Despite the uptick in market volatility, December ended up being a decent month for the portfolios, all posting gains, except the Moderate Balanced Portfolio, which was flat.
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.
For the year, all finished in positive territory, with the Growth Portfolio leading the way, gaining nearly 16%. Unfortunately, most of this gain was attributed to the fall in the Canadian dollar, and is not likely to be repeated in 2016.
In December, the Conservative and Moderate Balanced Portfolios underperformed their benchmarks. The primary reason for this was the conservative positioning of the fixed income sleeve. The Dynamic Advantage Bond Fund, with a duration of less than half the broader Canadian bond market finished in the red, as did the RBC Global Corporate Bond Fund. The PH&N Short Term Bond & Mortgage Fund, while modestly higher, still lagged more traditional fixed income.
The more aggressive portfolios managed to outperform, thanks to the equity funds, all of which outpaced their respective benchmarks.
It was a similar story for the year, with the Conservative and Moderate Balanced underperforming, while the others managed to outperform. Again, it was the conservative positioning of the fixed income sleeve which was the main drag in performance.
Looking ahead, I expect that 2016 will be a challenging year for investors. There is a lot of uncertainty on the table including divergent central bank policies, the economic outlook for China, the possibility of a U.S. earnings recession, and oil, which is top of mind for most Canadian investors. Still, I believe the portfolios are well positioned. The fixed income exposure is well diversified and is defensively positioned. If we see a big run-up in bonds, the bond sleeve will lag. However, if things get rocky or grind higher, I expect we’ll hold up relatively well.
The equity holdings are also rather conservatively positioned. The Mackenzie Ivy Foreign Equity Fund has a stellar track record in navigating volatility, and the Fidelity Canadian Large Cap Growth Fund has also shown it can handle both good times and bad.
I will continue to monitor not only the portfolios and underlying investments, but also the market environment. I will not hesitate to make changes if the portfolios can be improved from a risk reward perspective.