Trending for the Long Term
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.
By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer
Marchello Holditch, CFA, CAIA, Vice-President and Portfolio Manager, CI GAM | Multi-Asset Management
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 funds, 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. CI Assante Wealth Management and its dealer subsidiaries, Assante Capital Management Ltd. and Assante Financial Management Ltd. (collectively “Assante”) are affiliates of CI GAM | Multi-Asset Management, which is a division of CI Global Asset Management. Evolution Private Managed Accounts are managed by CI Global Asset Management under the United Financial brand and are available exclusively through your Assante advisor. Neither CI Global Asset Management 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 mutual funds and the use of the Asset Management Service. 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. Mutual 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 Wealth Management is a registered business name of Assante Wealth Management (Canada) Ltd. 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 Wealth Management. Copyright © 2021 CI Assante Wealth Management. All rights reserved.
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.
By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer
Marchello Holditch, CFA, CAIA, Vice-President and Portfolio Manager, CI GAM | Multi-Asset Management
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 funds, 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. CI Assante Wealth Management and its dealer subsidiaries, Assante Capital Management Ltd. and Assante Financial Management Ltd. (collectively “Assante”) are affiliates of CI GAM | Multi-Asset Management, which is a division of CI Global Asset Management. Evolution Private Managed Accounts are managed by CI Global Asset Management under the United Financial brand and are available exclusively through your Assante advisor. Neither CI Global Asset Management 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 mutual funds and the use of the Asset Management Service. 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. Mutual 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 Wealth Management is a registered business name of Assante Wealth Management (Canada) Ltd. 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 Wealth Management. Copyright © 2021 CI Assante Wealth Management. All rights reserved.