Opportunities Funds Commentary

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Trident Investment Management, LLC
Opportunities Funds Commentary
UPDATE
December 31, 2010
Peformance Discussion
2010 ended on a euphoric note for global equity markets. In November and December, the S&P 500 Index
was up an amazing 6.7%, the MSCI Europe Index was up 3.84% and the Nikkei was up 11.25%. Emerging
market equities also rallied, with the MSCI Emerging Markets Index up 3.82% over the period. Bond
markets globally sold off in tandem with the improved sentiment in equities with 10 year U.S. Treasury
yields rising 0.694% to end at 3.295%. Credit spreads tightened in the U.S., although not in Europe, with
the U.S. Investment Grade Index finishing close to its tightest levels for the year. Commodities rallied too
with gold rising 4.51% to end at $1420.78 an ounce and oil rallying 10.33% to end at $91.38 a barrel. The
U.S. dollar, in this atmosphere of euphoria, was broadly stable (all figures in U.S. dollars).
Our funds suffered over the last two months of 2010. Our long positions in fixed income in Australia,
Norway and South Korea significantly hurt performance since rates in these markets backed up more
than comparable U.S. rates. Our long-fixed income positions were almost all taken through options, and
the improvement in sentiment resulted in bigger losses than we had expected due to a substantial decline
in volatility. The credit tightening also hurt our performance, as did the relative stability, if not strength
of the U.S. dollar. Our U.S. curve steepeners were the only positions that helped our performance, but
unfortunately our gains here were not sufficient to offset our losses.
1. An Analysis of 2010
2010 proved a disappointing year for us. On the one hand, most of the serious problems that are more
than apparent now in the global economy surfaced over the year much as we had expected. Yet, markets
decided for the most part to ignore these issues and instead focus on the policy responses which promised
some prospect of near-term stability. We ended 2010 with the same global imbalances and problems of
2009, except that most of them have gotten much larger. Even worse, policymakers have considerably less
flexibility today because of the flawed measures they have taken so far. Yet, the eternally optimistic markets
are projecting a rosy future. The silver lining now, as we see it, is that it is a good time to be betting against
the consensus.
Entering 2010, the biggest single problem in the developed world was a crushing load of sovereign debt. The
debt to GDP ratios for the U.S., the U.K., most of Europe and Japan (which has still not recovered from its
1990 real estate bust) were all at levels that suggested that much of the debt was unpayable barring drastic
action such as an outright default or inflation through money printing. Unfortunately, we leave 2010 with
the developed world having taken on more debt over the course of the year and rendering itself even more
vulnerable. Europe and the U.K. however, have come to terms with the fact that current debt levels are
unsustainable and that a period of austerity if not perhaps a new fiscal and/or economic framework may be
needed. The U.S. refuses to even acknowledge that uncontrolled increases in debt are a problem. In fact,
numerous influential policymakers in the U.S. are calling for even more deficit expenditure to boost growth,
along with more money printing to keep rates low – a recipe that has inevitably led to hyperinflation wherever
it has been tried.
2010
DEC
UPDATE
The other big issue entering 2010 was the unbalanced nature of global trade. The Chinese, as the largest
exporters in the world, have an economy where consumption represented less than 40% of GDP, a
record low for any country, especially one with a large base of poor consumers. The U.S., which has been
steadily losing jobs to outsourcing, has an economy with consumption representing about 71% of GDP.
Given that the 2007-2008 crisis exposed the flaws of an economic growth model driven by leveraged
consumption, one could have reasonably expected that the U.S. would have taken some effort to reorient
its economy away from consumption. The Chinese, seeing their exposure to the leveraged U.S. consumer
could have also been expected to take measures to deal with their unbalanced economy. Instead, what
we observed in 2010 was a determined effort by both parties to continue with their dance of death.
The policies pursued globally in 2010 reflected the unfortunate reality of governments pandering to their
domestic constituencies while refusing to acknowledge the inherently global nature of their problems. The
markets would arguably have been the only objective arbiters of government policy. However, the world’s
largest markets were increasingly manipulated by the authorities so that they are now testaments to the
power of governments rather than an outsider’s assessment of reality. This has been brought home starkly
in 2010 in ways that we explore in greater detail.
Most U.S. observers believed that the U.S. economy in 2010 would be on a strong recovery path. A
sustainable recovery appeared imminent at the end of 2009, and the Federal Reserve was expected to end
its quantitative easing (QE1) on schedule at the end of March 2010. It was also believed that the Chinese
and the developing world in general would perform well as global growth resumed. We believed that QE1
would be totally ineffective in sustaining growth and that the moment it was withdrawn the strains in the
U.S. economy would become apparent. While we were not bearish about growth in the emerging markets,
we were nevertheless concerned because so much of the bullishness came from the expectation of very
strong growth in the developed world.
As things played out in 2010, global growth proved slightly weaker than the consensus had expected. The
U.S. economy failed to live up to the hype at the start of the year. The European Union (EU) became
enmeshed in a sovereign crisis where the solvency of its member states came into question. The region
has embarked on a round of fiscal austerity, which has yet to take full effect, but its overall contribution
to global growth was still anemic. China, and the emerging countries in general, grew strongly, partially
mitigating the relatively weak environment in the developed world. As growth concerns surfaced in mid2010 along with sovereign debt worries, risk aversion increased and markets swooned into August 2010.
However, the U.S. Fed rode to the rescue promising yet another round of QE. Even worse, the U.S.
announced an extension of the Bush tax cuts with an additional cut in payroll taxes to boot. The additional
government expenditures, with money printing, ignited another burst of euphoria notwithstanding the
usually dire consequences of such actions. We ended the year thus, with equity markets at their highs and
most participants believing that vibrant, consumer-led growth, especially in the U.S., was back. We seem
to be stuck in a time warp with the village idiot chorus.
Our portfolio in 2010 was positioned to profit from a move to resolve some of the gargantuan problems that
the world faced entering the year. We fully expected that the U.S. would print money and spend whatever
was necessary on its fruitless attempt to reignite growth, and that the main casualties of its measures would
be the dollar and longer-dated U.S. bonds, the former because of the commitment to print money and the
2010
DEC
UPDATE
latter because of the continued expansion of fiscal deficits. We also believed that the rest of the world would
move to letting the U.S. dollar depreciate while making their own painful adjustments to reorient their growth
away from U.S. exports. In the latter case, we could not have been more wrong. While there was generalized
dollar weakness over the year, the exchange rate that is the linchpin of the global trading system, the Chinese
renminbi, barely moved against the dollar. The Chinese economy did not reorient away to consumption,
nor did it even slow: we just had more investment in export capacity and real estate, as we did for the
last several years.
The European problems, which we believed would be instrumental in slowing down global growth and
creating conditions for more financial turmoil, appear to be having the effects we expected. Markets
nevertheless believe that the European issues will be contained to the periphery, even though Europe is
the largest single economic bloc in the world, much like the subprime problems of 2007 were “contained”
at first. This has meant a significant sell-off in fixed income in countries like Australia where the problems
of the developed world and the country’s own real estate bubble faded in comparison to the booming
exports to China. And our credit shorts, which were largely in corporate credits in the U.S. and Europe,
were relatively unaffected if not tighter over the course of the year despite the European turmoil. In
fact, sovereign credit spreads in Europe have blown out to levels that suggest that sovereign default is
highly likely across much of Europe, even as corporate credit spreads (even in Europe) suggest that this
problem is unlikely to affect the companies in question at all. So we have the anomalous situation now
where an AAA rated bond like that of France trades with a wider credit spread than a BBB+ bond issued
by a French company, which in turn trades at an even wider spread than a BBB rated U.S. company.
Most of our positions in fixed income and currencies were taken through options. Despite the clear and present
risks in much of the fixed income world and the huge gyrations of the bond market from the daily changes in
market sentiment regarding future growth, volatility has dropped considerably over 2010 on options.
Our biggest winners in 2010 were our long positions in gold and our U.S. curve steepener options. Gold
posted a healthy gain over the year albeit with constant wild swings. Our yield curve positions helped our
performance but not nearly as much as we had expected. Our steepener options finished in the money
for the most part, but since the yield curve remained only as steep at year end as it had at the start of the
year, our gains were limited to the so-called “roll-down” in these options, which reflected our gains from
the fact that the Fed did not raise rates in 2010 as the markets had expected in 2009 (when we purchased
these instruments). A true blow-up in the fixed-income market has not occurred – even with the selloff in
December following the U.S. tax cuts, the 10-year treasury remains at yields lower than those that prevailed
at the start of 2010.
All in all, our poor performance in 2010 can be traced to just one factor – the cost of waiting. We paid
out premium on our options which for the most part did not pay off. We lost money on negative carry on
corporate credit which remained tight all year. And we are glad we did little to no new positioning on the
news relating to the U.S. slowdown and the European turmoil – had we been more aggressive, most of the
positions that our logic would have suggested would have been major losers. We leave 2010 amazed at the
market action – reality has already started to bite at every level in virtually all of the world’s economies and
yet the markets and the Wall Street pundits persist in projecting a rosy outlook that could well be from a
parallel universe. Frustrating though 2010 has been, we cannot believe that we are entering 2011 with the
level of opportunity that we see today.
2010
DEC
2. The Global Situation in 2011
UPDATE
The major issues faced by the world entering 2010 have become much worse over the course of the year
so that we enter 2011 with less flexibility and more market risk than before.
First, the economic imbalances across economies are very high and have gotten worse over the course
of 2010. The world’s main exporter, China, has continued to grow exports with its main export markets
being those of the U.S. and the European Union. However, the latter economies have problems with
continued consumption. The EU is weighed down by significant unemployment and the potential of
further economic weakness due to government austerity. The U.S. also suffers from high joblessness with
its consumer facing the added problem of too much debt. Even worse, consumption in the U.S., unlike
most of the EU, is already over 70% of GDP suggesting that any consumer slowdown will feed quickly into
much weaker growth and higher unemployment. The Chinese economy in sharp contrast to those of its
customers, is driven mostly by investment and exports. Consumption in China represents less than 40% of
GDP, a percentage that is ridiculously low, especially for a developing country. Even worse, China’s policy
of pegging its exchange rate to the U.S. dollar has led to a domestic bubble in real estate and commodities,
making its already frugal consumer feel even more impoverished. Many of the exporting economies in Asia
share the characteristics of China to some degree, with the almost universal issue being that consumption
has been a much smaller portion of GDP than the wealth of these countries would suggest.
For long-term, sustainable global growth, we need to resolve the imbalances between the producer and
consumer countries in the world. The frugal Asian economies must be induced to consume considerably
more as a percentage of GDP and export less, while the more profligate advanced economies of the West
need to rein in their consumption and live within their means. Such a transition will require a major
reorientation of economic priorities in all the affected countries. Moreover, while this change would be of
long-term benefit, it is unlikely to help the economic situation in most countries in the short run. And this
brings us to the second major problem the world faces.
Getting out of the distorted equilibrium that the world economy is in today will involve significant economic
pain. Government policy could help mitigate such pain by assisting the affected sectors because such
assistance would lay the foundation for longer-term stability. However, most governments do not have the
wherewithal to mitigate the pain of transition because they have expended so much of their resources in
sustaining the status quo over the last several years. The lack of financial flexibility in the developed world
is particularly visible in the levels of sovereign debt. The debt in most of the advanced industrial nations
has reached such huge proportions that one can argue that it is no longer a “safe” investment. Even worse,
the developed world is adding to its debt at a staggering pace to the point where any reasonable analysis of
the dynamics would suggest a problem with repayment. The table below shows the situation of some of
the major countries of the world.
2010
DEC
UPDATE
Table 1: Sovereign market vulnerability statistics in % of 2010 GDP
Country
Net Debt
Budget Balance
Current Account
Balance
U.S.A.
66
-11.1
-2.7
Germany
59
-4.5
4.9
France
74
-8.0
-1.9
Japan
121
-9.6
2.8
UK
69
-10.2
-1.1
Italy
99
-5.1
-3.2
Spain
54
-9.3
-5.5
Greece
110
-7.9
-11.2
Source: Citi Investment Research, “The Debt of Nations”, 7 January 2011
The huge levels of debt put the developed world in a difficult situation. On the one hand, most of the
countries need to run large fiscal deficits to manage even anemic growth – for example, the U.S. is running
a deficit annually of over 11.1% of GDP to generate just 2.5% GDP growth. Yet, trying to generate growth
with deficits means even more debt and a bigger repayment hole, not to mention potentially higher interest
rates which in turn could feed into higher indebtedness. In this context, governments need to be especially
careful about policy. Any increase in indebtedness has to result in a proportionately greater increase in
growth if the debt ratios for the country are to remain stable. That is, the growth generated by the economy
by increasing debt should at least offset the interest payments on the increment – if not, we end up in
a situation with explosive debt dynamics where more and more debt is taken on just to service existing
debt. Yet, most developed countries are taking on debt to maintain current levels of consumption without
addressing the huge global imbalances with the developing world at all. That is, scarce resources are being
used to fund the least productive activities with no regard for long-term stability.
Even an optimist looking at the levels of debt in the developed world would have to conclude that there is a
high likelihood of either a hard default or restructuring of payments, or a soft default with the monetization
of debt and inflation. It may be possible, with several years of austerity, to perhaps avoid these outcomes
and muddle through to a benign resolution, but to do so requires strong leadership and a degree of political
will that is lacking in most of the advanced nations. Moreover, significant divergences exist across countries
in terms of what needs to be done and these will very likely create significant turmoil in markets in 2011.
The current U.S. policymaking consensus believes that the levels of U.S. debt are not a problem. In
fact, the latest “compromise” between President Obama and the Republican leadership extended
the Bush tax cuts while cutting some payroll taxes in addition. And this is in the face of a restive
population that seems unwilling to fund further expenditures by the government, as reflected by the
most recent election results in November 2010, where deficit-cutting “Tea-Party” candidates were
elected in significant numbers to the legislature. The U.S. Congress today is exceptionally polarized
with members of both houses appearing far from compromise even on the most trivial of issues.
2010
DEC
UPDATE
The bond market’s potential disciplining of the U.S.’ spendthrift leadership has been subverted by the Fed
which has engaged in a shameless exercise of monetization of debt with its quantitative easing policies.
Fed chairman Bernanke, in an amazing display of intellectual dishonesty, argued recently on national
television that the Fed’s QE2 was not the same as printing money, contradicting his own statements of
a year ago on the same television program. Even worse, most mainstream U.S. economists argue for
even more government largesse while supporting more QE as needed. With this framework, the U.S.’
trading partners are in the hapless position of catering to the country’s voracious import needs, while
continuing to accept in payment U.S. dollars, which should soon be in virtually infinite supply given
U.S. policymaker leanings.
The EU and the U.K., unlike the U.S., have not embraced the idea of continued government expenditure
with monetization. In fact, the crisis in peripheral Europe has come about largely because the institutional
framework of the EU does not permit the European Central Bank to engage in monetization of the region’s
debt, no matter what the benefits of doing so might be. An inability to monetize requires accepting market
discipline on debt issuance. Markets have started to balk at funding the large deficits of the countries
of peripheral Europe forcing many of these nations into painful fiscal austerity at a time where their
economies are already reeling with high unemployment and weak growth. Even worse, it is becoming
apparent that such austerity might be futile. Many of the peripheral European nations such as Greece,
Portugal and Ireland are essentially insolvent and austerity is only going to prolong the inevitable
restructuring of debt.
Finally, Japan, the other big player in the developed world, has adopted a policy of simply ignoring its
horrific debt levels while continuing to pile on more debt. The government in Japan so far has proved
unable to even enunciate a policy framework for dealing with its debt, relying instead on its relatively lessindebted households and corporate sector to continue to finance its borrowing. A major debt crisis that
could result in an outright monetization of debt for Japan is highly likely within the next two years. Such
an outcome might not prove catastrophic for the country especially if the yen were to weaken because it
would feed through into more exports, given the country’s manufacturing prowess, and domestic inflation.
Faced with the developed world’s policies, the developing countries are more than concerned. The problem
that they collectively face is that their productive output can be purchased by the developed world with
paper money that is becoming increasingly risky. This is of significant consequence to China, the world’s
largest exporter and reserve holder. Were the developing countries to revalue dramatically against the
developed world’s currencies, this would create near term pain for their export sectors as well as dramatic
paper losses on their reserve holdings. However, to the extent that countries have chosen to peg to the
U.S. dollar, they have started to face serious problems with domestic inflation because of huge U.S. dollar
inflows from the Fed’s QE2. Any rate increases to quell inflation are in turn leading to even more inflows
and domestic inflation – for example, Chinese reserves have increased almost $600 billion in just the last
six months of 2010, even as its official inflation (which is grossly understated) exceeded 5% for the year.
On a number of levels, we are reaching the point of no return in 2011. Serious questions exist about the
ability of the U.S., U.K., Japan and much of peripheral Europe to repay even their existing debt, let alone
new debt. The developing world is increasingly aware of this but is yet unwilling to adopt the exchange rate
appreciation needed. Any major adjustment in currencies will mean a significant near-term slowdown in
2010
DEC
UPDATE
growth globally, and possibly higher inflation in the developed world. Yet, postponing these realignments
is only serving to make the problems much worse to the point where many of the developing countries
could soon face internal unrest due to rising inflation. Muddling through is not a likely outcome for the
world in 2011.
3. Market Opportunities for 2011
Markets today, especially in the U.S., are oblivious to most of the risks we have highlighted above. The
reason for the insouciance comes from the fact that the Fed has essentially reassured participants that they
stand ready with more money printing as and when needed. In particular, Bernanke explicitly stated post
QE2 that a rise in the stock market would somehow bring confidence, if not prosperity to the U.S. While
the Fed chief also said he was 100% certain that these interventionist policies could be reversed when
conditions improved, what has become very apparent is that the Fed will essentially be unable to remove its
accommodative stance barring a crisis. In fact, even the slight slowdown that ensued after the end of QE1
caused the panicked Fed to embark on QE2 after consultation with market makers about just how much
QE2 needed to be to keep the domestic party going. Not surprisingly, asset prices in the U.S. are now at
elevated levels with volatility plumbing the lows of 2007 when subprime was not even a factor. Correlations
across asset classes are also at all time highs.
This near-term Fed-induced “stability” is in fact anything but that. Zero rates and ample liquidity are
driving market participants to ignore facts and embark on a dangerous chase for yield, while encouraging
practices in the stock markets reminiscent of the technology bubble days of 1999. Yet this time, we have
commodity prices soaring and this in turn is causing real pain to the developing world suggesting that a
reckoning is in the offing. The longer markets ignore these realities, the more certain that any adjustment,
when it does commence, will be a crash rather than the gradual tradeable decline that participants expect.
There are two possible scenarios that we foresee that might upset the happy world of today. One involves
a significant currency adjustment (and ultimately economic change) that will move the emerging and
developed world closer to the desired long-term equilibrium. The other is a recognition by the markets
of the unsustainability of the debt situation in the developed world, which in turn induces a round of
sovereign defaults and global debt aversion. We take up both scenarios in more detail below.
3.1 The Currency Adjustment Scenario
The continued inflation in food and commodity prices is forcing much of the developing world into a
difficult choice. On the one hand, they can tighten policy and face the prospect of increased U.S. dollar
inflows and an outcome with more inflation, price controls and the like. Or they can let their currencies
appreciate significantly accepting the export sector consequences, and act to boost the domestic consumer
economy. Unchecked food inflation is leading to social unrest in some emerging countries and could soon
prove destabilizing for many governments in the developing world. There is a strong likelihood that China
and many of the other developing nations will revalue their currencies significantly (at least 5-10%) against
the developed world and especially the U.S. dollar in 2011. Such a move would help quell domestic
commodity inflation given that most commodities are priced in U.S. dollars, even as it would help reduce
any risk of deflation in the U.S.
2010
DEC
UPDATE
The Chinese Yuan – U.S. dollar exchange rate is clearly the linchpin for this scenario and it is very much
in the global interest to force a major revaluation by China. While painful in the near-term for China,
and especially Chinese exporters, such a policy may not prove as detrimental in the medium term as
one might expect. Many of the goods that China exports involve assembly or manufacturing of imported
commodities and intermediates. Since the prices of these inputs are typically set in dollars, a sizeable
fraction of the costs faced by the Chinese exporters are also in U.S. dollars. Also, a large fraction of Chinese
wages goes to food and shelter. A continued rise in the prices of these necessities that is being engendered
by a pegged exchange rate is already leading to demands for wage increases. Thus, while exporters will see
a compression in their operating margins due to a yuan revaluation, this should be somewhat mitigated by
a reduction in input costs and possibly a reduction in the pressure for wage increases. Managed carefully,
a yuan revaluation coupled with tighter domestic credit and targeted fiscal policy to boost consumption,
could permit China to reorient its economy away from exports and real-estate investment towards domestic
consumption. This will entail near-term pain, but should have huge longer-term benefits. The developed
world would face a period of stagflation in this outcome, which is perhaps desirable and maybe even the
best one could hope for.
The best investment opportunities under this scenario would be to short the currencies and the bonds of the
developed world against those of the developing countries. Gold should also do well in this environment.
Selected equities, especially in the emerging markets, might perform well over the medium term.
3.2 The Sovereign Debt Crisis Scenario
This is perhaps the situation that markets deem most likely currently, but yet the consequences of the
same are not fully priced in. Credit Default Swaps for many of the European sovereigns suggest that
countries like Greece, Ireland, Portugal and Spain could default very soon on their obligations. Markets,
however, believe that such defaults will have little effect either on corporate activity or on global credit.
Unfortunately, a true sovereign default will mean a repricing of sovereign risk especially since both the
U.S. and Japan share the same debt dynamics of the peripheral Euro nations. As such, a global revulsion
to the debt of the riskier sovereigns could develop. While this might not mean more defaults, it might at
least force austerity on countries like the U.S. and Japan which can ill afford such measures at the present.
This in turn could lead to a significant global slowdown, falling commodity prices and a big deflationary
shock as countries like China continue to export their excess capacity into a world that is increasingly
unable to consume more. This situation could rapidly spiral into one involving trade wars and mutual
recriminations, which will exacerbate the global slowdown.
The best investments for this scenario would be the debt and/or the currencies of the highly solvent
sovereign nations such as Norway and Australia. Gold is likely to do well in this scenario as well because of
the loss of confidence in sovereigns. This environment however, will wreak havoc on equities, credit and
most risk assets – after all, leverage even with zero interest rates will prove painful if most investments one
can make will lose.
2010
DEC
UPDATE
Conclusion
Our portfolio is positioned to profit from either of the scenarios above. Much of our leverage to these
two scenarios is obtained through options that provide a limited and fixed downside, while providing
substantially greater upside if we are correct in our views. Given the significant decline in volatility over
2010, most of our options today are priced at levels that prevailed in the halcyon days of early 2007. Some
of them in fact have been written down over 70% in 2010. Yet, fundamental conditions have not changed
much, suggesting that if markets come around to our viewpoint, our payoffs could be explosive.
We enter 2011 sounding the alarm about global imbalances and highly risky policy measures much as we
did in 2010. The only difference today is that we are that much closer to the brink, as attested to by the
sovereign debt markets in peripheral Europe and the rampant inflation throughout the developing world.
Given the rather obvious challenges faced by the world, it is not much of a stretch to anticipate a volatile
and difficult 2011, but most market participants are overwhelmingly bullish. The Greek god Apollo gave
the Trojan princess Cassandra the gift of prophecy even as he cursed her to live in a world where no one
would believe her predictions. Given our views, I can certainly appreciate how Cassandra might have
felt in her time. Fortunately, we are much more mercenary than Cassandra and fully expect to profit
significantly when our predictions prove correct.
Wishing all of you a happy and prosperous 2011.
Performance Summary at December 31, 2010
Trident Global Opportunities Fund
1 Mth.
3 Mth.
6 Mth.
1 Yr.
2 Yr.
3 Yr.
5 Yr.
10 Yr.
YTD
-0.9%
-2.0%
-3.9%
-4.9%
-4.3%
9.6%
20.0%
N/A
-4.9%
Since Inception
(Feb. ‘01)
11.5%
CI Global Opportunities Fund
1 Mth.
3 Mth.
6 Mth.
1 Yr.
3 Yr.
5 Yr.
10 Yr.
15 Yr. YTD
-0.8%
-1.9%
-3.7%
-4.7%
9.3%
21.6%
8.2%
18.3%
-4.7%
Since Inception
(Mar. ‘95)
18.7%
Nothing herein should be read to constitute an offer or solicitation by Trident Investment Management, LLC or its principal to provide investment
advisory services to any person or entity. This is not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of
units of the Trident Global Opportunities Fund are made pursuant to the Offering Memorandum only to those investors in jurisdictions of Canada
who meet certain eligibility or minimum purchase requirements. Important information about the Funds, including a statement of the Fund’s
fundamental investment objective, is contained in the Offering Memorandum. Obtain a copy of the Offering Memorandum and read it carefully
before making an investment decision. These Funds are for sophisticated investors only. ®CI Investments and the CI Investments design are
registered trademarks of CI Investments Inc.
2010
DEC