It was a positive month for the portfolios as each finished both the month, and first half of the year with modest gains. The portfolios were up between 4% and 5% on a year to date basis, with the more conservative portfolios posting the strongest performance.
You can download our Monthly Portfolio Report here.
Despite these gains, the portfolios have lagged their respective benchmarks. The main reason for this underperformance has been the underweight exposure in energy and materials, which have been two of the strongest performers so far this year. My Canadian equity pick, Fidelity Canadian Large Cap, is decidedly underweight in these two sectors.
For example, the average Canadian equity fund held between 20% and 23% in Energy, which has gained more than 28% year to date. In comparison, the Fidelity Canadian Large Cap Fund held a more modest 10% weighting, dragging relative gains. It is a similar story with precious metals equities, which on average have gained more than 35%. The average Canadian equity fund holds between 7% and 9% of their portfolio in materials, while the Fidelity Canadian Large Cap has virtually no exposure to the sector.
In the global equity space, our top pick, the Mackenzie Ivy Foreign Equity Fund, has also underperformed on a year to date basis. The fund has a long history of defensive positioning, which has resulted in it underperforming in strong market rallies. That has again played out, with it posting a modest 1.4% year to date gain, compared with a nearly 7% rise in the MSCI World Index.
Despite this recent underperformance, I still believe that the funds in the portfolios are of very high quality, and are expected to deliver above average returns over the long term. When I analyze a fund, I focus not only on the return profile, but also its risk profile. My goal is to find a fund or group of funds that provides a reasonable balance between expected return, and expected risk. Should we see any meaningful market correction, I believe that the funds in the portfolios will do a much better job at protecting capital than those funds which may be heavily exposed to energy and materials.
During the month, I reviewed the Tactical Models, and based on that review, I did not make any changes to the allocations within the portfolios.
For the period ending June 30, 2014, the performance of the portfolios were:
| Strategic Portfolios | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 1 Mth | 3 Mth | YTD | 1 Yr | 2 Yr | 3 Yr | 5 Yr | 10 Yr | ||
| Conservative | 0.1% | 1.2% | 5.1% | 10.1% | 7.8% | 6.2% | 7.2% | 5.6% | |
| Moderate Balanced | 0.1% | 1.5% | 5.5% | 12.9% | 10.6% | 7.1% | 8.1% | 5.8% | |
| Balanced | 0.1% | 1.4% | 5.2% | 14.0% | 11.7% | 7.3% | 8.4% | 6.1% | |
| Balanced Growth | 0.4% | 1.1% | 4.2% | 15.5% | 14.0% | 8.1% | 9.0% | 6.1% | |
| Growth Portfolio | 0.3% | 0.6% | 3.8% | 17.5% | 16.7% | 9.9% | 10.9% | 6.4% | |
| Tactical Models | |||||||||
| 1 Mth | 3 Mth | YTD | 1 Yr | 2 Yr | 3 Yr | 5 Yr | 10 Yr | ||
| Conservative | 0.1% | 1.1% | 4.4% | 9.3% | 7.5% | 6.0% | 7.0% | 5.6% | |
| Moderate Balanced | 0.3% | 1.4% | 5.4% | 12.8% | 10.5% | 7.1% | 8.1% | 5.8% | |
| Balanced | 0.6% | 1.2% | 5.2% | 13.9% | 11.6% | 7.3% | 8.4% | 6.1% | |
| Balanced Growth | 0.6% | 1.0% | 4.4% | 15.7% | 14.1% | 8.2% | 9.0% | 6.1% | |
| Growth Portfolio | 0.4% | 0.6% | 3.9% | 17.6% | 16.7% | 9.9% | 10.9% | 6.4% |