Experience. Intelligent Investing.

O C T O B E R 2 0 1 5
The Exemplar Canadian Focus Portfolio had a
postive return of 0.36% for the month of October,
bringing the YTD performance to 4.98% vs. -5.20%
for the S&P/TSX.
U.S. stocks had the best October in 4 years,
clawing back the losses incurred during the
August to September market correction. The
burning question is whether this rally has sufficient
momentum to carry stocks higher all the way to
Christmas? Considering the unanimously poor
expectations for both the economy AND the
markets, the answer is a resounding MAYBE?
Markets were a lot testier here at home. Canadian
companies using roll-up strategies for growth have
come under indiscriminate attack in recent weeks.
Concordia and Valeant got the ball rolling, getting
hammered by short sellers presumably for different
reasons. Concordias latest acquisition (announced
in September), considered perhaps more expensive
than transformative, left the company in urgent
need for substantial amount of financing. The
timing was unfortunate, as the sector just recently
came under scrutiny for excessive drug price
increases. U.S. investors, less familiar and certainly
less enamoured with the companys track record
than Canadians, must have viewed the financing
as an opportunity to short the troubled sector.
More pain came in the form of a report questioning
Valeants use of specialty pharmacies. The mindnumbing sell-offs left Canadian portfolio managers
apprehensive and ready to sell any stock rumoured
to be under scrutiny by short sellers. I am not sure
it is fair, but Mr. Poloz bears at least partial blame
for the current malaise in the Canadian equity
market. By maintaining a low interest rate and
weak CAD policy, he has made shorting Canadian
equities attractive for U.S. investors. There are many
alternative explanations for the chaos endured by
Canadian markets in recent weeks. Because the
roll-up strategies have been mainly successful,
they attracted sufficient investment flow to lead

EXEMPLAR CANADIAN FOCUS PORTFOLIO

to hefty valuations. At the same time, commodity
and cyclical stocks proved rewarding shorts as their
valuations got ratcheted lower with deteriorating
fundamentals. The result became a crowded trade
which is being unwound before year-end.
I have frequently described why exposure to
consolidators made such good sense in the current
slow growth environment. Since the economic
environment seems only to have deteriorated
recently, I have a hard time finding an appropriate
substitute for this strategy and am therefore staying
with it. I have of course eliminated both CXR and
VRX positions from the portfolios, as it became
patently obvious neither company will be doing
much rolling-up in the near future as a result of
their collapsed valuation. I am ready to eliminate
any company whose fundamentals deteriorate for
whatever reason. However, I think the consolidators
left in the portfolios have tremendous merit not
withstanding that several were ripe for a valuation
correction.
I have been focused on finding good investable
ideas in the U.S., as I have exchanged a meaningful
amount of CAD cash into USD cash ahead of the
Canadian election, and am now trying to spend it.
There is an abundance of interesting companies in
the U.S., but valuations are even more challenging
south of the border.
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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