2021
Portfolio Construction: Trending for the Long-Term
Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer
Marchello Holditch, CFA, CAIA, Vice-President and Portfolio Manager CI GAM | Multi-Asset Management
Market activity in the past few weeks has reminded us of the dangers of speculation. A small number of early investors make vast profits at the expense of a much larger number of late entrants who end up losing their shirts. Our philosophy has always been to look beyond the next "big trade" and stay focused on what matters most, helping our clients achieve their financial goals with predictability and consistency.
Market trends
As we look ahead to determine our portfolio positioning, three burgeoning trends drive our strategic vision.
Digitalization: It’s highly likely that digital goods and services will continue to make up a larger share of the overall economy. Rampant innovation and exponential improvement in processing power have permanently altered the way we consume and conduct business. The COVID-19 pandemic has only accelerated the trends that were already developing, including shifts towards online shopping and working from home.
Decarbonization: We expect there will be a secular shift away from fossil fuels and towards sustainable energy. Major governments are already implementing initiatives to reduce greenhouse gas emissions and meet climate change targets, and investors have begun to reallocate capital away from traditional energy industries. We believe that these trends present both risks and opportunities for entire sectors over the long-term.
Debasement: Aggressive monetary and fiscal policy measures have drastic implications for our strategic equity and fixed-income exposure. Central bank balance sheet expansion and large fiscal stimulus packages are being funded by money printing, which has sharply increased money supply and threatens currency debasement. We believe that these actions increase the likelihood of inflation, which means investors need more exposure to assets that can protect purchasing power (equity, alternatives) and less to assets with fixed payments (bonds).
Portfolio management and positioning enhancements
In order to compete in a world of increasing digitalization, changing investor preferences and currency debasement, we have made the following enhancements to our investment platforms.
Asset mix flexibility: We have increased the flexibility of our investment platforms to capitalize on tactical opportunities across four levers: asset class, region, factor and sector. In a world of low interest rates, top-down asset allocation is more important than ever in helping our clients achieve their financial goals with predictability and consistency.
New managers: We’ve added new investment strategies that are well positioned to benefit from current market trends. Munro Partners, for example, has an impressive track record of identifying secular winners in global equities. The firm relies on a unique investment philosophy that eschews the standard definitions of region and sector, and instead segments investments into secular, sustainable growth trends labelled as “areas of interest,” adding a new perspective on investment opportunities.
Alternatives: We recently introduced investments in private equity, private debt and private infrastructure. These holdings are expected to provide several benefits, including low correlation to our existing portfolio holdings, higher return potential, absolute return focus and a smoother return profile. We are starting with smaller allocations to familiarize ourselves with the structure and investment process, then slowly add to the positions as the funds get off the ground. Our early participation should put us in a favourable position to make larger allocations when the managers are ready to call capital.
Combined top 15 equity holdings as of January 31, 2021 of a representative balanced* Private Client Managed Portfolio with alpha-style equity exposure:
1. Amazon.com, Inc.
2. Microsoft Corp.
3. AltaGas Ltd.
4. Visa Inc.
5. Lowe's Companies Inc.
6. Brookfield Asset Management Inc.
7. E-L Financial Corporation Ltd.
8. Canadian Tire Corporation
9. CGI Inc.
10. Toronto-Dominion Bank
11. Royal Bank of Canada
12. iA Financial Corp.
13. Apple Inc.
14. Starbucks Corp.
15. KLA Corp.
Combined top 15 equity holdings as of January 31, 2021 of a representative balanced* Private Client Managed Portfolio with value- style equity exposure:
1. Microsoft Corp.
2. Brookfield Asset Management Inc.
3. Royal Bank of Canada
4. Bank of Nova Scotia
5. Alphabet Inc.
6. Constellation Software Inc.
7. CGI Inc.
8. Canadian Tire Corporation Ltd.
9. Visa Inc.
10. Brookfield Infrastructure Partners L.P.
11. BCE Inc.
12. Bank of Montreal
13. Dollarama Inc.
14. Intact Financial Corp.
15. Thomson Reuters Corp.
Combined top 15 equity holdings as of January 31, 2021 of a representative balanced* Private Client Managed Portfolio with growth-style equity exposure:
1. Fairfax Financial Holdings Ltd.
2. Power Corporation of Canada
3. Apple Inc.
4. Empire Company Ltd.
5. Enbridge Inc
6. Fortis Inc.
7. Amazon.com Inc.
8. Microsoft Corp.
9. Manulife Financial Corp.
10. TC Energy Corp.
11. Brookfield Asset Management Inc.
12. Imperial Brands PLC
13. Keyera Corp.
14. Alimentation Couche-Tard Inc.
15. Alphabet Inc.
*Approximately 33% fixed-income, 10% enhanced income, 49% equities, and 7% global real estate.
To see the top 15 holdings of the individual pools or the equity alpha mandates, please contact us.
Source: Bloomberg Finance L.P. and CI GAM | Multi-Asset Management as at February 10, 2021
IMPORTANT DISCLAIMERS
This document is intended solely for information purposes. It is not a sales prospectus, nor should it be construed as an offer or an invitation to take part in an offer. This report may contain forward-looking statements about one or more pools, future performance, strategies or prospects, and possible future fund action. These statements reflect the portfolio managers’ current beliefs and are based on information currently available to them. Forward-looking statements are not guarantees of future performance. We caution you not to place undue reliance on these statements as a number of factors could cause actual events or results to differ materially from those expressed in any forward-looking statement, including economic, political and market changes and other developments. Private Client Managed Portfolios are available through CI Assante Private Client, a division of CI Private Counsel LP. The pools used in the Private Client Managed Portfolios are managed by CI Global Asset Management, an affiliate of CI Private Client LP. Neither CI Assante Private Client nor its affiliates or their respective officers, directors, employees or advisors are responsible in any way for damages or losses of any kind whatsoever in respect of the use of this report. Commissions, trailing commissions, management fees and expenses may all be associated with investments in Private Client Managed Portfolios and the use of other services. Any performance data shown assumes reinvestment of all distributions or dividends and does not take into account sales, redemption or optional charges or income taxes payable by any securityholder that would have reduced returns. Pool funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the fund prospectus and consult your advisor before investing. CI Assante Private Client is a division of CI Private Counsel LP, a wholly owned subsidiary of CI Financial Corp. CI GAM | Multi-Asset Management is a division of CI Global Asset Management. CI Global Asset Management is a registered business name of CI Investments Inc. This report may not be reproduced, in whole or in part, in any manner whatsoever, without prior written permission of CI Assante Private Client.. © 2021 CI Assante Private Client, a division of CI Private Counsel LP. All rights reserved.
