You can download our standard monthly portfolio report here. For those looking for even more detail, I am also providing additional reports generated from Morningstar which show even more detail regarding the portfolios. A summary report can be downloaded here, while the more detailed report can be downloaded here.
It was a solid start to year, with each of the portfolios well into positive territory. Bond markets were sharply higher after the Bank of Canada stepped in and cut their overnight rate by 25 basis points, shocking the market. Canadian equities were mixed, with the S&P/TSX Composite eking out a modest 0.55% gain as the oil selloff continued. Global markets were flat to negative, however those with unhedged exposure benefited greatly thanks to an 8% drop in the Canadian dollar.
The Conservative and Modest Balanced Portfolios lagged their respective benchmarks. The key reason for the underperformance was the conservative nature of the fixed income portion. The Conservative Portfolio has 45% invested in the PH&N Short Term Bond and Mortgage Fund, which while positive, were left behind the rally experienced by longer dated bonds. Further dampening performance was the Dynamic Advantage Bond Fund. The managers have kept duration short, currently around 3 years, as a protective measure against rising rates. They are expecting higher volatility in the rates market, and will be tactically managing the fund’s duration exposure. However, I still expect it to lag in a falling rate environment.
Each of the equity funds outperformed their respective benchmarks during the quarter.
Looking forward, the only fund of any concern is the Dynamic Advantage Bond Fund. The managers have maintained their conservative positioning, and this is likely to act as a headwind to performance if we see further drops in yields. I have considered changing the fund out for something a little more duration neutral, like PH&N Total Return Bond Fund, or TD Canadian Core Plus Bond, but have opted to say put in the portfolios to help protect capital, should the higher levels of volatility materialize.
Even with the potential headwinds to the Dynamic fund, I believe the portfolios are well positioned to deliver above average risk adjusted returns. I will continue to monitor them and their respective holdings to make sure they remain well positioned.