The S&P / TSX was the best performing (developed economy) stock market in 2016 (that was the big headline). If you were 100% invested in the SP / TSX you could have achieved a total return (including dividends) of a little over 21% (according to our Bloomberg analytics):
However, the reality is that you would have had to have not been invested in the SP / TSX through 2015 because the 2 year (through to Dec. 31, 2016) total return was a negative 3.5%:
So you would have had to have tactically shifted into the SP / TSX at the beginning of the year in order to capitalize on the great returns of 2016.
Did your portfolio get re-balanced last January?
On my BNN appearance (and on our weekly client webinars) in December of 2015, I suggested an over-weight of exposure to Canadian equities because in 2015 it had been the worst performing stock market (of the developed economies) in 2015. That would / should have been a natural allocation adjustment as it would have likely dropped in a standard, 60% equity balanced portfolio.
The diversified MSCI All Country World Index (our global equity benchmark) has a weighting of a little over 3% for Canadian Equities:
If you have a globally balanced equity portfolio with a 60% equity allocation, you would have exposure to approximately 1.8% of your portfolio dedicated to Canadian equities. Any more than this and you would be over-weight.
Having exposure to our (High Rock) tactical model (depending on your asset allocation strategy) would have automatically given you the over-weight to Canadian equity (and high yield) markets that I suggested.
The High Rock Canadian High Yield Bond Fund (which we managed, but has been since closed (following advisor redemption's) had a total return of a little better than 23% in 2016 :
A full-year client for 2016 (we began our private client division in April of 2015 and we had many new clients joining throughout 2016) would have seen better than benchmark returns because we had greater exposure to Canadian equities, non-correlated high yield bonds (which we tactically added in January and February of 2016), and non-bank, fixed rate re-set preferred shares (which we tactically added in November and which jumped in price in December as bond prices fell) .
The balanced benchmark for comparison purposes, 60% ACWI ETF ( + 8.4%) / 40% XBB (Canadian bond index) ETF (+ 1.29%) had a total return of 4.63% (allowing for fees and hidden MER costs of 1.15%) over 2016.
The 2 year balanced benchmark total return (after fees and costs) was a negative 1.36%.
ACWI = -1.58%
XBB = + 2.27%).
High Rock clients would have benefited from tactical adjustments to their portfolios, which can only happen for all clients simultaneously by virtue of discretionary portfolio management, where automatic re-balancing and asset allocation strategy adjustment can be done regularly, as required.
That is the benefit of true portfolio management.
We shall discuss this in greater detail on our weekly client webinar and shall post the recorded version on our website (http://highrockcapital.ca/current-edition-of-the-weekly-webinar.html) at or about 5pm next week (January 10, due to some technical issues). Feel free to tune in.
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Wishing you all a Happy. Healthy and Prosperous 2017!
And remember... past performance is no guarantee of future performance, although at High Rock we use our experience, expertise and deep research to do all that we can to provide the best possible risk adjusted returns for ourselves and our clients.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist