Connected Wealth Diversified Income
The rally that began in mid-February continued into March, quickly erasing the woes
from the start of the year. There was no seismic shift that took place to reverse the
trend. But it could have been the announcement made on February 16th that Russia
and Saudi Arabia are discussing collaborating on an output freeze. That day marked
the beginning of a rally in oil prices, which coincided with bottom in equities.
Relative performance for the mandate was driven by two distinct factors, Valeant
Pharmaceuticals and the U.S. dollar. Valeant lost 62% in the month, reducing health
care’s weight in the TSX from 2.23% to 0.99%. We have never owned Valeant in
Core Income or any of our mandates mainly because we did not buy into the
premise that growth through acquisition was a sustainable business model. Their
debt load now stands at 3x times the value of the equity and the company is under
acute scrutiny over their reporting standards and corporate governance. The other
major driver of fund performance is our active bet on U.S. dollar denominated
stocks. The mandate has the latitude to invest as much as 25% of assets in U.S.
assets. The dollar has been a large contributor to returns over the past few years,
but recently has weighed on the mandate. We continue to believe the U.S. dollar is
one of the best diversifiers for Canadian investors, as the dollar typically rallies when
our market is doing poorly. Investing south of the border also opens the door to a
plethora of high quality, dividend paying blue chip stocks in sectors
underrepresented in Canada.
We sold our stake in McDonald’s last month after the stock had a tremendous run
and we added Ford because of their exposure to the healthy U.S. consumer and
benefits of cheap fuel prices. During the month we also reduced our utility exposure
selling Canadian Utilities and buying a smaller position in Fortis. The sector was a
top performer in the first few months of the year, which coupled with low bond yields
had us looking elsewhere.
Strategy Overview
Objective – Sustainable income and
capital preservation with moderate growth
as a secondary objective.
Strategy – The portfolio is an actively
managed balanced portfolio of North
American securities. Based on our
macro outlook, valuations and market
expectations, the portfolio tilts away from
its 60% equity / 40% fixed income
baseline. The investment approach
focuses on dividend/income sustainability
and quality.
Risks – The portfolio has a risk profile
significantly lower than the S&P/TSX
Composite.
The Manager
Richardson GMP Asset Management, a
division of Richardson GMP, manages
over $350 million in assets across a
number of North American equity, bond
and ETF strategies.
$140,000
$130,000
$120,000
CW
Diversified
Income
$110,000
Benchmark
(60/40)
Craig Basinger – Portfolio Manager
James Price – Portfolio Manager
Chris Kerlow – Portfolio Manager
Derek Benedet – Analyst
Shane Obata
$100,000
12 April 2016
Jan-16
Jul-15
Oct-15
Apr-15
Jan-15
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
$90,000
2
CONNECTED WEALTH
Performance & Risk
Objective: Income & capital preservation
Benchmark: 60% S&P/TSX Composite Total Return + 40% FTSE TMX Domestic Bond Index
Available: SMA platform
Diversified Benchmark
Income
60/40
Relative
3.2%
1-month
3-months
3.5%
1.4%
3.3%
-0.3%
Statistic
Sharpe Ratio
Description
Performance relative to risk (higher is better)
-1.9%
Max Drawdown
Largest decline from peak to trough (less is better)
% of upside market participation (higher is better)
Diversified Benchmark
Income
60/40
1.2
0.7
-6%
-8%
96%
100%
% of downside market participation (lower is better)
6-months
4.6%
2.8%
1.8%
Up Market Capture
1-year
0.2%
-3.6%
3.8%
Down Market Capture
55%
100%
-1.9%
Standard Deviation
Volatility (lower is better)
4.9%
5.4%
0.7%
Downside Deviation
Volatility of down months (lower is better)
3.0%
3.6%
2.2%
Beta
Volatility relative to 60/40 benchmark
0.7
1.0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
YTD
2.8
1.1
0.6
1.5
2.4
2.2
-0.5
-0.5
0.9
0.8
2.0
1.2
1.6
2.5
2.1
2.3
-1.2
0.4
-0.3
-1.1
1.4
0.1
1.9
0.7
-1.3
-1.3
3.2
3.5
0.0
-0.3
1.0
-0.8
0.9
1.7
0.9
0.9
-0.8
-2.8
-0.3
0.4
0.0
0.4
-0.1
-0.7
1.4
0.7
-2.7
-3.1
0.1
2.6
-0.7
-1.9
1.6
0.7
1.6
2.0
0.0
1.1
0.5
0.4
0.3
1.5
-0.5
0.7
1.7
1.7
-3.2
-2.8
1.3
2.3
1.1
1.0
-1.3
-2.6
-1.6
-2.3
1.1
0.6
2.9
3.3
0.2
-1.0
3.3
1.1
-0.4
-0.5
1.5
0.2
1.4
1.3
0.8
-0.1
1.0
1.1
1.6
1.0
-0.8
0.0
-1.0
-1.4
6.1
3.0
12.9
7.1
6.6
9.9
1.8
-3.6
1.4
3.3
1.4%
YTD
5.3%
3-year
Inception
2012
2013
2014
2015
2016
3.3%
4.6%
6.9%
4.6%
Div Income
60/40 BM
Div Income
60/40 BM
Div Income
60/40 BM
Div Income
60/40 BM
Div Income
60/40 BM
Composition
Asset Allocation
Holdings (12 April 2016)
Bonds +
Cash
33%
Equities
59%
REITs
5%
Name
Industry
Global
HUSKY ENERGY INC
Energy
1.7%
na
Cyclical
TRANSCANADA CORP
Energy
3.8%
4.5
ENBRIDGE INC
Energy
2.4%
4.2
OCCIDENTAL PETROLEUM CORP
Energy
2.3%
4.2
ENCANA CORP
Energy
2.0%
0.9
POTASH CORP OF SASKATCHEWANMaterials
1.4%
6.4
UNITED PARCEL SERVICE-CL B
Industrials
4.1%
3.0
MICROSOFT CORP
Information Technology
2.8%
2.7
GENERAL ELECTRIC CO
Industrials
2.7%
3.0
Interest
CINEPLEX INC
Consumer Discretionary 2.9%
3.1
Sensitive
DOREL
Consumer Discretionary 1.7%
5.8
FORD MOTOR CO
Consumer Discretionary 2.3%
4.7
TORONTO-DOMINION BANK
Financials
4.8%
4.0
ROYAL BANK OF CANADA
Financials
4.2%
4.3
MANULIFE FINANCIAL CORP
Financials
2.6%
4.2
BB&T CORP
Financials
2.2%
3.3
FORTIS INC
Utilities
2.3%
3.8
BCE INC
Telecommunication Services
3.4%
4.6
ROGERS COMMUNICATIONS INC-B Telecommunication Services
2.7%
3.9
PROCTER & GAMBLE CO/THE
Consumer Staples
3.0%
3.2
MERCK & CO. INC.
Health Care
3.9%
3.3
CAN APARTMENT PROP REAL ESTAFinancials
2.9%
4.1
RIOCAN REAL ESTATE INVST TR
1.9%
5.2
NA Cyclical
Relative Weights
Diversified Income
Baseline
Defensive
Bonds + Cash
REITs
REITs
Source: Richardson GMP Asset Management
Yield
Prefs
BMO LADDERED PREFERRED SHARE
Prefs
Type
3.4%
5.4
Bonds
CDA HT1 FLT CMB SER 53
Floating 15 Sep 18
7.8%
1.2%
GOLDMAN SACHS GROUP INC
3.375% Feb 2018
5.9%
4.3%
WELLS FARGO & COMPANY
3.874 21 May 25
6.7%
2.6%
CDN WSTN BK 3.463% 17DEC24
17-Dec-24
3.7%
3.5%
ISHARES U.S. HIGH YIELD BOND
ETF
5.5%
97%
6.1%
Cash
3.1%
Equities
0% 10% 20% 30% 40% 50% 60% 70%
Financials
Weight
CONNECTED WEALTH
3
The research above is prepared by Richardson GMP Limited and is current as at the date on page 1. Please note that past performance is not
necessarily an indicator of future performance. The indicated rates of return are gross of fees and/or commissions. Individual results of client portfolios
may differ from that of the representative portfolio as fees may differ, and performance of specific accounts is based on specific account investiture. The
noted representative portfolio may not be appropriate for all investors.
This research has been prepared for the use of the clients of Richardson GMP Limited and must not be copied, either in whole or in part, or distributed to
any other person. If you are not the intended recipient, you must not use or disclose the information in this research in any way. Nothing in this research
shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is
general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider
the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any
financial investment decision. Past performance is not a reliable indicator of future performance. There are risks involved in securities trading. The price
of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks
inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the
value of the investment. This research is based on information obtained from sources believed to be reliable but we do not make any representation or
warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are
subject to change without notice. No member of the Richardson GMP Limited accepts any liability whatsoever for any direct, indirect, consequential or
other loss arising from any use of this research and/or further communication in relation to this research.
Richardson GMP Limited or its associates, officers or employees may have interests in the financial products referred to in this report by acting in various
roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market
maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if
any) in this research. Richardson GMP Limited is a member of the Canadian Investor Protection Fund and IIROC. Richardson is a trade-mark of James
Richardson & Sons Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited