PRMIA Montreal Career Day Charles Vanasse

PRMIA Montreal Career Day

Charles VanasseVice-President and Director

5 November 2009

TD ASSET MANAGEMENT

GESTION DE PLACEMENTS TD

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Agenda

TDAM in general. Assets Structure Institutional Products

Focusing on Quantitative Portfolio Management Quant strategies Philosophy, processes, roles. Products cycle. Tasks and tools Skills

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Alternative Investments/

Other$0.5 B0.3%

Int'l Equities$8.1 B4.7%

U.S. Equities$13.6 B

7.9%

Passive Bonds$28.9 B16.7%

Global Bonds$7.7 B4.4%

Short Term / Money Market

$35.0 B20.3%

Overlay$13.2 B

7.6%

Active Bonds$35.2 B20.4%

Canadian Equities$30.5 B17.7%

TD Asset Management Inc. ASSETS

Expertise, track record and risk-management focus

1 “The Top 40 Money Managers (as of December 31, 2008)” Benefits Canada, May 20092 As of September 30, 2009Note: Numbers may not add due to rounding.

Established in 1987: Long and distinguished history

One of Canada’s largest asset managers1, with C$172.7 billion2 in assets under management

(over C$106 billion in fixed income)

Culture of operational and risk management excellence

Broad and diversified client expertise

Strength and stability of TD Bank

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Investment Management DivisionOrganizational Structure

7-10 Research

Professionals

Notes: In addition to the above areas, we also have a division that focuses on high net worth clients and an Internal Distribution Management Team.TD Asset Management includes TD Asset Management Inc. and TDAM USA Inc.TD Asset Management Inc. and TDAM USA Inc. are wholly-owned subsidiaries of The Toronto-Dominion Bank (TD Bank).TDAM USA Inc. is an affiliate of TD Asset Management Inc. TD Asset Management Inc. leverages the experience of TDAM USA Inc. employees.

15-20 Portfolio

Managers and Traders

8 Credit

Research Professionals

INVESTMENT MANAGEMENT

Passive, Quantitative and

Quantitative-ActiveFundamental Active

Investment Grade Credit ResearchFixed Income

Index / QuantResearch

FundamentalFixed Income

FundamentalEquities

20 Portfolio Managers

and Analysts

DISTRIBUTIONMANAGEMENT

13 Relationship

Managers

External Distribution &Institutional Relationship

Management

President

3 Portfolio Managers

High Yield

Hedge Fund & Quantitative Risk

Investment Risk

Policy & Operational Risk

RISK MANAGEMENT

Chief Risk Officer

15-20 Portfolio

Managers and Traders

Index / QuantInvestment Management

25 Professionals

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Institutional Products

Institutional Pooled Fund Trusts Equity Fixed Income Balanced Alternative

Customized Solutions Policy Management (Currencies, Asset-Mix,…) Liability Driven Investment (LDI) Transition Management Segregated Portfolios

Canadian, US and Global Assets

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Quantitative Strategies

Equities (Canada, US, Global) Passive (indexing) Long-only quantitative active (benchmarked on indices)

Some are currency hedged Quantitative Active Extensions (“130/30”, benchmarked on indices) Low volatility and managed volatility Long-Short Market-Neutral

Fixed Income (Canada, US, Global) Passive (Indexing) Long-only quantitative active (benchmarked on indices)

Some are currency hedged Liability Driven

Min Surplus Risk Duration extension Portable alpha

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Quantitative Portfolio Management Group Philosophy, Processes and Roles

Delivering Optimal Risk-Adjusted Returns

Risk

Trading

Transaction Costs

On-going Research

Portfolio Construction/Optimization

Risk Management And Compliance

Alpha

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Quantitative Portfolio Management Group … RISK

Different types of risk: Total risk Market risk Benchmark risk (Index, Policy mix, …) Surplus risk Currency risk

We use risk models for all quantitative investment strategies To measure various forms of risk To understand risk sources. To control risk To manage risk

The Quantitative Portfolio Management Group has expertise in using and producing customized risk models.

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Quantitative Portfolio Management Group … ALPHA

Alpha is central to any form of active management.

Ex-Ante alpha is the predicted risk-adjusted return of an investment strategy. Single security level forecasts Tilts (Value/Growth, Gov/Corp,…) Market direction forecast …

Forecasts might have different horizons.

Ex-Ante alpha is an input to quantitative active portfolio management.

At TDAM, the Quantitative Research group is responsible for producing forecasts used in quantitative active strategies.

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Quantitative Portfolio Management Group … Transaction Costs

Transaction costs are a reality. Commissions Stamp duties Market impact

Market impact is a function of liquidity, urgency and size of trades.

At TDAM: We use market impact models to balance ex-ante risk-adjusted returns with cost of

trading over desired horizon. The Quantitative Research Group calibrates predicted trading costs according to

the horizon of predicted risk-adjusted alpha and investment horizon.

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Quantitative Portfolio Management Group … Optimal Portfolio Construction

Passive and quasi-passive investment strategies.

Min (σ2 + transaction costs) subject to constraints (policy, compliance…)

Active quantitative investment strategies.

Max (alpha – λσ2 – transaction costs) subject to constraints (policy, compliance…)

At TDAM: Quantitative Research Group is responsible for the R&D regarding optimization tools we use. Final portfolio construction is performed either by the Portfolio Managers or the Research

group. Portfolios are rebalanced according to horizon of forecasts, evolution of risk and policy

constraints.

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Quantitative Portfolio Management Group … Implementation-Trading

The Portfolio Manager controls the implementation phase: He observes market activity, he monitors news and corporate actions, he observes

current liquidity… He manages cash flows. He instructs Trading Team on how he would like to implement changes when

rebalancing the portfolio. He monitors trading in real time. He monitors portfolio performance in real time . He monitors compliance with investment policy of all portfolios and accounts in

real time. The Trading Team performs trades according to trading strategies discussed

with the portfolio manager. The Trading Team provides feedback to PM and Research on liquidity and

market impact.

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Product Cycle

R&D Investment ideas-strategies Tests of strategies

Historical data Simulations/backtests Stress-testing

Development of production tools Audit

Deploy Risk Management, Compliance, Legal… Migration to Portfolio Management Group Seeding Maintenance (Production of forecasts, risk models etc…) Performance attribution. Enhancements

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Quantitative Portfolio ManagementTasks and Tools

Research Data Group. Electronic external feeds

Numerous sources C# and various customized web based applications

Database Structuring Maintenance & synchronization C#, SQL

Quality control C#, SQL

Research analysts. Investment ideas… Testing of strategies

Matlab, SQL Development of tools: daily management and performance attribution.

Matlab, SQL Presentations (to colleagues and clients)

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Quantitative Portfolio ManagementSkills

TEAM PLAYER (multi-disciplinary group) Programming (Matlab, SQL, C#, …) Knowledge and understanding of financial strategies. Sound quant skills (financial econometrics, operations research, maths, stats,

engineering, computer science…) Ability and willingness to work with data Knowledge of financial data (Compustat, Worldscope, IBES, Reuters…) Understanding of financial statements (Accounting, CFA…) Communication and presentation skills. Result oriented

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Thank You!