Experience. Intelligent Investing.

J U LY 2 0 1 5
The Exemplar Canadian Focus Portfolio had a
positive return of 2.69% for the month of July,
bringing the YTD performance to 8.40% vs. 0.59%
for the S&P TSX.
In the U.S., economic growth has been improving
from the weather-affected winter weakness. I think
employment numbers have now been sufficiently
robust for a lengthy enough period to allow the
Fed to finally raise rates in September. A 25 bps hike
will have no material impact on the economy but
will end the incessant discussion of if and when the
Fed will hike. The September timing of the policy
change would allow markets to digest the interest
rate hike and rally into year-end. If Chair Yellen
convinces market participants that subsequent rate
hikes will be data dependent and should NOT be
expected for some time (most commonly referred
to as hike and pause), U.S. equity markets should
finally break out of the interminable trading range.
I have been asked how I will position the portfolio
for the rate hike. I have been hoarding cash for
months now and expect to start deploying it on
the rate hike announcement. I will give preference
to U.S. stocks for now, as U.S. economic growth
should exceed Canadian growth until commodity
prices reverse their downtrend.
Based on recent economic data, I do not foresee
changing my current preference for the U.S.
economy, whether through U.S. stocks or Canadian
companies with exposure to U.S. economy. By
needlessly cutting interest rates twice so far this
year, Bank of Canada Governor Poloz has given
hedge funds around the world carte blanche to
short Canada! Central bankers are not meant to
talk down the economy or the currency - Poloz has
done both. He has told the investment world that
Canada is mired in recession and thus accelerated
the decline in the loonie. The reality is that energy
dependant Alberta (as opposed to the rest of
Canada) is in recession, and there is NOTHING
Governor Poloz can do to change the global oil

EXEMPLAR CANADIAN FOCUS PORTFOLIO

supply glut. Lower domestic interest rates will
not increase demand for Canadian resources.
On the other hand, weak currency will certainly
attract shorting interest in Canadian assets, and
might even hinder access to equity capital for the
perennially needy energy industry.
And then there is the looming Canadian federal
election. Definitely a very dull affair compared to
the Trump show! How much interest will there be
in Canadian assets if the NDP leads in the polls? This
is purely a rhetoric question.
The large cash hoard, combined with some
shorting activity, has helped the portfolios to ride
out recent volatility. As described above, I would
expect a meaningful rally in U.S. equities IF Chair
Yellen announces hike and pause in September.
Unfortunately, more patience will be required in
Canada. We cant expect an equity rally until the
elections are behind us.
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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