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Message from the CIO

Graham Anderson

As I look back on 2009, two things stand out clearly in my mind. First, while it's always important for investors to be true to their investment discipline, it's especially important in a global bear market. Having that discipline enables you to keep focused on your long-term goals, instead of being caught up in the short-term irrationalities of market behaviour. Second, now more than ever, it's clear that being part of a financially stable organization is key to business success. Part of what we achieved this past year is because we were able to capitalize on the competitive advantage we enjoy in being backed by Invesco, one of the world's largest independent investment management firms.

Standing firm during market turmoil

Looking back to early 2009, no one was really predicting an outstanding year in the markets - and yet thanks to the discipline of our Trimark team, many of our funds performed extremely well last year. The equity market declines that characterized late 2008 continued into the new year, with Canadian and global indices all dropping sharply during the first months of 2009. Relief finally appeared in early March, with tentative signs that the markets had bottomed. It was a diffi cult time. From peak to trough, these market drops were dramatic, erasing 40% to 50% of global equity valuations.1 And even though most global markets have since rallied 45% to 55%, major indices will still have to rise 20% to 40% from their year-end closes just to return to their previous highs.1

The deep uncertainty in the markets extended into fixed income as well. High-yield spreads peaked dramatically to more than 2,000 basis points (bps) in December 2008 – versus only 1,000-bps peaks in the recessions of 1991 and 2001 - before returning to 565 bps at year-end.

It's in these difficult times that our Trimark portfolio managers outdo themselves in terms of sticking to their investment discipline: identifying good companies with strong management teams that may have been overlooked or unduly beaten down by other investors. By taking advantage of the short-term market volatility, the investment team could position the funds for success down the road.

Being part of an investment-focused and financially stable global organization also means that we have the resources to perform our proprietary investment research and due diligence, which is as rigorous as ever. This includes extensive internal research, which is supplemented by our investment professionals' visits to many companies around the world. And the results are beginning to shine through, with many of our funds across the different market-capitalization and geographic spectrums performing well coming out of the turmoil in 2008 and early 2009.

Persistence pays off

While the perspective is relatively short-term in nature, the fact is many of our small- and midcapitalization funds generated strong relative and absolute returns in 2009. A number of our fixed-income and larger-capitalization Canadian equity and balanced funds also performed well. And despite the market turmoil, in both absolute and relative terms, many of our global funds delivered solid performances during the second half of 2009.

While it will take more time to see consistent strength in our three- and five-year performance numbers, I'm confident that the investment process that continues to be followed by our managers has set our funds up for good long-term results. We strongly believe the businesses that have been selected out of the numerous attractive opportunities during the economic downturn will produce strong five- and 10-year returns.

Building bench strength

From a strategic management perspective, the market downturn provided us with the opportunity to position our Trimark investment team for future success. During the past 18 months, we promoted five analysts to portfolio manager, added four new analysts and, because of our financial strength, we were able to hire five veteran portfolio managers – all during an economic downturn. Now with over 30 members on board, the Trimark investment team is as strong as ever.

Safeguarding the Trimark legacy

As we add new members to our team, we have safeguards in place to ensure the consistent application of our Trimark investment discipline. Our fund oversight processes are designed to monitor all Trimark managers daily, monthly and quarterly to ensure the Trimark approach remains intact. In addition, our Fund Advisory Board of independent Board members is responsible for helping to ensure that our funds are managed in the best interests of investors.

Looking ahead, I feel confident that Invesco Trimark is well-positioned for whatever uncertainties may come in 2010. We have the discipline, the people and the financial strength that's going to be required to deliver strong long-term performance in the years ahead - and to help you build and protect your wealth over the long term.

Thank you for your continued support.

Sincerely,


1 Data as at December 31, 2009.

Graham Anderson
Chief Investment Officer
Invesco Trimark
March, 2010