Portfolio returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Aug 9, 2021) |
iProfile Portfolio – Global Neutral Balanced F |
1.81 |
4.83 |
11.46 |
18.55 |
4.94 |
4.34 |
||
Quartile rankings |
3 |
3 |
2 |
3 |
2 |
iProfile™ Portfolio – Global Neutral Balanced Series F
Portfolio commentary
Q3 2024
Highlights
① The portfolio rose over the period as all component iProfile Private pools were higher, led by the iProfile Canadian Equity Private Pool.
② Active central bank policies were key market drivers.
③ The market environment improved as interest rates fell.
Portfolio overview
The iProfile™ Portfolio – Global Neutral Balanced, Series F, rose over the period (+4.8%) as global inflation cooled, economic data reinforced expectations for a U.S. soft-landing, and the U.S. Federal Reserve (the Fed) surprised investors with a 50-basis-point interest-rate cut. The portfolio slightly underperformed its Global Neutral Balanced peer group median (+5.0%). It benefited from its significant exposure to equities, especially in Canada. The underperformance of its U.S. equity exposure and its exposure to alternative investments and real property weighed most on results.
The iProfile Fixed Income Private Pool is the largest component iProfile pool in the portfolio and so contributed the most to total returns – more than one quarter of the gains. The pool return (+3.4%) trailed the FTSE Canada Universe Bond Index Total Return (+4.4%) and most global bond indices mainly due to the underperformance of several pool components versus their narrow benchmarks (for example, global and short-term bonds) and the impact of the IG Mackenzie Real Property Fund (+0.5%). The Mackenzie – IG Canadian Bond Pool, the iProfile pool’s largest fixed income segment, slightly outperformed the FTSE Canada Universe Bond Index. In anticipation of interest-rate cuts, duration of holdings was increased earlier this year, which benefited performance as yields fell. The pool’s holdings of the IG Mackenzie Mortgage and Short Term Income Fund detracted from relative performance over the period as short-term bonds underperformed long-term bonds. IG Mackenzie Real Property Fund gained only slightly as Canada’s slower economic growth continued to weigh on real estate valuations. However, the fund has seen a stabilization this year of the property value write-downs which challenged performance through 2023.
Equity returns were especially strong from the iProfile Canadian Equity Private Pool (+9.1%) and the iProfile Low Volatility Private Pool (+8.4%). The Canadian equity pool was the portfolio’s strongest segment over the period, but it underperformed the S&P/TSX Composite Index Total Return (10.5%). The pool benefited most from a significant underweight exposure to the underperforming energy sector. However, an overweight exposure to and stock selection in the industrials sector detracted from results. The iProfile Low Volatility Private Pool outperformed the MSCI World Index Total Return (Net) $ CAD as low-volatility indices outperformed non-low-volatility benchmarks in all major regions. Among the low-volatility pool segments, Canadian equities performed best.
The iProfile™ Alternatives Private Pool rose (+1.1%) but was the weakest component pool of the iProfile portfolio. The pool’s underperforming of major global benchmarks is expected in periods of strong capital markets. The iProfile U.S. Equity Private Pool (+3.6%) was the weakest equity pool in the portfolio and underperformed the S&P 500 Index Total Return $ CAD mainly due to stock selection in the consumer discretionary and financials sectors.
Market overview: markets rallied with expanding breadth
Investor sentiment shifted to a “risk-on” attitude in the third quarter, in response to changes in central bank monetary policy across key economies. It began with the Bank of Canada (BoC) and the European Central Bank (ECB) in the second quarter and continued into the third. The BoC was particularly active, making two additional cuts of 25 basis points (0.25 percentage points) to its overnight rate this quarter.
The U.S. Federal Reserve (the Fed) started its own policy easing with a surprise 50 basis-point (0.5-percentage-point) cut in mid-September, launching rallies in both bonds and equity markets. The Fed noted an increase in the unemployment rate and that the battle against inflation was no longer a primary reason to maintain a restrictive monetary policy.
Market outlook: the market environment is generally improving
Looking ahead, central banks in Canada and the United States will continue to focus on supporting labour markets. Stimulus measures in China could help boost domestic consumer demand by propping up the Chinese stock market, property market and economy. Despite geopolitical risks from the Middle East conflict and the upcoming U.S. election, the market environment is improving.
We see a soft-landing scenario emerging in the U.S. and other areas around the world. This should support equity markets and help bond returns, as interest rates continue to fall from where they are today.
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