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Article Reprint Reprinted with permission from globeandmail.com – February 3, 2010 Got a question on where to invest? CI’s Eric Bushell, fund manager of the year for 2009, takes your questions Globe and Mail Update Eric Bushell is cautious about what this year might bring for the stock market. He’s avoiding cyclicals and base metals. He likes banks and oil stocks, as well as telecom, real estate investment trusts, health care and the highyield debt market. He also holds foreign stocks in his Canadian equity fund. The $3.3-billion CI Signature Select Canadian Fund made an average annual return of 10.9 per cent for the 10 years ending Nov. 30, compared with 6.5 per cent for the S&P/TSX total return index. Three of Mr. Bushell’s stock picks are: Talisman Energy Inc. TLM-T Manulife Financial Corp. MFC-T Roche Holding AG Sonali Verma, Globe Investor: Hello, everyone, thanks for joining us. We’ll be starting our discussion shortly. Michael Kennedy writes: I would like to know your thoughts on South American economies and if you see opportunities there for the long term, and where do you see these opportunities. Eric Bushell: OK Michael, the only Latam countries with sufficient populations and GDP size to underpin an investable equity market are Mexico and Brazil. Of the two, Brazil has a more dynamic capital market. They have made many improvements to the soundness of their equity market over the last decade. The combination of good demographics, agricultural and energy riches and true commercial instinct make Brazil the better investment jurisdiction. At this point there is a near euphoria for BRIC countries, and the winning of the Olympics capped that off for Brazil. Our investments to date in Brazil have been in banking, property, beverages, rail, agriculture and mining ventures. Names such as American Logistica, Bunge, Ambev, Santander and BR malls. A reader identified as Curious Investor writes: It looks like about a quarter of your CI Signature Select Canadian fund’s holdings are in Europe and a quarter in the U.S. Why did you decide on that? Eric Bushell: The main point to for me to make here is that the Canadian equity market continues to shrink. In relation, that is, to the number of large cap quality companies listed here. Consider that all the major mining franchises have been bought out – Alcan, Inco, Noranda, Falconbridge. What’s left in Canada is not sufficiently diversified to build a fund around. We advocated for the removal of the foreign property constraint which was finally done by the Dept. of Finance in 2005. Since that time our foreign exposure has climbed further. The actual domicile of the companies has relatively little bearing on our investment decision, in today’s globalized economy. Today, however, consideration of tax policy changes in different countries does bring this factor back into view. Bond Guy writes: Everyone’s talking about a crash in highyielding bonds. Your take? Compliments of Article Reprint Reprinted with permission from globeandmail.com – February 3, 2010 Eric Bushell: No crash expected here. With policy rates staying low, investors looking for higher yields will drive more inflows into high-yield funds. That said, our view is that the capital gain story for high yield has played out and 2010 offers coupon returns only. Furthermore, there is a supply wave coming. Specifically, the refinancing of lots of maturing LBO bank debt will keep high-yield bond issuance elevated. This will likely keep spreads attractive. SJ writes: Thanks for taking my question. Which banks do you like and why? U.S. vs Canadian – is the gap closing? How about TD? Eric Bushell: U.S. banks continue to trade at attractive discounts to Canadian peers on a price to tangible equity basis. This gap should close somewhat as their loan losses fade in 2010 and 2011. The earnings power of the large U.S. bank franchises will become clear, providing considerable upside for the shares. Our favorite is Bank of America. holders will be attracting investment, in my view. Our main positions are in Canadian Natural and Suncor and Imperial Oil. CN asks: Do you have an outlook for the Canadian dollar? Eric Bushell: The Canadian dollar and the Canadian bond market will stay on the rich side of fair value for the foreseeable future. The combination of a relatively strong fiscal position and the role of commodities in our economy will support the dollar. If the purchasing power parity with the U.S. dollar is roughly 85 cents, I expect we could deviate as much as 15 cents from that and reach parity later this year. We lower our U.S. dollar hedges whenever the CAD approaches parity. Our hedges are currently at 50 per cent of U.S. dollar exposure, with a bias to increasing that ratio as the CAD stumbles here. Heather Jeffreys asks: What is your outlook for U.S. and Canadian stocks? How much longer will the rally continue? TD has been beaten up on its U.S. exposure and concerns about the impact of Basel 3 on their capital adequacy. The Canadian franchise is in great shape. At 9.5x price to earnings, we think it represents good value. Eric Bushell: In 2010, we are facing the consequences of the financial crisis: Rising taxes, rising interest rates, financial re-regulation, etc. The losses were transferred from banking systems to the government, which is causing new strains. Joanne Keates writes: What do you think of BCE’s earnings today? Should I hang on to it, maybe buy more? That said, I am optimistic that the recovery is taking hold and that profit expansions will support higher equity markets by year end. Our asset mix in the balanced funds is overweight equities in support of this view. Eric Bushell: The 2009 recovery in corporate bond prices means that yields are much lower. In 2010 we expect investors to take on more risk and accumulate highyielding common shares. This will be a supportive year for telephone company shares. Furthermore, all investors need to hedge their bets on the China and emerging market-sensitive exposures. BCE has made investments in a new wireless network, which should improve their competitive position as consumers adopt more smartphones. Financially, the company is performing well against a low-growth backdrop. M. Gavotte asks: If I could pick just one oilsands play, which one should it be? Eric Bushell: I am not going to recommend a specific name. Global investors and oil companies looking for long-life energy reserves will come shopping in Canada. This pattern has only just begun. All large oilsand lease G. Lieberman writes: What’s your favourite sector in equities? Eric Bushell: I like health care. It’s out of favour, cheap, pays big dividends and is less correlated to the global economy. Sonali Verma, Globe Investor: Many thanks for giving us so much of your time and sharing your expertise with us. Is there anything you would like to say before we conclude today’s discussion? Compliments of Article Reprint Reprinted with permission from globeandmail.com – February 3, 2010 Eric Bushell: Nope. Thanks for having me on. Sonali Verma, Globe Investor: And thanks to everyone who joined us today. The Eric Bushell Bio Reprinted from Globe and Mail, in the “Funds” section. Eric Bushell is senior vice-president of portfolio management and chief investment officer of Signature Global Advisors, a division of CI Investments. He has 16 years of investment industry experience. © CTVglobemedia Publishing Inc. All Rights Reserved. All rights reserved. CTVglobemedia Publishing, Inc and Globe and Mail logos are registered trademarks of CTVglobemedia Publishing, Inc . The iCopyright logo is a registered trademark of iCopyright, Inc. As chief investment officer, Mr. Bushell leads a team of 23 investment professionals managing approximately $23-billion. He is lead portfolio manager of several funds, including Signature Select Canadian Fund. Mr. Bushell began his career as an equity analyst and equity trader at BPI Mutual Funds before becoming a portfolio manager at the firm. He joined CI’s Signature team in 1999 when BPI became part of CI Investments. He was named chief investment officer in 2002. He holds the Chartered Financial Analyst (CFA) designation and a BA from Queen’s University. Compliments of (c) CTVglobemedia Publishing, Inc