NEWSLETTER
BLUE BRIDGE
International Wealth Solutions & Family Office Services
October 2015 - www.bluebridge.ca
EDITORIAL
contents
editorial
p.1
featured article
p. 3
spotlight on
p.4
market watch
p.5
Total Return of Indexes
Editor-in-Chief
Marc Séclin
Managing Editor
Linda Monteiro
Questions or comments about
our content? We’d like to hear
from you. You can contact us
at:
[email protected]
www.bluebridge.ca
Blue
Bridge
Wealth
Management Inc.
1800 McGill College Avenue,
Suite 2108 – Montreal, Quebec
H3A 3J6 – Canada
© All rights reserved
September
gloom
By René Julien, MBA, CFA
Director of Investments
[email protected]
There are many reasons why one’s mood can turn to gloom when September rolls around. For one, it’s the end of summer, days get shorter
and colder. It also marks the end of summer vacations and the return to
work and school for most. This particular September was no different,
except that it offered yet another reason to loathe the month - poor equity
market returns. The S&P 500 fell 2.5 %, the MSCI Europe index dropped
by 4.4%, and emerging markets continued their slide.
Following a difficult month of August for markets, investors were already
in a sour mood as they awaited the much anticipated US Federal Reserve’s
decision on interest rates. Market expectations were mixed as to the
direction that Fed Chair Janet Yellen was going to take. Notwithstanding
many concerns, equity markets were generally trending up in the first half
of the month. When the Fed announced its decision to stand path and not
raise rates on September 17th, investors reacted negatively. The Fed’s
decision was an indication that all was not well with the world. The US,
on its own merit, could warrant the beginning of normalization in monetary policies, with the economy, wages and employment looking quite
healthy. However, the economic risk and financial turmoil coming from
China, Brazil and other developing economies, combined with low inflation expectations, led the Fed to maintain their “wait and see” approach.
Adding to the gloom, markets across the globe were rocked by the likes
of Volkswagen (share price -37.0%), Glencore (-38.3%) and Valeant
(-21.9%). These blow-ups, while painful for some, are healthy reminders of the merits of a well-diversified portfolio, both across and within
asset classes. As such, the fixed income market, other than the high
yield segment, offered some protection within balanced portfolios in this
turbulent month, as the Barclays Global Aggregate Bond index returned
0.5% (in USD).
So for now, while awaiting the next Fed meeting, investors will turn their
attention to company earnings, as the Q3 announcement season gets
underway. Actual corporate results and future guidance could well be the
determining factor in investor’s mood over the coming weeks, and as
such, hold the key to market behaviour and directions.
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blue bridge news
Our name evolves, our commitment remains
We are pleased to announce that Blue Bridge has recently changed its legal name
to Blue Bridge Wealth Management Inc. (Gestion de patrimoine Blue Bridge Inc.)
We wanted to better reflect the evolution of Blue Bridge over the years with its
global mission to manage, administer and provide professional advice for its
clients worldwide. Blue Bridge and its employees may be evolving, but we rest
on the same foundations of excellence, independence and expertise.
It is with great pride that we continue to accompany you wherever life takes you.
Tribute event Le Corbusier
This October 1st in Lausanne, Blue Bridge partnered with a special event dedicated to the artwork of Le Corbusier. The event was held in the Wohn Shop
Projecto boutique, which was entirely covered in paintings created especially for
the occasion. The art pieces evoked the life of the multi-talented architect and
urbanist who disappeared fifty years ago. Over fifty people attended and made
this event memorable.
Alain Lévesque, 2015
© All rights reserved
2
your newslet ter
featured article
Alternative
investments, land of possibilities
When people think about alternative investments, most will knee-jerk and think
about hedge funds. However, there are far more types of products in this asset
class. «Alternative” is an umbrella term for all types of non-traditional investments,
in other words, anything other than the mere holding of shares and bonds.
Alternative investments have a bad reputation for being exotic and unreliable. Yet,
three subcategories are fundamentally simpler than stocks and bonds traded on the
public markets. Private placement can be obtained in equity shares or debt. In each
case, the exchange of money allows a company to complete a project or continue
its business operations. With stocks, the investor will be paid in dividends. As for
private debt, he or she will receive periodic income. This kind of opportunity is a
fairly simple contract understood by all entrepreneurs. Another category which is
fundamentally intelligible is real estate. Property owners will naturally see the value
of this investment just as they see the value of their own buildings grow over time.
Recently, we have seen great opportunities in terms of debt and private equity. These
two new asset classes offer great diversification in long-term balanced portfolios.
Moreover, although we’re talking about private debt and private equity, the rationale
before investing is the same as traditional stocks and bonds, with the added bonus
of higher returns. This is due, firstly, to the lack of information and secondly, the
lack of liquidity in these products. It is also important to mention that these risks
can be reduced. Some firms are highly sophisticated and seek extensive information
and therefore gain a competitive advantage. As for the lack of liquidity of these
investments, this can be mitigated by a long-term investment horizon and a good
portion of the portfolio assigned to more liquid or traditional products. Moreover,
portfolios usually include a very large proportion of liquid products.
Jean-Michel
Charette,
M.Sc., CFA
Analyste principal,
Investissements
jean-michel.
charette@
bluebridge.ca
Ultimately, given the very low interest rates at the moment, these investments are
a great alternative. Low rates are generally good indicators for expected returns
in bonds. What’s more, stock market prices, although fair, are quite high at the
moment, so why not look elsewhere?
If you need more information or a more in-depth discussion on these new investment opportunities, contact [email protected].
© All rights reserved
3
your newslet ter
spotlight on
A
quick overview of exchange rate regimes
Long ago, Gold was the standard for global currencies. With the United States of
America holding roughly two thirds of the gold reserves at the the time, during the
Bretton Woods negotiations in 1944 the USA decided to impose their will on the USD
becoming the worlds’ reserve currency, directly convertible to gold (not all countries
signed the treaty). This was decided rather than using a “World Currency Unit”, known
in theory as the bancor as it was suggested by John Maynard Keynes. In 1971, the
Bretton Woods system ceased to exist as the USA stopped the convertibility of the
USD against gold. While the dollar remained (remains) a reserve currency, it allowed
many fixed currencies to become independently floating.
Now, there are generally two types of currency classifications. The first is de jure,
which is the type of currency announced by the country. The second is de facto,
which is its unofficial type of currency regime that is actually in place as established
by the IMF. The IMF establishes the type of currency based on criteria such as the
volatility of the nominal exchange rates, the volatility of the variation of nominal
exchange rates, the volatility of a country’s reserves and the volatility of the nominal interest rates.
There are many types of currency regimes that are listed as de facto currencies
from the IMF1 and this list includes, but is not limited to (independently) floating
currencies, soft pegged currencies (such as a crawling peg) and hard pegged currencies (fixed-pegged). Independently floating currencies are decided entirely by
the market. A few variables that influence the currencies versus others are interest
rates, inflation, reserves, trade balance, and investor sentiment. Soft pegged currencies are often periodically adjusted in smaller amounts towards another currency,
usually one of a trading partner. Fixed pegged currencies have a much more rigid
establishment, often +/- 1% peg relative to another currency (or band of currencies).
Central banks can peg or fix their currency on another country’s in part by to selling
their foreign reserves in exchange for their own currency. When a country buys its
own currency, they are effectively increasing the demand for their currency and thus
its price – they can maintain this attempt at limiting their currency’s devaluation as
long as they hold foreign reserves. This is something that China has done frequently.
Jonathan
Monat, M.Sc.
Quantitative
Analyst,
Investissements
jonathan.monat@
bluebridge.ca
1https://www.imf.org/external/pubs/nft/2014/areaers/ar2014.pdf
© All rights reserved
4
MARKET WATCH
Total Return of Indexes as of September 30th, 2015
EQUITIES
Last
S&P 500
1920.03
16284.7
13306.96
4455.29
9660.44
17388.15
117.25
44002.27
3258.49
-2.47%
-1.35%
-3.67%
-4.11%
-5.84%
-7.95%
-4.38%
-1.97%
-3.55%
-6.44%
-6.98%
-7.86%
-6.79%
-11.74%
-14.07%
-9.24%
-12.78%
-7.72%
-5.29%
-6.95%
-7.02%
7.15%
-1.48%
-0.36%
0.45%
-9.01%
-3.90%
-0.61%
-2.11%
-8.38%
4.10%
1.96%
7.51%
0.04%
-9.35%
-0.78%
12.40%
9.26%
5.71%
13.57%
10.21%
25.15%
8.20%
-0.38%
11.86%
13.34%
11.38%
4.46%
7.64%
9.17%
13.16%
5.43%
-0.74%
10.00%
1936.43
219.57
250.18
222.82
0.68%
0.76%
0.50%
-3.05%
1.23%
1.73%
0.32%
-5.13%
1.13%
0.49%
-0.12%
-3.61%
2.94%
2.69%
1.18%
-3.98%
1.71%
5.45%
2.18%
2.50%
3.10%
4.94%
4.16%
5.37%
193.76
1115.07
45.09
-4.12%
-1.74%
-9.69%
-14.71%
-4.89%
-25.40%
-15.74%
-5.89%
-23.30%
-30.44%
-7.71%
-48.24%
-14.43%
-14.31%
-20.16%
-7.55%
-3.15%
-13.04%
0.7512
1.1177
1.5128
119.88
1.488
-1.29%
-0.30%
-1.41%
-1.11%
1.01%
-6.14%
0.27%
-3.72%
-2.14%
6.84%
-12.70%
-7.61%
-2.88%
0.08%
5.83%
-15.90%
-11.51%
-6.69%
9.33%
5.20%
-9.59%
-4.57%
-2.19%
15.42%
5.56%
-5.02%
-3.90%
-0.76%
7.49%
1.18%
Dow Jones Industrial
S&P/TSX Composite
CAC 40
DAX
Nikkei 225
MSCI Europe
MSCI Emerging Markets
MSCI World
1 month
3 months
YTD
1 year
3 years*
5 years*
BONDS
Barclays US Aggregate
iBoxx Euro World Overall
iBoxx USD Corp
iBoxx USD Liquid HY
COMMODITIES
CRB Commodity Index
Gold Spot US
Crude Oil WTI
CURRENCIES
CAD/USD
EUR/USD
GBP/USD
USD/JPY
EUR/CAD
Returns are expressed in local currency and include dividends.
*Returns above one year are annualized.
Source: Bloomberg
The information contained in this newsletter is up to date as of the date of its publication. Blue Bridge Wealth Management Inc. (“Blue
Bridge”) will not update the information. Errors may have slipped in this newsletter. Blue Bridge does not accept any responsibility in
connection with the timeliness and accuracy of the information. The information is provided strictly for informational purposes and is not
to be construed as a recommendation to buy or sell stocks, bonds, currencies or other securities or as an offer or solicitation to buy or sell
any security, asset or product whatsoever. The information is not intended to provide you with specific advice of any nature whatsoever,
including legal, financial, accounting, tax or in connection with investments. This newsletter does not constitute legal advice. If you need
advice, you should consult a qualified professional. This newsletter may not be reproduced in any way or for any purpose whatsoever
without the prior express consent of Blue Bridge. We are not responsible for the opinions expressed in external links of this newsletter.
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