The U.S.-China trade war, rising or falling policy rates, uncertainties concerning Brexit and the USMCA: the year 2019 has seen the resurgence of global market instability. Faced with this situation, and considering that we are in the late stages of the current economic and stock market cycle, we have made changes to our Private Management approaches in order to protect our clients’ assets, but also to improve the performance of our funds in a period of volatility.
Protecting in a period of instability
In fact, most of these measures were introduced in May when our investment managers decided to review the strategic allocation of certain funds in our Private Management approaches to optimize the medium- and long-term returns, but also to crystallize some of the attractive gains made early in the year. Considering market developments, the adjustments sought primarily to secure the portfolios through strategic and preventive risk reduction. More aggressive asset classes were therefore reduced in certain approaches. This strategy entails more cautious investments in direct response to the weak economic growth we are currently experiencing and the high debt levels of governments, businesses and individuals.
What are these changes?
Private Management approaches (Fixed Income, Growth, Dynamic)
Our decisions sought to reduce risk:
- The weight of high-yield bonds was reduced from 15% to 12% because of the higher volatility of this type of investment.
- The weight of the Active Management Canadian Bond Private Portfolio was increased from 64% to 67%.
- The weight of the FDP Global Small Cap Equity Private Portfolio was reduced (the percentage varying according to the approach). The proceeds of the sale were reinvested in larger cap global equities.
Growth approach only
The purpose of the adjustments was to optimize the capital growth potential:
- The weight of the FDP Global Dividend Equity Private Portfolio was reduced from 12% to 6%, while that of the FDP Global Equity Portfolio was increased.
Note also that Copper Rock Capital Partners LLC was dropped as manager of the FDP Global Small Cap Equity Private Portfolio. This change was made with a view to increasing the return potential of the fund.
Protecting but also optimizing
Although risk management remains the decisive factor, our investment managers also want to create growth opportunities for the portfolios. We are committed to maintaining strong risk management in all our investment decisions, while seeking the best means of optimizing the performance of our funds.
Note that the events of May proved us right, because just a few days after implementing these measures, the markets were hit by considerable turbulence.
To learn more, don’t hesitate to contact your wealth management advisor.