Q REPORT HG PARTNERS LIMITED MODEL PORTFOLIOS: OVERVIEW

Transcription

1 Q REPORT HG PARTNERS LIMITED MODEL PORTFOLIOS: OVERVIEW Market Commentary Looking at global equity markets overall in the first quarter, results were mixed. Fixed income markets improved a bit, but obviously interest rates remain at very low levels. Demand for corporate bonds remained strong during the quarter. Ukraine, some instability in emerging markets and slowing growth in China created headwinds for markets over the last three months. For the first quarter in a while, the Canadian market did well relative to global benchmarks. We marked the fifth anniversary of the current bull market during the first quarter of this year. Markets on a global basis have recovered nicely from lows hit in March of Volatility remains with us, and likely will be a factor for the forseeable future. While a significant market decline does not appear to be imminent, volatility will remain, and a normal market pull-back would not be surprising. We are very pleased with the depth and breadth of our current portfolio management team and are confident that they will continue to do in the future what they have done in the past, and that is to deliver excellent risk-adjusted returns. Page 1

2 The Investor Profile We want to ensure that every client investing in one of our model portfolios is directed to the model which is most suitable, given that client s goals, objectives, investment time horizon and risk tolerance level. A systematic and disciplined approach is of critical importance in developing and monitoring our model portfolios. Such an approach is equally important in making sure that each of our clients understands their individual investor profile. The determination of that profile is both objective and subjective. Each client completes a standard questionnaire which determines in as objective a manner as possible which model would be most suitable. We then review the questionnaire and the resulting profile with the client to ensure that he or she agrees with the more objective assessment. In cases where the objective and subjective results are not a match, we ensure that the model recommended to the client is the one where there is the highest level of comfort. Philosophy and Approach We have designed a number of model portfolios, covering the investment spectrum from the very conservative to the very aggressive. One of our key objectives in developing these models was to create a strategy that would take the emotion out of investment decisions, both for us as investment professionals and for our clients. The models are comprised of a mix of equities, bonds and gold bullion and, in some of the models, GICs. In selecting the individual components of the models, we use a systematic and disciplined screening process. Many criteria are considered, including a history of above average and consistent performance by the fund manager, the relationship of risk to reward, and correlation analysis. The objective with each of the models is to create a portfolio made up of some of the best managers available, and one where there is as little correlation as possible among the various components in it. These models are not static. They are constantly monitored and managers will be removed and added from time to time. Page 2

3 Where a client has invested in one of the models, we review his or her portfolio every 90 days. As described below in detail, each of the models has a particular asset mix which matches each client s investor profile. If, at the time of a 90- day review, the portfolio needs to be rebalanced, we will so advise the client. As an example, if a client had invested in the 65% equity / 35% income model, if that allocation were out of balance by at least 5 percentage points, the portfolio would be rebalanced so that the suitable asset mix is maintained over the long term. This rebalancing process forces us to buy low and sell high. What is important is that rather than having these on-going buy and sell decisions determined by emotion, it is the asset mix of the portfolio itself that determines what action needs to be taken. We strongly believe that the best investment decisions are generally the ones that involve the least emotion. The Models There are six different model portfolios: Defensive (25% equities / 75% income) This model is suitable for those investors who are primarily concerned about preservation of capital. Often investors opting for this model are looking for a steady and dependable income stream. A typical defensive investor is much more concerned about conserving capital than about growth of capital. Conservative (35% equities / 60% income / 5% gold bullion) Like the defensive investor, a conservative investor is primarily concerned about earning a reasonable level of income, but is also willing to take on a bit more equity exposure, and the market risk that entails. Traditional (45% equities / 50% income / 5% gold bullion) An investor for whom this model is most appropriate is looking for a balance between the growth potential offered by equity investments and a stable income stream provided by income producing investments. Page 3

4 Traditional Growth (60% equities / 35% income / 5% gold bullion) Typically, an investor choosing this model is willing to take on somewhat more equity risk, and is more concerned with longer-term results. While seeking some steady income production, that is not the focus. The income component is comprised of 20% in bond funds and 15% in funds invested with a focus on dividends, high yield bonds, REITs and income trusts. Growth Oriented (75% equities / 20% income / 5% gold bullion) The growth oriented investor is primarily focused on growth of capital and has a long term investment time horizon. He or she is willing to take on the risk of a high exposure to equity-related market volatility in return for capital growth over the longer term. Aggressive Growth (85% equity / 10% income / 5% gold bullion) With this model the focus is almost entirely on long-term growth of capital. Current or medium-term income requirements are not an issue, and the investor s time horizon is very long term. Portfolio Construction These portfolios are intended to work as an overlay that applies to all of a client s investments, including both registered and non-registered portfolios. In cases where clients have both registered and non-registered assets, it is quite possible that neither account will match the target asset allocation, but the aggregate of the two should reflect that mix. When allocating investments between registered and open accounts, for tax reasons it is generally beneficial to keep income-producing investments in registered accounts. This shelters interest income, which is subject to a higher tax rate than are capital gains. Page 4

5 These models are solely the work of Howard Goodman who is a registered representative of HollisWealth Advisory Services Inc. (a member of the Mutual Fund Dealers Association of Canada and the MFDA Investor Protection Corporation) for the private information of his clients. Although the author is a registered Senior Financial Advisor with HollisWealth Advisory Services Inc,, this is not an official publication of HollisWealth Advisory Services Inc. The views (including any recommendations) expressed in these models are those of the author alone, and they have not been approved by, and are not necessarily those of HollisWealth Advisory Services Inc. Trademark of The Bank of Nova Scotia, used under license. Page 5

6 HG PARTNERS DEFENSIVE MODEL PORTFOLIO The Defensive Portfolio is an ideal investment for investors seeking to preserve capital and generate consistant returns. In seeking to preserve capital, the Defensive Portfolio will maintain heavy exposure to Canadian fixed-income investments. The portfolio also includes investments in Canadian, U.S. and global equities. 20% GICs 5% 40% 35% Dynamic Strategic Yield 5% 2.9% 10.0% 9.2% 7.1% 13.8% 11.3%** CI Black Creek Global Leaders 10% 5.0% 17.7% 37.3% 13.7% 17.1% 5.6%** Edgepoint Global Portfolio 10% 7.7% 18.7% 35.2% 16.5% 19.6% 19.3%** GIC's 40% 0.4% 0.8% 1.6% 1.7% 1.8% 2.4% PH&N High Yield Bond 17.5% 2.6% 5.0% 5.9% 6.9% 10.3% 7.4% Manulife Strategic Income 17.5% 4.7% 8.5% 6.4% 6.1% 7.3% 7.2%** HG PARTNERS DEFENSIVE MODEL 3.28% 5.16% 6.05% 4.46% 6.64% N/A DEFENSIVE WEIGHTED BENCHMARK 3.11% 4.96% 5.29% 3.70% 6.60% N/A VALUE ADDED 0.17% 0.20% 0.76% 0.76% 0.04% N/A VALUE ADDED AS % OF BENCHMARK 5.47% 4.03% 14.37% 20.54% 0.61% N/A * Month-end performance measured as of 03/2014 **Since inception. Page 6

7 HG PARTNERS CONSERVATIVE MODEL PORTFOLIO The Conservative Portfolio is ideal for investors seeking current income, consistent returns and an opportunity for modest capital growth. The conservative investor is willing to absorb a modest amount of price volatility and interest rate risk in exchange for current income. 30% 5% 20% 30% 15% GICs Gold Bullion Dynamic Small Business 5% 3.9% 10.3% 10.3% 5.7% 17.5% 13.0% Dynamic Strategic Yield 10% 2.9% 10.0% 9.2% 7.1% 13.8% 11.3%** CI Black Creek Global Leaders 10% 5.0% 17.7% 37.3% 13.7% 17.1% 5.6%** Edgepoint Global Portfolio 10% 7.7% 18.7% 35.2% 16.5% 19.6% 19.3%** Mackenzie Universal Gold Bullion 5% 10.8% 2.7% -14.1% -2.4% N/A 2.5%** GIC's 30% 0.4% 0.8% 1.6% 1.7% 1.8% 2.4% PH&N High Yield Bond 15% 2.6% 5.0% 5.9% 6.9% 10.3% 7.4% Manulife Strategic Income 15% 4.7% 8.5% 6.4% 6.1% 7.3% 7.2%** HG PARTNERS CONSERVATIVE MODEL 3.86% 8.95% 12.11% 7.27% 9.92% N/A CONSERVATIVE WEIGHTED BENCHMARK 3.91% 9.07% 11.10% 5.74% 9.23% N/A VALUE ADDED -0.05% -0.12% 1.01% 1.53% 0.69% N/A VALUE ADDED AS % OF BENCHMARK -1.28% -1.32% 9.10% 26.66% 7.48% N/A * Month-end performance measured as of 03/2014 **Since inception Page 7

8 HG PARTNERS TRADITIONAL MODEL PORTFOLIO The Traditional Portfolio is designed to achieve balance between income and capital growth. The portfolio's asset allocation targets are 5% GICs 20% 25% evenly split between equity and fixed income. The traditional investor is willing to accept a moderate amount of price volatility in exchange 20% 30% Gold Bullion for some current income and potential capital appreciation. Dynamic Small Business 10% 3.9% 10.3% 10.3% 5.7% 17.5% 13.0% Dynamic Strategic Yield 10% 2.9% 10.0% 9.2% 7.1% 13.8% 11.3%** CI Black Creek Global Leaders 10% 5.0% 17.7% 37.3% 13.7% 17.1% 5.6%** Edgepoint Global Portfolio 15% 7.7% 18.7% 35.2% 16.5% 19.6% 19.3%** Mackenzie Universal Gold Bullion 5% 10.8% 2.7% -14.1% -2.4% N/A 2.5%** GICs 20% 0.4% 0.8% 1.6% 1.7% 1.8% 2.4% PH&N High Yield Bond 15% 2.6% 5.0% 5.9% 6.9% 10.3% 7.4% Manulife Strategic Income 15% 4.7% 8.5% 6.4% 6.1% 7.3% 7.2%** HG PARTNERS TRADITIONAL MODEL 4.33% 10.19% 14.00% 8.06% 11.52% N/A TRADITIONAL WEIGHTED BENCHMARK 4.37% 10.45% 13.12% 6.43% 10.47% N/A VALUE ADDED -0.04% -0.26% 0.88% 1.63% 1.05% N/A VALUE ADDED AS % OF BENCHMARK -0.92% -2.49% 6.71% 25.35% 10.03% N/A * Month-end performance measured as of 03/2014 **Since inception. Page 8

9 HG PARTNERS TRADITIONAL GROWTH MODEL PORTFOLIO The Traditional Growth Portfolio is designed to provide investors with the opportunity for long-term capital growth via a reasonably balanced asset mix. Equities make up the majority of this portfolio, but the 20% fixed income allocation should reduce volatility. 40% 5% 20% 35% Gold Bullion Dynamic Small Business 10% 3.9% 10.3% 10.3% 5.7% 17.5% 13.0% Dynamic Strategic Yield 25% 2.9% 10.0% 9.2% 7.1% 13.8% 11.3%** CI Black Creek Global Leaders 15% 5.0% 17.7% 37.3% 13.7% 17.1% 5.6%** Dynamic Power Gbl Growth 10% -0.1% 5.4% 36.3% 8.4% 18.5% 9.2% Edgepoint Global Portfolio 15% 7.7% 18.7% 35.2% 16.5% 19.6% 19.3%** Mackenzie Universal Gold Bullion 5% 10.8% 2.7% -14.1% -2.4% N/A 2.5%** PH&N High Yield Bond 10% 2.6% 5.0% 5.9% 6.9% 10.3% 7.4% Manulife Strategic Income 10% 4.7% 8.5% 6.4% 6.1% 7.3% 7.2%** HG PARTNERS TRAD GROWTH MODEL 4.15% 11.43% 19.01% 9.24% 14.73% N/A TRAD GROWTH WEIGHTED BENCHMARK 5.37% 13.84% 18.52% 7.98% 13.21% N/A VALUE ADDED -1.22% -2.41% 0.49% 1.26% 1.52% N/A VALUE ADDED AS % OF BENCHMARK % % 2.65% 15.79% 11.51% N/A * Month-end performance measured as of 03/2014 **Since inception. Page 9

10 HG PARTNERS GROWTH ORIENTED MODEL PORTFOLIO The Growth Oriented Portfolio is ideal for investors seeking long-term capital growth, but who are uncomfortable moving into an equity only portfolio. The Growth Oriented investor is willing to accept a fair amount of short term price volatility in exchange for potential higher return over the long term. 40% 5% 20% 35% Gold Bullion Dynamic Small Business 10% 3.9% 10.3% 10.3% 5.7% 17.5% 13.0% Dynamic Strategic Yield 5% 2.9% 10.0% 9.2% 7.1% 13.8% 11.3%** Edgepoint Canadian Portfolio 10% 5.0% 11.7% 24.3% 7.8% 17.6% 18.1%** CI Cambridge Canadian Growth 10% 7.7% 17.7% 33.5% 30.2% N/A 29.1%** Dynamic Power Gbl Growth 15% -0.1% 5.4% 36.3% 8.4% 18.5% 9.2% Edgepoint Global Portfolio 12.5% 7.7% 18.7% 35.2% 16.5% 19.6% 19.3%** CI Black Creek Global Leaders 12.5% 5.0% 17.7% 37.3% 13.7% 17.1% 5.6%** Mackenzie Universal Gold Bullion 5% 10.8% 2.7% -14.1% -2.4% N/A 2.5%** PH&N High Yield Bond 10% 2.6% 5.0% 5.9% 6.9% 10.3% 7.4% Manulife Strategic Income 10% 4.7% 8.5% 6.4% 6.1% 7.3% 7.2%** HG PARTNERS GROWTH ORIENTED MODEL 4.69% 12.08% 23.80% 11.84% 17.25% N/A GROWTH ORIENTED WEIGHTED BENCHMARK 5.37% 13.84% 18.52% 7.98% 13.21% N/A VALUE ADDED -0.68% -1.76% 5.28% 3.86% 4.04% N/A VALUE ADDED AS % OF BENCHMARK % % 28.51% 48.37% 30.58% N/A * Month-end performance measured as of 03/2014 ** Since inception Page 10

11 HG PARTNERS AGGRESSIVE GROWTH MODEL PORTFOLIO The Aggressive Growth Portfolio is ideal for investors seeking long-term capital growth, but who are uncomfortable moving into an 5% 10% equity only portfolio, but with a higher weighting in Canada. The Aggressive Growth 45% 40% Gold Bullion investor is willing to accept a fair amount of short term price volatility in exchange for potential long term higher returns. Dynamic Small Business 10% 3.9% 10.3% 10.3% 5.7% 17.5% 13.0% Edgepoint Canadian Portfolio 15% 5.0% 11.7% 24.3% 7.8% 17.6% 18.1%** CI Cambridge Canadian Growth 15% 7.7% 17.7% 33.5% 30.2% N/A 29.1%** Dynamic Power Gbl Growth 15% -0.1% 5.4% 36.3% 8.4% 18.5% 9.2% Edgepoint Global Portfolio 15% 7.7% 18.7% 35.2% 16.5% 19.6% 19.3%** CI Black Creek Global Leaders 15% 5.0% 17.7% 37.3% 13.7% 17.1% 5.6%** Mackenzie Universal Gold Bullion 5% 10.8% 2.7% -14.1% -2.4% N/A 2.5%** Manulife Strategic Income 10% 4.7% 8.5% 6.4% 6.1% 7.3% 7.2%** HG PARTNERS AGG GROWTH MODEL 5.09% 13.09% 27.02% 13.52% 19.12% N/A AGG GROWTH WEIGHTED BENCHMARK 5.59% 14.79% 20.29% 8.29% 13.62% N/A VALUE ADDED -0.50% -1.70% 6.73% 5.23% 5.50% N/A VALUE ADDED AS % OF BENCHMARK -8.94% % 33.17% 63.09% 40.38% N/A * Month-end performance measured as of 03/2014 **Since inception. Page 11