Craig Baun, senior investment advisor and senior portfolio manager with Baun Investment Group, Wellington-Altus Private Wealth Inc., in Calgary.
Baun diversifies portfolios by holdings and by management style. He also incorporates a tactical layer into the overall investment strategy. This allows him to focus on current opportunities for outperformance while effectively managing risk in the total portfolio.
John, 45, inherited $10 million. He is an aggressive investor seeking growth.
- 40% to the firm’s proprietary North American Relative Strength Strategy, a subportfolio comprising 20–30 stocks. The portfolio is about evenly split between U.S. and Canadian stocks, with no more than 20% weighted in any sector. At least five industries are always represented in the strategy.
- 20% to the firm’s North American Tactical Yield Strategy, which is 65% equities and 35% fixed income. Each issuer must pay a dividend and is screened for relative value, sustainability and consistency of earnings, Baun said.
- Among the stocks held in the tactical bucket are Microsoft Corp. (Nasdaq: MSFT); Nutrien Ltd. (NYSE: NTR), the world’s largest provider of crop inputs and services; Nvidia Corp. (Nasdaq: NVDA), which designs and manufactures graphics processors and chips; Enbridge Inc. (TSX: ENB); and BCE Inc. (TSX: BCE).
Relative value/income bucket
- 20% to securities such as Canadian Natural Resources Ltd. (TSX: CNQ), Suncor Energy Inc. (TSX: SU) and National Bank of Canada (TSX: NA). This bucket includes investments that provide outsized income opportunities, the ability to grow their income streams over time and effective inflation hedging.
- 20% to third-party managed investments, such as the:
- Pimco Tactical Income Opportunities Fund (TSX: PTO.UN), a closed-end fund that invests in debt obligations, other income-producing securities and real estate-related investments
- Mawer Global Balanced Fund, which invests in both equities and fixed income
- iA Clarington Strategic Corporate Bond Fund, which invests primarily in North American corporate and government issues
- iShares Canadian Select Dividend Index ETF (TSX: XDV), which tracks the Dow Jones Canada select dividend index
- Vanguard S&P 500 ETF (NYSE Arca: VOO)
- DFA International Core Equity Portfolio, which tracks the MSCI world ex-USA index
- Evolve Global Healthcare Enhanced Yield ETF Hedged (TSX: LIFE), a special-situations holding that invests in global health-care companies
John also received a $10,000 employment bonus.
Same as above. Given the size of the investment, the objective is to “stay on top of each investment and look for the best value and best complementary holdings,” Baun said.
Joe Pochodyniak is a senior portfolio manager with MacNicol & Associates Asset Management Inc.in Toronto.
Pochodyniak builds customized portfolios composed of North American value stocks, as well as alternatives to traditional equities and fixed-income positions, with a high concentration in private positions in the alternative space.
Janie, 40, is an advertising executive who inherited $10 million and recently separated from her spouse. She is seeking balanced growth.
Pochodyniak recommends core holdings in high-quality public securities together with private alternative assets that are not available to retail investors.
“Real estate, private equity and hedge funds provide investors with a hedge against inflation and diversification from public market risk,” he said, whereas private credit, supply-chain finance and senior bank loans can provide yield in a world with higher rates and higher inflation expectations.
- 20% to fixed-income alternatives. These include short-term senior bank loans and emerging-market bonds, such as one from Petróleo Brasileiro SA that matures in August 2022. The allocation also includes North American private credit companies such as Toronto-based Apogee IT Services LLC, a leading IT services company in North America.
- 25% to equities alternatives, such as multifamily residential partnerships in U.S. growth markets such as South Florida, West Texas and the Greater Atlanta Metro Region; and hedge funds, with an emphasis on market-neutral strategies, including limited partnerships with firms such as Bain Capital LP.
- 55% to core equities holdings. These include blue-chip dividend-paying stocks, such as TC Energy Corp. (TSX: TRP) and Crescent Point Energy Corp. (TSX: CPG); mid-and large-cap stocks, such as Toronto-Dominion Bank (TSX: TD) and Mississauga, Ont.-based goeasy Ltd. (TSX: GSY), a public alternative financial company; and growth/value stocks, such as Shopify Inc. (TSX: SHOP) and IBM Corp. (NYSE: IBM).
Janie also received a $10,000 bonus.
- 20% to fixed-income alternatives, such as the BMO Premium Yield ETF (TSX: ZPAY).
- 25% to equities alternatives, such as the MacNicol Alternative Asset Trust, a multi-strategy, alternative investment platform.
- 55% to core equities, such as the BMO International Dividend ETF (TSX: ZDI), the iShares S&P/TSX Capped Energy Index ETF (TSX:XEG), the iShares S&P/TSX Capped Consumer Staples Index ETF (TSX: XST) and the VanEck Gold Miners ETF (NYSE Arca: GDX).