1. finance
2. investing
3. stocks

Managing Portfolio Risk
while Reducing Climate Risk
Presentation by: Wayne Wachell MBA CFA,
CEO & Chief Investment Officer, Genus Capital Management Inc.
June 2015 RIA Banff Conference
Leading the Way
Investors with sustainability values don’t want their capital
contributing to climate change
Genus collaborated with leading environmentalists to
develop Genus Fossil Free Solutions
Divest from primary fossil fuel industries – extracting,
processing, transporting – and engage the rest
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Canada’s Low-Carbon Leader
Genus Fossil Free Solutions are ranked in “the subcategory of the most robust of all currently-existing
fossil fuel free portfolios”*…
*“The Climate has Changed” – 2014 RIA Report
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Fossil Free Does Not Hamper
Investment Returns or Increase Risk
Long Run Performance
Global
U.S.
Canada
Fossil Free
Index
Fossil Free
Index
Fossil Free
Index
Returns
6.84%
6.53%
10.68%
10.63%
9.23%
8.38%
Standard
Deviation
16.65%
16.55%
14.14%
14.81%
21.15%
21.14%
1996 - 2014
Returns: Annualized
Standard Deviation: Annualized
1988 - 2014
1999 - 2014
Source: Aperio Group, LLC
Building a Carbon-Free Equity Portfolio 2014
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Extracting Fossil Fuels
& Poor ESG From Investment Portfolios
of the Canadian stock market
As at November 28, 2014
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Global Equity Frameworks
Simplistic regional approach
with three separate buckets
Makes it difficult to fill the
International
energy void in Canada
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Global Equity Frameworks
Single bucket of best-of-best
stocks: Genus Total Equity
Greater exposure to world class
companies, globally optimized,
40% Canada
30% U.S.
better risk management, and…
30% International
[Benchmark]
Makes fossil free work
40/30/30
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Total Equity Solves the Problem
Energy Sector Weights as Percentage of Index
30
Canada S&P/TSX
25
20
40/30/30 Benchmark*
15
10
5
MSCI World Index
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Benchmark: 40% S&P/TSX, 30% S&P 500, 30% MSCI EAFE [Europe, Australia, Far East]
Source: Genus/Bloomberg/MSCI – As at December 31, 2014
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Filling the Fossil Fuel Void
Modern Risk Model Technology Fills
the Fossil Fuel Hole by Utilizing Sector Correlations
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
Materials
Industrials
Utilities
Financials
Consumer
Discretionary
Consumer
Staples
Information
Technology
Health Care
Telecom
MSCI World Index – Sector Correlations with Energy Sector
Source: Genus/MSCI – For the Period 1990-2014
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Managing Risk in
Fossil Free Portfolios
Strategy
Comparison
Vs. Benchmark
Genus
CanGlobe
With Fossil
Fuels
Genus
Fossil Free
CanGlobe
Difference
±
Predicted Beta
.97
.95
-.02
Active Risk
2.9%
3.5%
+0.6%
Active Sector Exposure Vs. Benchmark
Financials
Consumer Discretionary
Telecom Services
Information Technology
Health Care
Materials
Industrials
Consumer Staples
Utilities
Energy
-0.8%
+2.0%
-1.4%
+2.2%
+2.0%
-1.0%
+0.7%
-0.9%
-0.1%
-3.1%
*Benchmark: 40% S&P/TSX, 30% S&P 500, 30% MSCI EAFE
+3.9%
+4.5%
+0.3%
+3.5%
+2.6%
-0.5%
+0.9%
-1.4%
-2.8%
-12.3%
40/30/30
Benchmark
Tracking Error
Difference ±
+4.7%
+2.5%
+1.7%
+1.3%
+0.6%
+0.5%
+0.2%
-0.5%
-2.7%
-9.2%
Filling the Fossil
Fuel void
As at March 31, 2015
Source: Genus
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The Energy Replacements
INFORMATION TECHNOLOGY
FINANCIALS
CONSUMER
DISCRETIONARY
TELECOM SERVICES
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Genus Fossil Free CanGlobe
Strategy Research: Cumulative Returns, February 1, 2004 – January 31, 2015
160%
Genus Fossil Free CanGlobe Equity
150%
Benchmark
15.9%
40% S&P/TSX, 30%S&P 500, 30%EAFE
140%
130%
120%
7.8%
110%
100%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Genus
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Genus Fossil Free Live Performance
Cumulative Returns May 1, 2013 to May 25, 2015 in U.S. Dollars
30%
Genus Fossil Free CanGlobe Equity
25.9%
25%
Benchmark
19.3%
20%
15%
10%
5%
0%
-5%
-10%
2013
2014
2015
Benchmark: May 1, 2013 – March 31, 201540% S&P/TSX, 30%S&P 500, 30%EAFE
April 1, 2015 35% S&P/TSX, 65% MSCI World
Source: Genus
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Key Takeaways
1 Fossil Free investing can be done.
2 The only way to do it right in Canada is
through Total Equity…
3 …using modern portfolio risk management
technology.
4 Genus has Canada’s most robust Fossil Free
solutions.
5 It is possible to align your portfolio with your
values and beat your benchmark.
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Disclosure
This document was prepared for general information purposes only and should not be considered a substitute for specific professional advice. In particular, its
contents are not Intended to be construed as the provision of investment, legal, accounting, tax or other professional advice or recommendations of any kind, or to
form the basis of any decision to do or to refrain from doing anything. As such, this document should not be relied upon for investment or other financial decisions
and no such decisions should be taken on the basis of its contents without seeking specific advice. This document is based on information available to Genus
Capital Management Inc., (“Genus”) at the date of issue, and takes no account of subsequent developments after that date. In addition, past performance is not
indicative of future results. In producing this document, Genus has relied upon the accuracy and completeness of certain data and information obtained from third
parties. The information contained in the Strategy Research sections of this document are for educational and illustrative purposes only. The performance data
indicated has been generated through a back-tested analysis and represents only hypothetical results. These illustrations have been created in the present, using
quantitative methods or formulas in an attempt to apply the strategies presented to historical data over a period of time. The information outlined does not in any way
represent any actual historical results or track record achieved through any investment product, fund or client account. The performance results shown also have
important inherent limitations as to their relevance and use. For example, these illustrations ignore significant real world factors such as the actual timing of trades,
security buy and sell prices, transaction costs, taxes, other conflicting investment research, and firm trading restrictions. Further, the strategies examined in these
illustrations often assume monies would be fully invested in securities, whereas in real world situations, investors may hold higher levels of cash for liquidity. Also,
this data has been created with the benefit of hindsight and without the challenges of having to make investment decisions in real-time and under real market
conditions. Any and all of these factors mean that no representation is being made that an investor trying to follow this investment approach in the past would have
achieved performance similar to that shown, or would in the future achieve performance similar to that shown. The accuracy of the data contained in this illustration
is not guaranteed and may not be updated in the future. The contents of this document may not be reproduced or distributed to any other party, whether in whole or
in part, without Genus Capital Management’s prior written permission, except as may be required by law. In the absence of its express written permission to the
contrary, Genus and its affiliates and their respective directors, officers and employees accept no responsibility and will not be liable for any consequences
howsoever arising from any use of or reliance on the contents of this document including any opinions expressed herein. It should also be noted that past
performance is no guarantee of future results. Inherent in any investment is the potential for loss.
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Genus Capital Management Inc.,
6th Floor – 900 West Hastings Street,
Vancouver, BC, Canada,
V6C 1E5
T 604 605 4631
E [email protected]
www.genuscap.com