Market neutral equity strategies are fully hedged, meaning they hold a portfolio of stocks and offset the risk of those stocks by investing an equivalent dollar amount in short sales of other stocks (50% long /50% short). A well-constructed portfolio will have similar exposures to all sources of volatility such as style biases, interest rates, industry-specific factors and market risk. The end result is an almost complete zeroing-out of both the upside and the downside volatility associated with the stock market. The portfolio produces a return in two ways: by investing the proceeds of the short sales in money-market instruments and by skillfully identifying undervalued stocks to buy and overvalued stocks to sell. This strategy category is of most interest to those investors with an emphasis on capital preservation and lower volatility.

Canadian Market Neutral Equity Strategy

The investment objective of the Strategy is to provide a non-correlated rate of return on capital in excess of Canadian T-bills over a three-year period and with volatility equal to or less than that of long-term bonds. The Strategy invests a minimum of 80% of its Total Assets primarily in a diversified selection of 50 to 200 selected Canadian corporations trading on major Canadian stock exchanges with at least CAD $100 million market capitalization at the time of purchase or short sale. The Strategy maintains a net market exposure of between -20% and +20% at all times. No single long or short position exceeds 3% of Total Assets. The Strategy may invest up to 5% of its Net Asset Value in derivative instruments, primarily exchange traded, in order to eliminate its exposure to market risk. Leverage is limited to a maximum of one and one half times the Strategy's net assets.