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James: [00:00:01] Hello, everyone, and thank you for joining us today. My name is James Burton, managing editor of Wealth Professional Canada. I'm delighted to introduce today's webinar Under the Hood of Canada's first target date ETFs with Evermore Capital. Now with price interest rates on the rise, bond prices hit and markets reeling from a tough 2022 to date. Retirement planning is essential. Retirees and soon to be retirees want income and capital protection. The evermore retirement ETFs are an efficient low fee one ticket solution, meaning advisors can spend less time rebalancing retirement investment accounts and more time on client service. With that in mind, then, in this session, our special guests will provide insights into how to solve the asset allocation problem over time efficient frontier analysis, glide path construction and why fixed income belongs in the long term portfolio. Now to bit of house bits of housekeeping, just to let everyone know there will be a Q&A session at the end. So please, if you have any questions that come into your head throughout the presentation, type them into the Q&A box. I'll be monitoring, monitoring, monitoring them throughout the session, and I'll get to the best ones at the end. There are also two poll questions that will pop up on your screen throughout the presentation. Please take time to read the question and answer appropriately so. Without further ado, let's crack on. It's my pleasure to introduce Evermore Capital Chief Investment Officer Brian See and Vanguard Investments Canada senior strategist Surenanthan Tharummakulasingam to discuss their views on retirement, investment planning and the markets. Gentlemen, the floor is yours. 

Brian: [00:01:46] We appreciate it, James, and thanks for that introduction and thanks, everyone, for attending the webinar. Appreciate you taking the time to listen to us today at Evermore Capital and Anthem at Vanguard as well. So before we dive into things, I wanted to talk about just the concept of retirement. As James had mentioned in his intro remarks, retirement often entices a lot of different questions for your clients When should I retire? How much do I need to retire? How much do I need in retirement? How long will retirement last? Often spurs a lot more questions than answers. That was one thing that we set out here at Evermore Capital to do is to solve that retirement problem via the first ever target date fund ETFs in Canada. And so in today's presentation, we're going to go through four key things. Number one, what exactly a target date fund is. Now, some of you might already know what that is, but we want to go through the details on how we view target date funds. The second thing is the benefit of more retirement ETFs. Really? What's in it for you? Why? Why should you care about these retirement products? The third thing is to touch on and describe what exactly is in the retirement or ETFs. It's going to involve a discussion of how we construct the portfolios and the specific investments as well. Then and then I'm also going to turn it over to Surenanthan at Vanguard to describe more of the role of fixed income and portfolios. I spend a lot of time analyzing the bond market, and bonds became a significant part of that retirement ETFs. And he's going to go through some of the high level discussions on the role of fixed income. So with that, why don't we get started then? So what exactly is a targeted fund? Well, it's really a fun where the mix of assets changes as it progresses towards and beyond the target date. It might be familiar with the typical balanced fund, the 6040, the 5050, the 7030. There's a lot of reincarnations of all these balanced products. Now, what a target date fund is. It's essentially a balanced fund that actually changes its asset allocation over time. So while a balanced fund is static, the target of a fund adjusts over the course of time. I think that should make sense because somebody who's early on in their life, say, is a 25 year old is going to have a lot different risk reward characteristics and criteria than someone who's in their forties with a family. And that person is going to have a different investment characteristics than someone who's 65 and pretty much retired. And so when we're talking about target date funds, they're designed for retirement. That's that's what a target date fund is suited for. The other thing with target date funds is they're really simple. Investors decide what year they want to retire and choose the fund with the closest date. So, for example, if you want to retire in, say, 2045 and mind you, it's regardless of age. So it's when you actually want to retire. So if it's 2045, you simply pick the target date fund with the year 2045 in it. And if it's something if you want to retire in 20 or 44, you just pick the one that's closer to it. So the 2045 fund. So it's really that simple. Moving on to the next slide here. I talked about asset allocation and how the asset mix changes over the course of time. That's what we call a glide path in a target date fund. It's the asset allocation that changes over time in a predetermined way. So it's rules based and gives you a sense of the asset allocation over a long period of time in the investment. Now, if you look at the chart there on your screen, you can see at the bottom there, there's years to retirement. And on the far left, it's 40, 35 and 30 years away from retirement. So it's the timeline. And then on the left hand side of the axis, it's the asset mix, the mix of stocks and bonds. And so you can see early on when you're, say, 35 years away from retirement, it's a 95% equity mix in 5% fixed income mix. I think intuitively that should make sense. You need equities to allow for greater capital appreciation, the bigger gains to build up the nest egg when you do need it in retirement. And because you're early on your life, you have time. You have the time to withstand volatility. Equities are a riskier asset class than bonds. And so the market's going to go through its ups and downs and ebbs and flows and with a greater time horizon, it allows you to weather those storms. So there's going to be a higher equity wait in the beginning. But as you move over the course of time, say, 15 years prior to retirement or ten years, you can see the fixed income mix really ratchets it up and increases. And again, I think this should also make sense as you get closer to retirement. You need to reduce risks. You need to be more conservative and preserve that nest egg that you've spent many years already building up. Fixed income also allows for income, generation and capital preservation. And so you'll need all those facets as you go into retirement. You'll see as well. The glide path flattens out five years after retirement to a mix of about 55% fixed income and 45% equities. And that's really the optimal asset mix that we came up with here at Evermore in order to minimize what we call longevity risks. And that's really the risks of living ones assets during retirement. I mean, that would be a bad thing if you were still in retirement and you ran out of money. And so we wanted to minimize that key risk for this product. And therefore, this is the asset mix or the optimal mix that we came up with here at Evermore. Okay. So that's a high level overview of what exactly targeted funds are. Why don't we now cover that next section? What are the benefits of the evermore retirement ETFs? What's in it for you or what's in it for your clients when you're when you're speaking to them? And we're going to go through these three key points and details. But there's three important facets. One, it saves time. There's an automatic rebalancing process. Number two, it's really easy to understand. We talked about the year and how you buy more ETFs. There's also significant amounts of diversification which we're going to get into. And finally, it's low fees. It's a low cost product. And those are benefits that you could pass along to clients and what the end users want at the end of the day. So going through the first point there on Saves Time, this is pretty significant in terms of a time saver for advisors and say you're for instance a non discretionary financial advisor working with several clients. You often have to rebalance your portfolios on a regular basis, whether it's quarterly annually and that involves calling clients, emailing, booking meetings and so forth. What the target date funds does. It actually automatically does the asset allocation for you when you rebalance that portfolio according to that glide path that you saw earlier. And so that makes it really simple and frees up a lot of time where you don't have to spend constantly rebalancing the portfolio. It can then be spent doing better financial planning for clients, building your business, or doing other estate planning needs. The other thing which saves time is the security selections are chosen. The Evermore Retirement ETFs that are comprised of several ETFs and those securities are already optimally done. And so you don't have to sit there researching and figuring out what is to get into one investment or the other. The other big component is rebalancing. It's rules based rebalancing. So any time the targets deviate from one and one half percent from target, they rebalance again. And so that instills discipline in the investment process. It's not like a portfolio managers come in and decide to buy equities one day because they feel bullish about it. We're taking the biases out of it, putting a rules based system in place, and that discipline is going to lead to better, ultimate, longer term returns. At the end of the day, we do the work so you don't have to. The second benefit for the products is it's easy to understand. I talked earlier about choosing the fund with the close to target date. It's really that simple. You pick that one fund you invest in year after year, and then you withdraw from that fund when you retire. So it's pretty straightforward. The other thing is diversification. It's a pillar of investing, as we all know. You have to have a diversified portfolio. The more ETFs have 8000 plus stocks, 17,000 bonds, 75 across 75 countries, all in one single ETF. Now a lot of people are trying to get that diversification by buying, say, 30 or 40 different securities stocks or different ETFs. The problem with that is the only not having to monitor all these things on an individual basis and then be exposed to company specific risks as well. And our ETF, you're getting it all into one one single product and global diversification across all asset classes. It's really the ultimate set it and forget it tool. The last one is costs or more specifically fees. And we just shot at some of the headlines there that you can see on the screen, how investors are obviously understanding the fee complex and that people generally want lower fee products. And that's an important hallmark here at Evermore, is to provide low cost solutions to investors. In a day. We know all about the effects of compounding compound interest when you're making returns. Well, fees have the opposite. There are negative compounding effects. Obviously, higher fee products are going to have a negative impact on portfolio performance at the end of the day relative to the low costs fees. And so there's the table there. In this presentation, you can see that more retirement ETFs, the all in expected hour is going to come in at 45 basis points total. And if you can compare that with other target date fund F class specifically, it's just a tad over 100 basis points. So it's really half of what the industry average at least for F fund class shares of course products are so significant cost savings when you're comparing products across the board. So that's the second part of that presentation, which is really the benefits of it. Now we really want to move into how the portfolio was designed and more specifically, what's in the portfolio. So we spend some time before we dive into actual securities. It's how we came about, the portfolios and the investment process behind that. So you can see that this was a what we call a four step iterative process, and I'll be flipping back and forth between the slides. But you can see at the top there there's equity and fixed income. So we have to start before we start picking securities in the portfolios. We want to look at this from a holistic basis. You know, what did we want in the equities portfolio and fixed income portfolio? How much candidate did we want? How much us, how much global? These were high level questions that we wanted to answer before we start picking securities. So if you flip ahead and go into the equity slide here, this is what we call the efficient frontier and we're going to get into that, but basically the optimal equity portfolio in the retirement fund. And so I'll touch on the efficient frontier here. The techs might be small, but let me explain it here. The you see the access at the bottom there. That's called standard deviation and that's a measure of risk. So on the left hand side, that's less risk. And the right hand side there's more risk. On the left hand axis is the expected return. And so with more risks you take, you would get higher return. And vice versa. If you took less risks, you would get less return. And I think intuitively that makes sense as well. The the millions of dots on that page are all the different global equity portfolios in the world that we came up with. And so you can see that the red dot there is the ever more equity portfolio that would be the efficient portfolio and it maximized the Sharpe ratio. And the reason for that is it's giving you a maximum amount of risk or maximum amount of return for a given level of risk. And if you start to compare that to different portfolios around the world, you'll get a sense of that, that blue dot on the page. That's the international global equity portfolio. You can see that it's giving basically less return for a significant amount of risk, i.e. there it's not an efficient portfolio. The yellow dot is the Canadian stock market, so a bit better but not as efficient. And then the green dot is the US portfolio, so a lot more risk for greater return. But at the end of the day, you want to be on that edge. The top part of that boomerang, if you will, and that's where the ever more equity portfolio sits. If you move on. We did the same thing for fixed income and we're going to dive into more of this on a fixed income basis. But the exact same thing, risk and risk versus reward. And the red dot is the ever more fixed income portfolio. It is the most optimal portfolio. The one caveat, though, for in the fixed income world is we pick the fixed income portfolio that was the most negatively correlated to equities. And the reason for that is it's going to act as the balance and the negative asset where equity markets are volatile or weak bonds are going to provide that level of defense and in fact, some offense in some cases as well. So it provides that safety in your portfolio, if you will. And that's what we did from both a fixed income and an equity perspective. So when we looked at that and we got the efficient portfolios for both those asset classes, we ended up running a Monte Carlo simulation. Now that's just a fancy term for a big computer simulation. And we examined 12,000 paths, as you can see. So I showed earlier the one glide path we settled on, but we looked at 12,000 of those and then ran 4 billion plus scenarios, adjusting for different investor assumptions, market assumptions to again minimize that longevity risk that I talked about, which is the risk of someone outliving their assets. That's something we obviously don't want anyone to experience, and that's why we spent a lot of time running this. So once we had all that, we figured out that glide path that you saw earlier, we had to go to security sections and say, okay, well, what are we going to put in these funds to meet this criteria? And so this slide here shows kind of a funneling process of how we got to the you can see there the seven ETFs that ultimately we put in the funds. We had to start off with the global ETF universe, 10,000 plus different securities. We're going to put 10,000 names in there because that wouldn't be a portfolio. So we had to really narrow it down. We focused on Canada and US listed ETFs mainly from an operational perspective. We want it to be around during the trading hours to run the funds obviously. So that helped it narrow down. And quite frankly, the Canadian ETFs had a lot more efficient efficiencies as well. We filtered down to 349 ETFs by focusing on the broad base passive indexes in equity and fixed income. So we excluded the sector funds or individual securities or crypto or commodities. I mean, put it this way, it's back to basics investing. There's no gimmicks here. There's nothing wrong with those other investment products. But it didn't meet our criteria to meet the retirement goals that we were trying to accomplish for our for investors. At the end of the day, at the end of the day, the data showed that the passive index is between equities and fixing that allowed us to achieve the retirement goals. After that, when we start to screen down to the 19 and seven ETFs, this involves a lot of looking at certain criteria, one of which was liquidity. So we wanted ETFs with narrow bid. As spreads, liquidity is going to be important to run the funds. The other thing was looking at overall lower costs. I touched on costs earlier in the slide, but cost also includes withholding taxes. So sometimes when you're purchasing securities in the US or international, you'd be subjected to a 15% withholding tax. It's not as well advertised or prevalent in the investment community, but it's something that we took the care toward analyzing and to ensure that the overall cost, not just numbers but just withholding tax, was going to be low. And that way investors can benefit. At the end of the day, when we looked at this, a lot of ETFs were kind of in that ballpark. And how we really screened it down to the final seven was we'd always favor more diversity. So all caps versus to get you more names and then the better Sharpe and Sortino ratios as well. And that's ultimately what we ended up with. Seven ETFs, which you're probably wondering, okay, well, what's in it? So the next slide, we'll show you exactly what's there. This is an example of the ever more retirement 2045 ETF. You can see on the far right the this is a chart, but the equity portion is made up of three BlackRock products and one BMO product across Canada, US international markets and the fixed income stuff was made out of purely vanguard products. It just so happened to work out that way. These were the lowest cost, most efficient portfolios that met the retirement goals. Now all our ETFs have the same holdings, so we have eight vintages, which means that the Evermore retirement ETFs offer 2025 all the way to 2060 in five year increments. All the securities are the same the BlackRock, BMO and Vanguard Securities. It's just a weights that are different because that depends on the glide path that you're on. The other facet is the distributions are made quarterly and they change to monthly once the fund's hit target date. And then the other thing is the foreign. Foreign I guess the foreign exposure is hedged internally. Now we kind have simply pick the product that offered hedging, but we elected to do that in-house because it was much cheaper and more cost effective. And that way we can pass the benefits on to end users as well. I want to spend some time again on the fixed income side. You can see that it's made up of Vanguard products from Canada, US and International. And again, this was part of the component of having that offset to equities and having that balanced approach. Bonds provide that balance and that defensiveness, if you will, in terms of volatile equity markets and why we spend a lot of time adding bonds to meet the longer term retirement goals. But I think this would be also a good part to maybe pass it along to Anthem at Vanguard, and he's going to go over and describe some of the importance of bonds in the portfolio. So why don't I pass it over? Surenanthan. 

Surenanthan: [00:20:11] Good afternoon. I want to thank Brian and the team at Evermore for inviting us to speak today. My name is Surenanthan Tharummakulasingam. I'm a senior strategist at Vanguard Investments, Canada. Firstly, prior to starting, I want to thank all the advisors on the call for supporting both Vanguard and Evermore and the funds that we offer to advisors. I'd also like to spend a little bit of time to explain why we think we have the credentials to speak about the merits of fixed income within the context of a broader portfolio. So at Vanguard, we've been managing fixed income for four decades, and during this time we've built and constructed funds for financial advisors and asset alocators alike, such as yourselves and for each fund that we built. We really want to focus on long term investments. We think it's the optimal way of managing your client's wealth. And so at Vanguard, we very much believe in long term investing, which is why we're quite excited about the products that Evermore is bringing to the market, because at the end of the day, target date funds really embody what long term investing really means. Over the next 10 minutes, I want to spend a little bit of time talking about how we think fixed income and how certain attributes of fixed income can help investors weather potential bouts of volatility and help you protect your portfolio, especially in markets like we have today as well. I'd like to address some of the issues with duration and look at the context of your portfolio from both a global and local bond market perspective. So on the slide here, what you can see is as a quick intro to Vanguard as a fixed income house. Vanguard manages approximately $1.7 trillion in fixed income assets. How this breaks out is about a third of that is in active funds, making Vanguard the third largest active fixed income manager in the world, and two thirds will be an index products making Vanguard the second largest index fixed income manager in the world. On the next slide, we really want to visualize how this looks from a global perspective. So the Vanguard fixed income group is about 180 individuals who reside in several different places globally. What this really allows us to do is trade at the best prices that are available to us regardless of market, and also allows us to leverage our global credit research team that supports both our active and our index funds by providing valuable company level research. At Vanguard. We like to say that ultimately we trade around the clock with traders in Melbourne, London and in two different time zones in the United States. So now heading into the main presentation, I think the question we're trying to answer is why do investors buy fixed income or why should you invest in high quality fixed income and vanguard? We would say it comes down to four things. The first one is in the title and it comes down to income. And fixed income is really one of the few asset classes that provide reliable and stable fixed income. And what this means for your portfolio is it really provides stability. Brian kind of spoke about the next point, which is diversification. We know that over the long term, fixed income is a great diversifier to your equities as well as your other risk assets. But when you're looking at asset classes, you know, in addition to diversification, you have to make sure that that asset class has merit on its own and fixed income has been able to help investors reach their target return goals. And the last thing is really around liquidity. You know, when clients want to access their portfolio in class, cash is not sufficient. Really, fixed income is a great place to source some of that liquidity because bonds tend to trade at fair prices. The issue that a lot of investors have is you rarely find a particular type of fixed income that has all four of these aspects to it. So we know government bonds, for example, are a great source of diversification. They also have amazing liquidity. However, they tend not to give you the income that you may want and also make it a bit harder to reach your return goals. In contrast, you can look at something like high yield corporates, which can have great return and great income. What we've seen with high yield corporates is the liquidities there, especially in markets where you need your liquidity. And also from a diversification perspective, they are highly correlated to equities, so they don't provide the balance you're looking for. And so this is why we think high quality aggregate fixed income that has both exposure to government and credit can act as a core. So we're quite happy that Brian and the team, all three funds that they were using, are all aggregate fixed income names. And so really what happens here is when we when we say we're using aggregate fixed income, the common question I get is in aggregate, fixed income generally is higher duration. Doesn't that mean we're more sensitive to interest rate hikes? There's a few things I'd like to say on this. The first one is, you know, even if there is an interest rate hike similar to what we're seeing in the market, you have to keep in mind that not all bonds and not all maturities move in parallel. Right. That typically never happens. Different bonds and different maturities will behave differently. And so it's very much in part to the demand and supply we see in the fixed income market. It's something that's very hard to predict as well. But what we know with certainty is duration provides three attributes to your overall portfolio. The first one, it lowers volatility. So we'll get into this in the next couple of slides. I'll move over to the second benefit. It really provides higher income, especially when there's unexpected interest rate movements. Right. And the last thing is longer duration bonds. And this is probably why we optimize quite well in Brian's model, is they tend to provide higher diversification to your equity part of your portfolio. So I want to talk a little bit about unexpected bond movements. And so what I would say is a lot of times we have advisors say, well, I know interest rates are going to go up, so why don't I go onto the short end of the curve? And what I would tend to say to that is you have to keep in mind government bonds are some of the most traded instruments in the world, and they typically are very accurately priced when it comes to expected interest rate movements. And so as an investor, if you're trying to reduce your interest rate exposure, you've got to keep in mind you're really taking an active view on how fast interest rates will move because the bonds have already reflected expected interest rates. And so we spoke a little bit about diversification and the role of aggregate bonds on this slide. What I want to highlight is you have two lines here. And so the yellow line is around short term bonds and we can call them short duration bonds. And then on the teal line here is around the whole market. So think of this as your aggregate portfolio. Now, if your portfolio is only fixed income, I'll concede that it's fair to think that shorter duration bonds have lower volatility and risk. It's reasonable because you're lending to a company for a shorter period of time, and so that shorter duration is going to come with less risk. However, this does change when it's alongside equities in your portfolio, similar to what we have in these target date funds provided by Evermore. What you see in this chart is you still have those two teal and yellow lines from before, but we're now combining both short duration as well as total market duration bonds with equities at a 5050 split. And what you see here is all things equal. The net impact between short duration and long duration in terms of volatility is nonexistent. And so what I often get is Surenanthan well, by themselves, short duration has lower volatility. And what you're showing me here is the volatility, even with aggregate bonds, is very similar. So why wouldn't I always go short? And what you have to keep in mind as an investor and especially as an asset allocator in the sense of these portfolios, is shorten your duration also lowers your overall yields. And so from a total return perspective, you get lower yields and there's little to no benefits when it comes to reducing volatility in a combined portfolio. And as I spoke to already in equity downturns, the whole market duration generally returns a bit more than short duration. So the last couple of things I want to talk about is the context of how your portfolio should look in global and local market bonds. So on the next slide, there's four key takeaways that I want to really position, and it starts in the top left here. If you're investing only in Canadian bonds, you only have exposure to about 3% of the broader market. And if we're looking at diversifying your portfolio, that leaves you completely open to not having 97% of the market in addition to just more bonds. What you get is exposure to different sectors. We know Canadian bonds tend to be concentrated in certain sectors, financials, energies being some of those. And so you get a broader portfolio of bonds. You have exposure to more sectors. So your portfolio is now a little bit more all weather when it comes to how it's composed. And the last thing I want to talk about is this last slide. And there's a lot of numbers here on the next slide here. And what the chart is really showing is the correlation between quarterly changes in bond yields since 1970. And so a correlation of one would mean that yield changes move in parallel together between two different countries. And a correlation of zero ultimately means there's absolutely no movement together when it comes to different countries across the globe, what you'll see is most fixed income bond correlations are quite low, and so a large portion of the correlations seen here are green. And so that's less than 0.4. And then most of it is zero point is yellow, which is between 0.4 and 0.59. So these numbers indicate that bond yield changes are not very correlated in general. And so as a bond investor, you get the benefit from diversification by being in multiple markets, especially as a Canadian investor, owning non Canadian bonds really gives you a little bit more diversification and a balanced into the context of your broader portfolio. With the exception of the US, where there's high correlation and this is logical since the US and Canada share quite a lot in terms of economy, the rest of the market really does provide quite a bit of diversification. So in summary, before I send it back to Brian, really, we think Bonds play a key role in your portfolio because they touch on four important aspects liquidity, diversification, return and also income. We think there are certain strategies that do this better than others, but with aggregate bonds, you're able to touch all four of them. We know that shortening duration doesn't reduce overall volatility, especially in the context of a broader portfolio. And ultimately being invested in global bonds gives you that further diversification because you partake in several different market cycles across the world. I'll pass it back to Brian to speak to the remaining slides here. 

Brian: [00:30:49] Thanks Surenanthan and thanks for the informative summary. They are on global bonds and so I hope the audience found that informative as well, pulling all that together, just the benefits of fixed income in a portfolio. This slide describes basically the underlying portfolio composition of the Evermore retirement ETFs, and so both from an equity and a fixed income perspective. So why don't we go into these charts there just to give you a flavor, a taste of what's in here. The bottom right hand pie chart, that's the equity market caps across a variety of market cap ranges. So you can see that the blue shade there, that's a that's stocks that have 100 billion or higher market cap, the yellow ish, it's 50 to 100 billion in market cap and so forth. Now, these include all the big individual names that you would have heard of, that Google and Amazon and Microsoft and so forth. All of that's here because it's a global equity portfolio. The key point with that pie chart, though, is it's diversified across all market caps. So you get the benefit of diversification from an equity standpoint. Moving to that pie chart on the left hand side. That's the fixed income composition. You can see it's about two thirds government and approximately 27% corporate. Anthem talked about the benefits of government and corporate bonds there. And so what we've done here is incorporated all of those key advantages of a diversified global bond portfolio. And this is what you see in terms of the makeup of fixed income. The the chart at the top there, that's the fixed income maturity dates and the weights. So, for example, if you look at the bottom, those are bonds. One, two, three years is the bar chart on the left and then 3 to 5 is the bar chart, the second and the third is 5 to 7 and so forth. And then on the left, on on the left axis is the weights. The point here being is that the bonds, while you are taking on interest rate risk, it's diversified across all the different time horizons per se. So you're getting bonds all across the yield curve. And again, the key point is diversification across both asset classes, fixed income and equities moving forward. Now to the next slide, putting it all together really and these are some of my favorite slides. So going back again to that 2045 ETF example, I think I showed you the composition earlier before the different weights of those seven ETFs that we hold. Well, if you put it all together geographically, what does it look like? And that's a pie chart at the right. So that portfolio, the 2045 or more retirement ETF has about 34% Canada, 43% US and then the rest global, that is the geographic makeup of that particular portfolio. It would be different for, say, the 2025 or the 2060, but at least for this one, it gives you a graphical representation of the mix. The bottom chart is the sector allocation. So sometimes we will get advisors or clients asking, well, what's actually in it from a sector basis? And so here you can see it's completely diversified across all sectors. Financials, you can see it's about 21%, consumer 14, technology 11 and one half and so forth. You can see that is broadly represented across all the sectors. And mind you, this includes the fixed income and equity component. So for example, if you're looking at, say, an energy, the energy would include energy stocks and energy bonds as well. So it encompasses both. It gives you a more wholesome, holistic picture of the actual sector exposure. Again, the key point here is the products themselves. They're diversified across asset classes, geographies and sectors. Okay. Finally, maybe just in conclusion here, I think we've given a really good flavor of what target date funds are with the benefits, how they were constructed and then strengthened. Describe the the importance of global bonds in a portfolio as well. I'd probably just leave you with maybe three key points again. If you're an advisor working with your clients, the three key benefits, it saves time when you're when you're working on portfolios, they're low fee, low cost and really easy to understand. And with that, I think I'll turn it back over to James. 

James: [00:35:15] Thanks so much, Brian. Thanks. Thanks also to Surenanthan. That was that was a great presentation. Super insightful. So I've got a few questions to throw at you guys just to wrap things up. We'll hopefully illuminate some of those points a bit more, maybe crystallize some of those points to some of some of the advisors watching and listening. I guess maybe I'll start off with with one. Why not why not go all in in stocks 100% from, you know, initially. 

Brian: [00:35:47] Yeah, sure. Why don't I take that? Yeah, that seems we get that question at times. You know, the stock market has done relatively well over the last five years. So I think there's some recency effect where people look at the returns there. But we have to remember that equity markets and stock markets can change very quickly as we're seeing year to date. I mean, I think the S&P is down over 20%. So the key point here is why not go all in on equities? Well, it's because of volatility and the range of outcomes. And so while equities do return higher than bonds on a on a given basis, on average, the range of outcomes or the volatility can be more significant. So what I mean by that is equities can be up 40% in any given year. It could also be down 35 to 40% on any given year. And so while people might say, well, we'll get these average returns over the course of time, that might be true. But again, we want to protect against that longevity risk, which I mentioned earlier. The worst thing would be to retire at age 65 and then have the global financial crisis happen and have your portfolio down 50%. And so that's why we don't want a 100% equity portfolio. We need equities to build up the nest egg. But having that over the long course of time wouldn't be prudent. And that's not what the data showed us when we analyze and build these retirement products. 

James: [00:37:09] Yeah, okay. I mean, on a similar on a similar theme, why only stocks and bonds? Was there a temptation to bring in maybe alternatives or other investment classes? 

Brian: [00:37:22] Yeah. No, it's it's also a good question. I mean, we did look at all the investment products out there and everything from the sector funds, tech funds, energy funds, commodities, crypto. The reality is at the end of the day, those products didn't add to the overall goal of building retirement portfolios. And what I meant by that was they didn't add the appropriate return for given level of risks relative to the bond and equity ETFs that we found in the portfolio. So and a good example of that is kind of what we're seeing in commodities right now in Canada, Energy Securities have are the best performing securities to date and rightfully so. I mean, oil is up, gas is up, they should be up. And while those things can outperform during certain short term time periods, as they are right now, if you look at data over long periods of time and why long term is important, because we're building a retirement product. It's not just for one year, it's for ten, 20, 30, 40 years. Commodities have actually shown to destroy value over long periods of time. So that's the reason why a lot of those other types of securities and sector funds didn't make it into the portfolio. There's nothing wrong with them. They just didn't fit within the evermore retirement and the goal of retirement investing. 

James: [00:38:42] Yeah. Okay. So well a couple questions here. Maybe speaks to the advisor's day to day fees are obviously a big talking point for advisors. They are on wealth professionals coverage. And in your presentation you compared your fees to industry average. I mean, I guess just how how are you able to offer that value? What is it about your fund that means you're able to offer this product for 45 basis points compared to something nearer the industry average, for example? 

Brian: [00:39:16] Yeah, I know it's a good question. I mean, I think at the end of the day, having a low cost investment product was important for us from a philosophical standpoint, it was important to pass the lower fees to end users. I mean, we were we are big fans of the Vanguard approach, which is what they've been doing over the years and how they built the company. And so we're following in those footsteps now. How we can do that is, for one, we are just charging a lower cost. But I think it's more if you look at other high fee products, why is it that they can and quite simply, it is they've had the ability because quite simply they just did. There's been an advent of more low cost product coming into the market. I think if you kind of take a step back and say, well, what was the landscape ten years ago? I mean, ETFs were just sort of starting out. They were there, but they're not as prevalent as they are now. And at that time, the mutual funds were a big driving force of what investors invested in, and a lot of products were 200 basis points and above. And that's seemed to be just sort of what was the industry standard and it kept being that way and people sort of get used to that. But then as an industry, there's always disruption evolution and enter the ETF market and ETF players and Vanguard, BlackRock and so forth. Ourselves were just one of many. And so with that we can come with more innovative products. Etfs, by nature, are just simply cheaper than mutual funds, and so we're just simply passing on those lower cost savings to consumers. At the end of the day, you can be profitable and run companies with lower cost structures as as you've seen evident with the two biggest providers being BlackRock and Vanguard. 

James: [00:40:55] Yeah, yeah. Okay. I wonder, I think this is obviously a fairly sort of a new product for some clients of advisors. This is going to be totally a new concept to them. I wonder, you know, putting myself in the position of an advisor who's maybe faced with a bunch of clients who are looking to retire maybe sooner than they initially wanted to, given the effects of the pandemic. I wonder if you had any advice for advisors in terms of how to explain this product to a client who's who's looking to retire or might want to might want to put this into their sort of retirement plan? 

Brian: [00:41:36] Yeah, sure. I mean, I think first off, it's probably important to note that targeted funds in general, the concept isn't new. targeted funds have been around for quite some time. They're actually a pretty significant player in the US. The US market is actually 3.27 trillion actually in target date fund market. So it's quite large. There is also a target fund market here in Canada, but it's not as prevalent as us. But target funds in general existed in company pension plans and group RRSPs. And so if you worked at one of these companies, you had the benefits of this, the target date fund, the whole glide path and asset allocation and rebalancing for extremely low cost. And for those that have it, that's great. But for the rest of us in Canada, which is the vast majority, they just didn't have that access and it was hard to find suitable retirement products. And that was one of the reasons for starting over more was to find that suitable investment. So, you know, that's what I just want to caveat that to begin with, targeted funds are a concept that's there now to address your your point on what should a retiree do. 

Brian: [00:42:42] I think it kind of goes back to you have to decide what what you're doing to retire if it's if they're close to retirement. The 2025 fund is that simple fund. At that point in time, you know, the mix is very close to a 5050 type mix, and with that is providing an appropriate level of income. But at the same time, that capital appreciation, you know, there's a reason ours Evermore target date funds are 5050. Some of the other competitor products are 70% fixed income and higher end less equities. We wanted a greater equity mix because it was important to continue to still shield the effects of inflation, generate a healthy level of capital appreciation, but at the same time have the defensive asset bonds as well. And so I think for a retiree, what they can look for is they should be investing in the closer to 2025 when it does reach the target date that fund converts reportedly to monthly distributions. So that again, supplements the income that they would require since they wouldn't be working anymore. 

James: [00:43:44] Yeah, I think you might have sort of answered my next question, but you know what happens when when the glide path ends? 

Brian: [00:43:51] Yeah. Yeah, I guess I kind of jumped the gun there. 

James: [00:43:55] No, no, no. 

Brian: [00:43:57] Yeah, it's exactly what it is. What? I just said that quarterly distributions go to monthly distributions. I think, you know, obviously when someone retires, they lose their income. And so they have to start replacing that income and a monthly income because most people pay bills monthly is designed to help with that process. And that's what the targeted funds are are used for. 

James: [00:44:20] Okay, fantastic. That's great. Brian, I appreciate you answering those questions. Is there anything you wanted to add is kind of a summary to advise maybe any final words to advise us in terms of the product and how they might want to use it? 

Brian: [00:44:36] Yeah, I would just say, well, first of all, thanks for everyone who attended the call. I know everyone's busy, so I appreciate the time listening to our product and what it can do for your clients portfolios. I think if you have any more or you want more information, I think it's up there on the slides there it's www.evermore.ca and our social handles are EvermoreETFs. And then if you do have any more questions, you can always email us at [email protected] Okay, we're on that monitoring that all the time, answering questions for advisors and clients. And so yeah, if you have any more questions, feel free to reach out and find us on social media. 

James: [00:45:15] Wonderful. Well, thanks, Brian, for your time and insights and the presentations and thanks also to Surenanthan. I know he dashed off there at some point, but there he is. There is. Thanks so much, Jonathan. I appreciate your your insights and your time. Thanks also to everyone who tuned in and listened. We appreciate you spending part of your day with us. Enjoy the rest of it. And thanks so much for attending by now. 

Brian: [00:45:41] Thanks. 

Surenanthan: [00:45:41] Thank you.