MBA, CIMTM, Fin. Pl.
Investment Specialist, Products Knowledge
The search for excellence
In school, as in investment, performance is often evaluated over a given period: for a student, it’s the school year; for a portfolio manager, it’s a complete market cycle.
By taking into account both good times and bad, we obtain a more accurate picture, either of the quality of the student or the skill of the manager, making it possible to distinguish excellence from average in terms of both school grades and fund returns.
We’ve seen it all!
As far as investments are concerned, the year 2020 is obviously part of a longer economic cycle, but it included, in the first eight months of the year, almost all the phases that usually occur in such a cycle.
- A good start to the year without too much disruption,
- followed by one of the fastest market corrections in history,
- followed by an equally rapid "V" recovery.
Over the past few months, the stock markets have gained back what they lost and now appear to be looking for direction.
Although these various market movements occurred over a short period of time, they nonetheless are a good opportunity to assess the capabilities of a portfolio manager.
Combining risk and return: no easy task!
Behind any performance there is first a philosophy. And our investment philosophy is to seek every available percentage point of return for every percentage point of risk. This perspective does not mean that our managers always have their "foot on the brake", quite the contrary. They aim rather to be nimble and never to give in to greed or panic.
Throughout the year, we have always remained invested in the markets, even during the most difficult times. We have made numerous adjustments depending on the circumstances, both in our mutual funds and in our Private Management approaches. This proactive approach to the markets has enabled us to maximize the risk-return ratio in our clients’ portfolios. Because for you, too, as an investor, the best approach is to avoid giving in to the emotions that market movements can elicit and to stay invested according to your investment policy.
Now let’s take a look at the performance of the FDP Portfolios since January 1, 2020.
The Ides of March
At Professionals’ Financial, we offer our clients a range of eleven Series A mutual funds that cover all the asset classes required to construct good, well-diversified portfolios. Overall, these funds are much more growth oriented than you might think and many of them are correlated with growth, allowing them to take advantage of market conditions.
At the end of March 2020, immediately after the markets had fallen sharply, nine of our 11 funds were outperforming the median for their respective category. This means that our funds performed very well during a difficult period, the beginning of the health crisis. This performance enabled our clients to limit the decrease in value of their portfolio, compared to the results of our competitors.
For their optimal management at the beginning of this year, we can therefore give an A grade to our investment team and to our external managers.
And then the rebound
How are our funds faring during the rebound that followed the recovery? At the end of August, nine of our funds were still in the first or second quartile of their category. The context was entirely different, but the result remained the same.
With this steady performance in a context diametrically opposed to the previous one, we can once again give an A grade to our managers.
Two of our funds have been particularly impressive since the start of the year.
- First, our FDP Balanced Portfolio has managed to generate a year-to-date return of 4.15%, compared to 1.23% for the median of its category, a difference of close to 3% in favour of our fund.
- Then there is our FDP Canadian Equity Portfolio. While the median year-to-date return for its category is -3.51%, our fund is in positive territory with a return of 1.48%. It wins the comparison with a 4.99% difference in its favour.
- These two funds also earned a Fundata FundGrade A rating for their superior monthly risk-adjusted return as at August 31, 2020.
All things considered, both of these funds certainly deserve a star for their excellent performance.
On balance, our team of investment managers has so far obtained excellent grades on its 2020 report card!
Stéphane Girard, MBA, CIMTM, Fin. Pl.
The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns net of fees and expenses payable by the fund including changes in security value and reinvestment of all dividends/distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
The Morningstar Risk Adjusted Return (MRARs), commonly referred to as the Star Rating, relate the risk-adjusted performance of a fund to its peers with the same CIFSC (Canadian Investment Fund Standards Committee) Fund category for the period ended as noted and are subject to change monthly. The ratings are an objective, quantitative measure of a fund’s historical risk-adjusted performance relative to other funds in its category. Only funds with at least a three-year track record are considered. The overall star rating for a fund is a weighted combination calculated from a fund’s 3-, 5- and 10-year returns, as available, measured against the 91-day treasury bill and peer group returns. A fund can only be rated if there are a sufficient number of funds in its peer group to allow comparison for at least three years. To determine a fund’s rating, the fund and its peer are ranked by their MRARs. If a fund scores in the top 10% of its category, it receives five stars (High); if it falls in the next 22.5% , it receives four stars (Above Average); the next 35% earns a fund three stars(Neutral or Average); those in the next 22.5% received two stars (Below Average); and the lowest 10% received one star (Low). For greater detail, see morningstar.ca.
For the period ended on August 31, 2020, the returns of the FDP Balanced Portfolio (Series A) are as follows: 6.36% (1 year – 604 funds), 6.47% (3 years – 553 funds), 5.73% (5 years – 435 funds), 6.37% (10 years – 180 funds) and 7.86% (since inception – August 31, 1978).
For the period ended on August 31, 2020, the returns of the FDP Canadian Equity Portfolio (Series A) are as follows: 4.16% (1 year – 680 funds), 6.49% (3 years – 591 funds), 6.05% (5 years – 415 funds), 6.73% (10 years – 220 funds) and 7.46% (since inception – December 31, 1987).
© 2020 Morningstar Research Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is not a guarantee of future results. Source: Morningstar Direct and Professionals’ Financial, as at August 31, 2020.
About Fundata Canada Inc.
Fundata supplies accurate and comprehensive data to the Canadian financial services industry and business media since 1987. Fundata is a leading provider of market and investment funds data on funds and securities in Canada.
About the monthly FundGrade A® rating from Fundata
The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by the Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade.
Ratings are subject to change every month. For more information, see www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.
The FDP Balanced Portfolio (Series A) received a FundGrade A® rating in the Canadian neutral balanced funds category out of a total of 408 funds, as defined by the Canadian Investment Funds Standards Committee (CIFSC), a Canadian organization that is independent from Fundata. This monthly rating is for the period of August 1, 2020 to August 31, 2020. For the period ending August 31, 2020, the performance of the FDP Balanced Portfolio is as follows : 6.36% (1 year – 604 funds), 6.47% (3 years – 553 funds), 5.73% (5 years – 435 funds), 6.37% (10 years – 180 funds) and 7.86% (since inception – August 31, 1978).
The FDP Canadian Equity Portfolio (Series A) received a FundGrade A® rating in the Canadian equity funds category as defined by the CIFSC, out of a total of 406 funds. This monthly rating is for the period of August 1, 2020 to August 31, 2020. For the period ending August 31, 2020, the performance of the FDP Canadian Equity Portfolio is as follows : 4.16% (1 year – 680 funds), 6.49% (3 years – 591 funds), 6.05% (5 years – 415 funds), 6.73% (10 years – 220 funds) and 7.46% (since inception – December 31, 2010).