Short-Term Income Class Commentary
Portfolio Advisor: Industrial Alliance Investment Management
Inc.
Fund Commentary - April, 2012
During the first quarter of 2012, the world economic recovery
continued having a positive effect on stock markets worldwide.
However, fears of another market downturn are not unfounded.
The European sovereign debt crisis continues to pose a significant
risk to the world economy. While a Greek default was avoided, we
are clearly not "back to normal."
The start of 2012 presents some major differences from 2011.
U.S. economic data is much stronger than a year ago with better
than expected results in employment data and Americans renewing
their automobile fleet by replacing old cars with more
energy-efficient models.
While the stock markets were strongly positive, the bond market
turned out a slightly negative performance in the first quarter as
the bond yield curve increased. Only the corporate bond sector saw
a positive return while the opposite held true for federal,
provincial and municipal bonds. In addition, rates increased more
among the long-term maturities (10 years or more), causing the DEX
Long Term Bond index to decline. The Bank of Canada kept its target
rate at 1.0% during the quarter.
The Portfolio Advisor expects the Bank of Canada will keep
interest rates on hold in the near future as it waits to see
whether Canada's economic rebound sustains itself in the coming
months. At the end of the period, the Fund primarily held Treasury
bills. The Portfolio Advisor continues to focus on high-quality
issuers and maintaining a high degree of liquidity in the Fund. The
Portfolio Advisor is not taking any unnecessary credit risk in the
selection of securities as the main investment objective of the
Fund is capital preservation and liquidity.