Philosophy

The Independence Cash Management Portfolio (Quebec) has been designed to provide above average rates of return on cash balances and allows qualified investors to apply invested amounts towards the calculation of capital, with the objective of reducing the capital tax payable mandated under Quebec tax law.  In order to meet these two objectives, we construct a portfolio of high quality short term corporate securities with an eye towards their eligibility and relative valuation as well as the term structure of interest rates.  We also recommend that the client stay in the portfolio for a minimum of 6 months. 

Investment Style

• Portfolio duration adjusted using an interest rate anticipation style
   
• Exposure to and trading of corporate commercial paper and short bonds
   
• Exposure to and trading of bank deposit notes, short bonds, and bankers acceptances
   
• Recognition of inter-market relationships between short paper, bonds, and currencies

Selection and Restrictions of Securities 

• Maximum term to maturity to be 3 years and under
   
• Corporate commercial paper and short bonds
   
• Bankers acceptances and bank short bonds and deposit notes
   
• Investment in Federal and Provincial governments securities is not permitted
   
• Investment in income trusts is not permitted
   
• Investment in securities of crown corporations with no capital stock is not permitted
   
• Investment in crown corporations with capital stock is permitted, even if wholly owned by the Federal or Provincial governments (ex., Farm Credit, Hydro Quebec)
   
• Holding period for the securities must be at least 120 days
   
• Holding period must include the date of the investor's fiscal year end
   
• Securities that have not been held in the portfolio for 120 days before the end of the investor's fiscal year must be held until the 120 day period is completed.

Present Market Strategy

• The current direction of short term interest rates in North America is up as central banks are tightening monetary policy with a view to slow down economic growth.
   
• In that environment, our strategy is to be very defensive, that is to concentrate holdings into 4-6 month bank/corporate paper. 
   
• Economic weakness and a related easing in monetary policy would cause us to shift our strategy to a more aggressive stance, reallocating the assets invested in short term paper into longer term securities, subject to the holding period requirement.