Experience. Intelligent Investing.

JANUARY 2016
The Exemplar Canadian Focus Portfolio was down
-3.06% for the month of January.
Equity markets around the globe have stumbled
out of the gate with one of the worst beginnings
of the year in recent memory. Intra-day volatility
added to the misery, with 10 out of 19 trading
days experiencing an intraday move in excess of
2% - already more super-volatile days than were
recorded in all of calendar year 2013! Some of the
volatility is being caused by the big unwind of the
2015 crowded macro trades: short crude and other
commodities, and long U.S. dollar against most
other currencies, including CAD. There is chatter
about several Oil Ministers putting pressure on
Saudi Arabia to call an emergency meeting for the
purpose of hammering out an agreement to curtail
crude production. This might be the eventual
outcome later this year, but the process should be
lengthy and arduous considering the animosity
between several (most) oil-producing countries
and the diverse interests of the parties involved.
Nonetheless, there is a distinct possibility that crude
and energy equities are in the process of forming
a bottom in anticipation of a balanced market by
the second half of 2016. No investor on the planet
wants to miss this once-in-a-career opportunity to
load up on cheap energy stocks.
The worrisome weakening of economic indicators
layered on top of a strong USD have caused
investors to begin pricing in at least an earnings
recession. Many fear that the evolving economic
weakness, policy uncertainty and deflationary
forces could deteriorate into a full blown U.S.
recession. These risks are the cause of the current
market mayhem -commonly referred to these days
as a multiple reset.

EXEMPLAR CANADIAN FOCUS PORTFOLIO

growth. It has been my biggest fear, that the
premium valuation justifiably awarded to these
growth companies would one day be taken away.
That certainly happened during the first days of
February, as many of the overpriced hope stocks
started giving disappointing guidance for 2016
during their quarterly reports. As they crashed,
they caused a valuation reset of all premium priced
stocks. The bad news is that many of my favorite
growth stocks were not spared. It has become
apparent that current market correction will not
end until it cycles through all sectors and punishes
even the best companies. The good news is that
the correction should be entering its final stages by
the time it becomes indiscriminate.
I continue to allow cash to accumulate in all the
portfolios until it becomes clear to me which
sectors or group of stocks will lead us out of the
current correction. By months end, cash in the
Exemplar Canadian Focus Portfolio rose to 51%. The
huge volatility and rapid group rotation has made
it difficult to pick a sufficient number of effective
short positions to protect the portfolios. Inflection
points are painful, and I could predict at least a
dozen different scenarios for the current market
environment. I have eliminated some of the most
expensive positions while I await clarity.
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.

Because of their paucity in the current fragile

economic cycle, markets have been kind to
companies with a history of consistent and robust
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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