00:49:39,900
the c, if anyone's a CFA Turner. Holder has gone

975
00:49:39,900 --> 00:49:42,020
through this. They made you learn this. This is basically

976
00:49:42,020 --> 00:49:44,900
how you set a good benchmark. There's this acronym, Samurai,

977
00:49:44,900 --> 00:49:47,540
right? So specified in advance. If you're going to have

978
00:49:47,540 --> 00:49:49,820
a benchmark, that investment manager is going to be accountable.

979
00:49:49,820 --> 00:49:53,943
To. Should be specified in advance. Should be appropriate. Right.

980
00:49:53,943 --> 00:49:56,749
So you should know about it. Again. Shouldn't benchmark an

981
00:49:56,749 --> 00:49:59,029
equity manager to a bond index that doesn't make a

982
00:49:59,029 --> 00:50:02,149
lot of sense, measurable. Should be able to actually calculate

983
00:50:02,149 --> 00:50:05,749
it, right? Unambiguous. It should be clear what securities are

984
00:50:05,749 --> 00:50:09,775
in it. The relative of current market opinions means. You

985
00:50:09,775 --> 00:50:12,015
shouldn't have kind of obscure securities in it that no

986
00:50:12,015 --> 00:50:14,535
one can form an opinion. On because there's no information

987
00:50:14,535 --> 00:50:18,015
available. Accountable. The manager will take ownership of it and

988
00:50:18,015 --> 00:50:20,815
investable. Should be able to recreate it or invest in

989
00:50:20,815 --> 00:50:23,535
the benchmark. If you didn't. Want to be active. Not

990
00:50:23,535 --> 00:50:26,295
all benchmarks meet all of these, right? So if you're.

991
00:50:26,295 --> 00:50:28,015
A real estate manager and you say I'm going to

992
00:50:28,015 --> 00:50:32,981
benchmark myself. To cpi plus four. Yeah. That might be

993
00:50:32,981 --> 00:50:36,261
somewhat specified in advance might be accountable, but it's not

994
00:50:36,261 --> 00:50:38,581
investable. You can't invest in it. So there's always going

995
00:50:38,581 --> 00:50:40,221
to be areas where you have to give and take

996
00:50:40,221 --> 00:50:43,981
on making a benchmark, but these are technically the concepts

997
00:50:43,981 --> 00:50:45,621
you should be. Trying to look at when you put

998
00:50:45,621 --> 00:50:48,061
one in place. Right. So we've given you a modern

999
00:50:48,061 --> 00:50:50,981
example. This is this example client, right? So you get

1000
00:50:50,981 --> 00:50:54,284
results, right? June 30. So this portfolio you can see

1001
00:50:54,284 --> 00:50:58,164
made 1.67% in the quarter, and it underperformed its benchmark

1002
00:50:58,164 --> 00:51:01,524
by 00:15 so this report you'd hopefully want to see

1003
00:51:01,524 --> 00:51:03,924
well, what were the areas that underperformed in the benchmark?

1004
00:51:03,924 --> 00:51:05,964
But over the five years this client might have had

1005
00:51:05,964 --> 00:51:09,004
a goal of make 6%. Hey, we've exceeded that. We

1006
00:51:09,004 --> 00:51:11,804
made eight, but also we beat our benchmark by the

1007
00:51:11,804 --> 00:51:15,656
full percent over. Five years. There's also a relative percentile

1008
00:51:15,656 --> 00:51:18,736
ranking at the top. So this is comparing the portfolio

1009
00:51:18,736 --> 00:51:21,856
to other similar portfolios. So again, maybe you made eight,

1010
00:51:21,856 --> 00:51:24,496
but everyone else made twelve. Maybe the eight doesn't look

1011
00:51:24,496 --> 00:51:27,776
so good anymore. Right. So what's the relative performance? To

1012
00:51:27,776 --> 00:51:30,656
other similar funds. And then we also look at the

1013
00:51:30,656 --> 00:51:32,616
risk on the far right. So what did you take?

1014
00:51:33,368 --> 00:51:35,848
To get this right. So there's an information ratio for

1015
00:51:35,848 --> 00:51:38,408
everyone familiar? That's kind of your unit of return for

1016
00:51:38,408 --> 00:51:41,248
your risk. Then use your capture ratios. A lot of

1017
00:51:41,248 --> 00:51:44,288
clients we have focus on how does the portfolio perform

1018
00:51:44,288 --> 00:51:46,248
when the market's up? How does it perform? When the

1019
00:51:46,248 --> 00:51:49,448
market's down. So this specific fund, every time the market

1020
00:51:49,448 --> 00:51:52,528
goes up, there's. 112 there on the up market. Capture

1021
00:51:52,528 --> 00:51:53,917
if you look to the right. That means if the

1022
00:51:53,917 --> 00:51:58,798
mark goes up ten, they go up, basically. Another 12%

1023
00:51:58,798 --> 00:52:02,158
above that, the market falls, or capturing 107% of all

1024
00:52:02,158 --> 00:52:04,078
the markets. So they're doing worse than the market when

1025
00:52:04,078 --> 00:52:06,758
it's down, but they're exceeding by a higher merch and

1026
00:52:06,758 --> 00:52:10,278
when it stops. So technically, that relationship has helped them.

1027
00:52:10,278 --> 00:52:13,478
They've more than compensated for the losses they've had on

1028
00:52:13,478 --> 00:52:16,718
down markets through the performance and up markets, right? There's

1029
00:52:16,718 --> 00:52:19,750
a lot of. Statistics that you can get generated on

1030
00:52:19,750 --> 00:52:23,070
a portfolio. These are just a sampling, but these are

1031
00:52:23,070 --> 00:52:24,670
some of the ones that we find most groups are

1032
00:52:24,670 --> 00:52:28,750
somewhat interested in. Right. Relative risk and then absolute next

1033
00:52:28,750 --> 00:52:32,550
to your benchmark, but all of that is timepoint sensitive.

1034
00:52:32,550 --> 00:52:34,070
That was all at one date. That was at the

1035
00:52:34,070 --> 00:52:38,273
second quarter. The same portfolio, you can look at trend

1036
00:52:38,273 --> 00:52:40,873
analysis over time. So this is every core? These are.

1037
00:52:40,873 --> 00:52:43,953
Five year returns on a quarterly basis going down. So

1038
00:52:43,953 --> 00:52:46,393
if you look in that first column of the added

1039
00:52:46,393 --> 00:52:48,913
value. You can see that starting in the first quarter

1040
00:52:48,913 --> 00:52:53,033
of 2022, it started to deteriorate, so it starts falling.

1041
00:52:53,033 --> 00:52:54,633
So this might be something. If you're bored, you could

1042
00:52:54,633 --> 00:52:56,580
look there and say, hey, listen. The numbers are still

1043
00:52:56,580 --> 00:52:59,380
green, but there seems to be an alarming trend here.

1044
00:52:59,380 --> 00:53:02,260
Every quarter we're losing some. Six continues. We're going to

1045
00:53:02,260 --> 00:53:05,460
be negative soon. What's happening? In the portfolio that's driving

1046
00:53:05,460 --> 00:53:08,780
this same thing on that bear market capture. You want

1047
00:53:08,780 --> 00:53:10,380
that? To be less than 100. You want to be

1048
00:53:10,380 --> 00:53:12,540
better than the market when it's negative. It used to

1049
00:53:12,540 --> 00:53:15,380
be. And then you can see that something obviously started

1050
00:53:15,380 --> 00:53:17,592
to get worse. Over a few quarters. But on the

1051
00:53:17,592 --> 00:53:21,792
flip side, the bowl actually somewhat improved through a few

1052
00:53:21,792 --> 00:53:25,232
of them. Right. So all this trend analysis might help

1053
00:53:25,232 --> 00:53:28,192
you try to determine, is there something going on? From

1054
00:53:28,192 --> 00:53:30,992
a risk perspective in the portfolio that I'd want to

1055
00:53:30,992 --> 00:53:33,352
be aware of right by. Not just looking at a

1056
00:53:33,352 --> 00:53:37,067
specific point in time. Every report. A lot of things

1057
00:53:37,067 --> 00:53:40,284
that you want to know. Is compliance. Right. So you

1058
00:53:40,284 --> 00:53:42,044
have an asset mix policy that says we got to

1059
00:53:42,044 --> 00:53:44,364
be this much. Fixed income, this much equity, and there's

1060
00:53:44,364 --> 00:53:47,564
ranges for most portfolios that you can operate. Within. So

1061
00:53:47,564 --> 00:53:49,604
this is actually showing you what are you above and

1062
00:53:49,604 --> 00:53:51,924
below in? Right. So this would show you the current

1063
00:53:51,924 --> 00:53:54,964
quarter, the previous quarter, and the policy. Right. And the

1064
00:53:54,964 --> 00:53:57,084
range of what you're allowed to be in to make

1065
00:53:57,084 --> 00:54:00,662
sure you're within the limits. And a qualitative assessment is

1066
00:54:00,662 --> 00:54:03,584
an example where. Who do you have managing something for

1067
00:54:03,584 --> 00:54:07,024
you in this example? Even Ocio, an alternative manager and.

1068
00:54:07,024 --> 00:54:09,784
Then we've given performance objectives straight from your policy. Are

1069
00:54:09,784 --> 00:54:12,904
they meeting them? Yes. No, manager. Changes. Is there anything

1070
00:54:12,904 --> 00:54:15,144
going on with this? So the one manager at the

1071
00:54:15,144 --> 00:54:17,864
bottom there, we've given an example. Maybe they were doing

1072
00:54:17,864 --> 00:54:21,544
okay on performance, but they have significant organizational turnover. Maybe

1073
00:54:21,544 --> 00:54:24,796
they're. Failing so you can have an overall rating. And

1074
00:54:24,796 --> 00:54:27,276
if you have managers that are failing, you might put

1075
00:54:27,276 --> 00:54:29,876
them on a watch. Right. So now it's a more

1076
00:54:29,876 --> 00:54:32,596
formal assessment. You're going to do based on whether or

1077
00:54:32,596 --> 00:54:34,676
not they're performing, this could be for no CIO. Manager.

1078
00:54:34,676 --> 00:54:36,876
This could be a very investment manager as well. And

1079
00:54:36,876 --> 00:54:39,796
then monitoring an OCIo mandate. Which might be applicable to

1080
00:54:39,796 --> 00:54:43,051
you. So within the ocio governance structure, the Dec. Decisions

1081
00:54:43,051 --> 00:54:46,811
relating to underlying managers are delegated or strategies are delegated

1082
00:54:46,811 --> 00:54:49,811
to the oci. So you want to receive ongoing reporting,

1083
00:54:49,811 --> 00:54:52,451
likely on the results, but also you got to represent

1084
00:54:52,451 --> 00:54:55,251
that's. Not a decision factor that you're making. You're not

1085
00:54:55,251 --> 00:54:59,051
picking the strategy, the OCio manager is so again they

1086
00:54:59,051 --> 00:55:01,811
may sit there and have again. If you see an

1087
00:55:01,811 --> 00:55:04,193
underperforming. Strategy. You might have a question for them on

1088
00:55:04,193 --> 00:55:06,913
what's your plan for that, but you wouldn't. Necessarily be

1089
00:55:06,913 --> 00:55:10,273
making the call to, say, fire that strategy. Right. So

1090
00:55:10,273 --> 00:55:14,793
monitoring an ocio. Relationship requires aspects of traditional investment manager

1091
00:55:14,793 --> 00:55:17,953
monitoring but also needs a qualitative assessment around the ocio

1092
00:55:17,953 --> 00:55:20,993
because those CIO is implementing. But they're typically also giving

1093
00:55:20,993 --> 00:55:24,060
you advice, right? On the policy on. New asset classes.

1094
00:55:24,060 --> 00:55:26,260
So you kind of want to get an assessment of.

1095
00:55:26,260 --> 00:55:29,100
Do I think that advice is adding value. And again,

1096
00:55:29,100 --> 00:55:32,380
Eckler has quite a bit of experience doing these reviews,

1097
00:55:32,380 --> 00:55:34,460
so. Obviously where we do them, we think it's obviously

1098
00:55:34,460 --> 00:55:36,460
quite good to try to determine where you might see

1099
00:55:36,460 --> 00:55:40,380
differences in opinion. So I'll stop there for the question.

1100
00:55:40,380 --> 00:55:43,897
Yeah, I think board member test a question. Thank. You,

1101
00:55:43,897 --> 00:55:48,737
Kyle. Terrific presentation. My question is really to talk about.

1102
00:55:48,737 --> 00:55:50,577
I think this is a key point. For us who

1103
00:55:50,577 --> 00:55:53,817
are employing an ocio model. And the question I have

1104
00:55:53,817 --> 00:55:57,422
for you is whether or not you typically see. The

1105
00:55:57,422 --> 00:56:03,783
introduction. Of a policy that specifically outlines what's been delegated

1106
00:56:03,783 --> 00:56:08,914
to the Ocio versus what the governing board retains. And.

1107
00:56:10,206 --> 00:56:13,886
If that policy lives within a broader investment policy or

1108
00:56:13,886 --> 00:56:16,886
if it's a standalone document and the reason I'm feeling

1109
00:56:16,886 --> 00:56:20,686
that is actually post your training. One of the questions

1110
00:56:20,686 --> 00:56:22,886
that I have is I've seen some areas of our

1111
00:56:22,886 --> 00:56:28,002
delegation. For example, minor adjustment to policies. And, Jim, I

1112
00:56:28,002 --> 00:56:30,442
think you've raised it a number of times of how

1113
00:56:30,442 --> 00:56:35,032
much are we allowing? Investment policy adjustments to go on

1114
00:56:35,032 --> 00:56:40,818
beyond because. There is. This dual challenge that you face

1115
00:56:40,818 --> 00:56:43,538
where you want to give the Ocio, the nimbleness. To

1116
00:56:43,538 --> 00:56:47,828
execute. But ultimately, our role is to ensure that the

1117
00:56:47,828 --> 00:56:50,468
assets are invested according to an investment policy. So how

1118
00:56:50,468 --> 00:56:53,988
much flex do you give in adjustments, particularly during the

1119
00:56:53,988 --> 00:56:58,748
implementation phase when you're onboarding? New provinces. So one, do

1120
00:56:58,748 --> 00:57:03,771
you advise a policy? To. How tight is that? In

1121
00:57:03,771 --> 00:57:06,971
particularly implementation phases. Yeah, I think those are great points.

1122
00:57:08,672 --> 00:57:10,512
So on the first part of your question, so most

1123
00:57:10,512 --> 00:57:12,352
clients we would have, I would 100%. Agree with you.

1124
00:57:12,352 --> 00:57:15,992
It should be very clear who's responsible for what that'd

1125
00:57:15,992 --> 00:57:20,281
be. Fundamentally, I would agree. Whether the policy. Extend. Most

1126
00:57:20,281 --> 00:57:22,001
groups would have it in the investment policy. To be

1127
00:57:22,001 --> 00:57:24,041
honest with you, there'd be a clear section at the

1128
00:57:24,041 --> 00:57:27,601
beginning that talks about governance. Right. So who's responsible for

1129
00:57:27,601 --> 00:57:32,239
what? And also, again, there's usually a section of responsibilities

1130
00:57:32,239 --> 00:57:34,799
that goes through. Ocio has to do this. This. The

1131
00:57:34,799 --> 00:57:37,159
board is responsible for this. The board has delegated certain

1132
00:57:37,159 --> 00:57:39,599
tasks even to staff or other people that would do

1133
00:57:39,599 --> 00:57:42,279
that. So to answer that, I don't think there's a

1134
00:57:42,279 --> 00:57:43,639
set rule on whether it has to be in your

1135
00:57:43,639 --> 00:57:46,679
investment policy or a standalone what you'll see, though, is

1136
00:57:46,679 --> 00:57:49,794
you probably have an investment management agreement, some. Somewhere, right?

1137
00:57:49,794 --> 00:57:53,629
Like an Ima with an OC. Typically what they say

1138
00:57:53,629 --> 00:57:56,109
in that Ima. You could write whatever you want in

1139
00:57:56,109 --> 00:57:59,229
your own policy. That Ima is what they're talking to

1140
00:57:59,229 --> 00:58:02,269
legally, to say, this is what I'm responsible for because

1141
00:58:02,269 --> 00:58:04,789
you sign this agreement with me. So you'd want to

1142
00:58:04,789 --> 00:58:07,189
make sure. The IMA is kind of consistent with what

1143
00:58:07,189 --> 00:58:08,949
you come up with in your policy. And again, most

1144
00:58:08,949 --> 00:58:11,909
OCI managers would want to see your investment policy to

1145
00:58:11,909 --> 00:58:15,273
say. You kind of have this thing outlined in your

1146
00:58:15,273 --> 00:58:16,713
policy. I just want to make it clear to you.

1147
00:58:16,713 --> 00:58:20,353
Our IMA does not say we're responsible for that. So

1148
00:58:20,353 --> 00:58:22,473
should we adjust this? Or do you think that we

1149
00:58:22,473 --> 00:58:25,514
need to talk about this point? But that's how I

1150
00:58:25,514 --> 00:58:28,615
think most groups would look at that. I can answer

1151
00:58:28,615 --> 00:58:31,855
you the second one in terms of ranges or flexibility

1152
00:58:31,855 --> 00:58:34,535
when you're implementing I think is kind of the point.

1153
00:58:34,535 --> 00:58:37,465
Again. There usually is some amount of. So if you

1154
00:58:37,465 --> 00:58:40,025
had investment policy, you might have ranges in it. For

1155
00:58:40,025 --> 00:58:43,025
asset classes. Right? That says this much. This much. Most

1156
00:58:43,025 --> 00:58:45,785
groups, if you're going through a transition to a portfolio

1157
00:58:45,785 --> 00:58:48,505
that's going to be materially different than what you're. In.

1158
00:58:48,505 --> 00:58:50,585
You may have a sentence under there that says, listen,

1159
00:58:50,585 --> 00:58:54,065
we acknowledge that the portfolio is. Conducting a transition to

1160
00:58:54,065 --> 00:58:57,488
a new governance structure during. This time period, the board

1161
00:58:57,488 --> 00:59:01,448
will allow for temporary deviations to the asset mix policy.

1162
00:59:01,448 --> 00:59:04,008
Any deviation in the policy has to be either you

1163
00:59:04,008 --> 00:59:05,848
could seek. That has to be approved by the board.

1164
00:59:05,848 --> 00:59:10,008
In advance or reported to the board within one quarter

1165
00:59:10,008 --> 00:59:13,568
with an explanation how we will move towards policy. Right.

1166
00:59:13,568 --> 00:59:16,775
So you typically would have some kind of overarching. Statement

1167
00:59:16,775 --> 00:59:19,175
that says, listen, I understand these are all our ranges,

1168
00:59:19,175 --> 00:59:21,615
but we acknowledge that it may not. Be possible to

1169
00:59:21,615 --> 00:59:23,815
stay within all of them. So again, most groups would

1170
00:59:23,815 --> 00:59:25,895
have it let's say you commit to real estate, a

1171
00:59:25,895 --> 00:59:27,335
real estate manager may not be able to take your

1172
00:59:27,335 --> 00:59:29,935
money. Immediately. Right. So you're going to be underweight, your

1173
00:59:29,935 --> 00:59:32,335
target. Right. Because you can't. Invest in it. So you

1174
00:59:32,335 --> 00:59:34,295
might have a sentence that says, listen, I acknowledge that

1175
00:59:34,295 --> 00:59:37,255
this might happen so to. The extent it happens, I

1176
00:59:37,255 --> 00:59:39,415
want to see reporting on it, and I want the

1177
00:59:39,415 --> 00:59:41,975
ocio manager to tell me what the strategy is to

1178
00:59:41,975 --> 00:59:45,655
get me to policy compliance in the timeline. Right. I

1179
00:59:45,655 --> 00:59:48,775
would rather not say. We're trying. We'll see what happens.

1180
00:59:48,775 --> 00:59:50,735
Should be. What are you telling me is going to

1181
00:59:50,735 --> 00:59:53,375
happen to get me there, right? So that's usually what

1182
00:59:53,375 --> 00:59:56,015
we would say so, Kyle, I'm retaining a couple of

1183
00:59:56,015 --> 00:59:59,613
things. One. That the delegation to the OcIo needs to

1184
00:59:59,613 --> 01:00:05,524
be articulated somewhere. And ideally, some kind of reference should

1185
01:00:05,524 --> 01:00:08,880
be made. To the IMA and the document of what

1186
01:00:08,880 --> 01:00:11,720
the manager themselves has accepted to take on as a

1187
01:00:11,720 --> 01:00:16,536
responsibility. I'm also retaining that in a transition period where

1188
01:00:16,536 --> 01:00:18,976
you may have assets in movement and where there needs

1189
01:00:18,976 --> 01:00:21,496
to be flow that can be called out in an

1190
01:00:21,496 --> 01:00:23,576
investment policy. I know I've used that in my own

1191
01:00:23,576 --> 01:00:27,879
personal. Work relationships where you call out a transition period

1192
01:00:27,879 --> 01:00:32,835
of time. So that there's a natural cessation. Okay. This

1193
01:00:32,835 --> 01:00:38,630
is very helpful. Thank you. No, thank you. Not seeing

1194
01:00:38,630 --> 01:00:41,350
any more questions yet. Do you have maybe one more

1195
01:00:41,350 --> 01:00:49,061
slide? Is that right? Oh, yeah. No, it's just a

1196
01:00:49,061 --> 01:00:53,074
big eckler. I don't have anything on that one. Okay,

1197
01:00:53,074 --> 01:00:59,268
great. Last call for questions, then. No, not seeing any.

1198
01:00:59,268 --> 01:01:04,050
Okay, well. This has been very helpful. All three sessions

1199
01:01:04,050 --> 01:01:08,028
have been very helpful, so thank you. Maybe we'll just

1200
01:01:08,028 --> 01:01:12,944
do some of. The regular admin stuff that we do.

1201
01:01:14,570 --> 01:01:16,610
So could I have a motion to receive the presentation

1202
01:01:16,610 --> 01:01:21,103
from Eckler? Thank you. Board member ready? Makes that motion.

1203
01:01:21,103 --> 01:01:26,876
All in favor, please raise your hands. Thank you. That

1204
01:01:26,876 --> 01:01:31,728
Carrie is very good. So thank you again, Kyle and

1205
01:01:31,728 --> 01:01:36,002
Brad, very much for these sessions. It's great. Thank you

1206
01:01:36,002 --> 01:01:38,082
so much. And obviously, if there's any questions that come

1207
01:01:38,082 --> 01:01:40,322
up after the fact. Feel free to reach out to

1208
01:01:40,322 --> 01:01:43,882
us more. Happy to answer. Okay, great. Thank you. Yeah.

1209
01:01:43,882 --> 01:01:46,402
All right. Have a great day. Thank you. Thanks a

1210
01:01:46,402 --> 01:01:51,474
lot. Now, before everybody goes, can I have a motion

1211
01:01:51,474 --> 01:01:53,754
that the appropriate staff of one jib and one investment

1212
01:01:53,754 --> 01:01:56,594
be given the authority to do all things necessary, including

1213
01:01:56,594 --> 01:02:00,114
executing any documents to give effect. To the board's decisions

1214
01:02:00,114 --> 01:02:03,965
today. Board member Giles makes that motion. All in favor,

1215
01:02:03,965 --> 01:02:11,185
please raise your hands. Any opposed? No. All right. Can

1216
01:02:11,185 --> 01:02:14,547
I have a motion to adjourn? Makes that motion. All

1217
01:02:14,547 --> 01:02:22,248
in favor, please raise your hands. Any opposed? I would

1218
01:02:22,248 --> 01:02:26,363
say that carries so. We are now adjourned. And just

1219
01:02:26,363 --> 01:02:29,843
as a reminder, our next meeting is on Wednesday, November

1220
01:02:29,843 --> 01:02:33,323
27 at 10:00 so we'll look forward to seeing you

1221
01:02:33,323 --> 01:02:35,283
all there. Thanks very much, everyone.