MBA, CIMTM, Fin. Pl.
Investment Specialist, Products Knowledge
Let’s talk about performance
During tumultuous periods like the one we’re currently going through, certain elements become particularly important for the protection of your assets. As mentioned during our last webinar (March 19), wealth creation is not an event, but a process. That’s why the Professionals’ Financial investment team is constantly taking concrete steps to improve portfolio returns and protect assets.
An expertise that matters
We’ll discuss these actions below, particularly the importance of having managers who can add value to our clients’ investment portfolios. In a difficult situation, their expertise really comes to the fore.
The importance of portfolio managers
One of the most important actions concerns the choice of portfolio managers. A very rigorous process has been implemented to choose the external managers to whom we entrust management mandates.
Currently, we have twelve external managers for our various equity funds. Each has been carefully selected for their management skills and for the complementarity of their management style with that of the other portfolio managers.
The results obtained so far confirm the strength of our process.
- Since the beginning of the year, 9 of these 12 managers have outperformed their benchmark index. We’re talking here about excellent results which, as of last Friday (March 20, 2020), beat their respective index with a return of up to 8.74%.
Although the manager selection process is not directly related to current events, it testifies to our constant search for ways to add value to our investors’ portfolios.
GOOD TO KNOW : Good managers remain focused on companies that have demonstrated their value over time. By following a rigorous buying and selling process based on the risk and return data of these stocks, good managers look for issues that will perform well in a normal environment. These managers can also take advantage of the opportunities created by the market movements we’re now experiencing. They are thus a primary source of added value for our clients.
The importance quality portfolio construction
Another element that adds value for our investors is the quality of construction and active management of our portfolios. Once again, our management decisions are not just reactive to the markets, but proactive.
Take the example of our Private Management:
- Before the start of the crisis, our investment team had changed the strategic allocations in the different approaches. For example, we reduced Canadian equities by 5% in our Income and Dynamic approaches.
- As of March 20, the S&P/TSX index had produced a return of -30.1% while U.S. and global markets had returned -20.7% and -22.1% in Canadian dollars. So our allocation adjustment has paid off so far by enabling us to take advantage of the drop in the Canadian dollar against the U.S. dollar, which went from $0.77 in January to $0.697 last Friday.
- In the Income approach, we also reduced our exposure to dividend stocks in favour of growth stocks. This turned out to be a fruitful decision since, over the 55 trading sessions since the start of the year, the growth style has outperformed the value style in 42 sessions, or 76% of this period.
- In our Growth approach, we also reduced our exposure to dividend stocks in 2019.
The importance of the tactical aspect of our investment management
We also keep a close eye on the daily movements in our portfolios as part of our tactical management. Our FDP Tactical Asset Allocation Private Portfolio, which is held in most of our clients’ Private Management portfolios, adds another potential source of value. Its flexibility is a definite advantage. We manage it according to our macroeconomic analyses, while always keeping in mind the overall composition of our clients’ portfolios.
- Overall, we are underweight equities versus bonds for all our clients.
- At the moment, even though this can change quickly, we believe it is not yet time to rebalance the portfolios, considering the high level of uncertainty still in the markets.
We remain vigilant and are closely monitoring market movements. We’re ready to react if other measures are necessary and we’ll keep you regularly informed. If you would like more details on the content of this communication, feel free to discuss it with your advisor.
Stéphane Girard, MBA, CIMTM, Fin.Pl.
Product Manager, Professional Practice
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.