“Our clients are not concerned with how the market is doing – they only care how their portfolio is doing.”

Our portfolio management team strives to adapt our strategy to the changing dynamics of the market. As a result, we intend to provide non-benchmark returns to our clients with a focus on consistent returns in both up and down markets.

Most managers adhere to the concept of “benchmark management”, or comparing portfolio performance to a benchmark or index. This approach often works well when markets consistently trend upward. As history has demonstrated, particularly in the last decade, there are serious consequences for relying on this pattern of continuing upward markets on growing your wealth.

Features of benchmark management include:

Measuring performance relative to the market by using benchmarks such as the US S&P 500, Canadian TSX composite, or Japanese Nikkei index.
Striving to keeping pace with the selected benchmark – in good times and bad.
Ignoring investment opportunities that are outside the domain of a benchmark – even if the opportunities are in line with an investor’s risk-profile and objectives.
Remaining fully-invested in the market in order to avoid tracking-error risk, or risk associated with outperforming/underperforming the benchmark significantly.
Also includes “closet indexing” whereby managers appear to actively buy and sell securities but are essentially mimicking a benchmark.
Benchmark management is a common aspect of most mutual funds.

If a benchmark is down 20% and a benchmark tied portfolio or mutual fund is down 15%, it is considered by the manager to be a “good” performance since the portfolio lost less than the benchmark. However, this is often of little comfort to the investor who may then require several years of strong market returns to overcome this setback and stay on pace to achieve their investment needs and objectives.

Using a Non-Benchmark return approach, we seek consistent returns over a market-cycle. This is a very challenging goal to achieve, but it better focuses us on increasing and preserving our clients’ wealth instead of simply following a benchmark.

During volatile market conditions, strategies that we utilize include:

Proactively adjusting industry weightings and asset class exposure.
Active trading including sector rotation into defensive areas.
Raising cash and bond weights and focusing on investment income.
Selectively engaging in alternative strategies such as utilizing “short” or inverse instruments.

We believe the successful execution of this strategy is the key to keeping our clients’ portfolios on track to achieve their long-term objectives, regardless of market direction.