Experience. Intelligent Investing.

SEPTEMBER 2015
The Exemplar Canadian Focus Portfolio had
a negative return of -1.16% for the month of
September, but remains positive YTD at 4.57% vs.
-7.02% for the S&P TSX.
Chair Yellen failed to raise interest rates as she
worried that recent global economic and financial
developments may restrain economic activity
somewhat and are likely to put further downward
pressure on inflation in the near term. Was Yellen
worried about the state of the currency and equity
markets, or the global economy? Equity markets
reacted to the lack of certainty with heightened
volatility and quickly revisited previous August
lows. Subsequently released disappointing
economic data convinced investors there will be
no need to raise rates until sometime in 2016 and
markets staged a relief rally. With the threat of a
stronger U.S. currency diminished for the present, a
Dash for Trash rally lifted oversold commodity and
cyclical stocks off their quarter-end bottom. What
happens next?
It would certainly make sense for investors to start
rotating into more cyclical sectors as the current
cycle matures. I just dont think the time for such
a rotation has arrived just yet. If Yellen does not
feel confident the economy can absorb a measly
25 bps rise in interest rates, how can investors start
betting on the healthy progression of this cycle?
Thus, I am staying with the view that present
environment will continue to reward the NIFTY
FIFTY style of investing. Companies delivering
consistent earnings growth will be rewarded
with premium valuations. Just look at Nike and
Constellation Brands making new highs after
delivering solid earnings beat. Their generous
multiples did not stop investors from flocking to
the stocks. Then there is Yum! Brands - the stock
got crushed after the company missed estimates.
In Canada similar forces are at work. Alimentation
stock made a new high after a surprising beat

EXEMPLAR CANADIAN FOCUS PORTFOLIO

despite currency headwinds, while flat results at
Jean Coutu caused the stock to languish despite its
significantly lower valuation.
Recent stock market weakness gave me the
opportunity to start deploying the large cash hoard
accumulated in both mutual funds. Despite my
shopping spree, I have not made much of a dent in
the cash stash, as I have decided to exit most of the
pharma stock positions. There will be no shortage
of unfavorable headlines (a la Clinton price
gouging comments) during the hotly contested
US presidential election race. In Canada, the sector
looks even worse thanks to the botched Concordia
equity raise and its pending bond financing. So
apart from making very short-term trades from
both the long and short side, I will revisit this sector
at a future date. The Portfolio only has a 3.51%
weighting in health care stocks.
The October 19th Canadian election remains the last
hurdle in my quest to get cash invested during the
seasonal weakness. Not fully trusting current polls, I
will remain somewhat defensively positioned until
the election results are safely in the rear view mirror.
In the interim I am looking for opportunities to add
to my U.S. positions on weak days, while covering
many of my profitable short positions. Not since
2008 has there been such opportunity to profit
from short positions - mainly in the resource sector.
Teck, Major Drilling, Potash and First Quantum are
some of the more profitable short positions I have
recently covered.
Thank you for your continued interest in the Fund.
For further information, please contact your regional
Arrow Capital Management representative.
Sincerely,
Veronika Hirsch
Portfolio Manager
Arrow Capital Management Inc.

Unless otherwise stipulated Exemplar Portfolio returns are net of all fees, in Canadian dollars, reflect class F shares and assume
reinvestment of all distributions. Commissions, trailing commissions, management fees and expenses all may be associated with
Exemplar Portfolio investments. Please read the full prospectus before investing. Except as otherwise noted the indicated rates
of return are the historical annual compounded total returns including changes in share or unit value and the reinvestment of
all dividends or distributions and do not take into account the sales, redemption, distribution, or optional charges or income tax
payable by the unitholder or shareholder that would have reduced returns. Exemplar Portfolios are not insured or guaranteed by
Canada Deposit Insurance Corporation (CDIC) or any other insurer. Exemplar Portfolios are subject to risks of loss of capital and
income and their values change frequently. Past performance may not be repeated. Shares of the Portfolio are highly speculative
and involve a high degree of risk. You may lose a substantial portion or even all of the money you invest in a Portfolio.
36 Toronto Street, Suite 750 Toronto, Ontario Canada M5C 2C5 Tel: 416.323.0477 Tel: 1.877.327.6048 Fax: 416.323.3199 www.arrow-capital.com

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