Our equity portfolios typically consist of 80 to 120 companies, diversified by sector, geography and individual securities. We generally do not set formal targets for sector or geographic weights, but instead allow security selection to drive the process. Portfolios are then reviewed to ensure they are constructed with a balanced exposure in mind and good representation across many industries and regions of the globe.

Because we seek businesses that will appreciate in value over three to five years, the turnover rate on equity portfolios is relatively low at 20% to 25% per year. Turnover on fixed income is even lower at approximately 10% per year.

Fixed Income

The fixed income portion of a portfolio is viewed as a source of stability and income. As such, great care is taken to avoid credit risk that is normally inadequately compensated by higher returns. The equity markets offer more generous compensation for risk.

We stress forecasting major swings in interest rates and adjusting the term of the portfolio accordingly. Our belief is that short-term fluctuations are extremely difficult, if not impossible, to forecast consistently, whereas intermediate-term movements can be easier to predict.

We prepare detailed economic forecasts for Canada and the United States. We also follow this data for Europe and Asia. We analyze all major currencies in-house. From this work we seek to determine the inflation outlook and demand for funds in each economy and sector in order to analyze the medium to longer term direction of interest rates.

The financial characteristics of specific instruments can be quite important. For instance, the choice between a coupon and a bond of equal duration can often be a strategic issue. Attention is thus given to analyzing the special characteristics of many bonds, such as extendible, retractable, callable, redeemable, convertible and currency features.

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