iProfile™ Private Discretionary Portfolio – Global Equity Balanced
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 returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (March 15, 2021) |
iProfile Private Discretionary – Global Equity Balanced
|
1.96 |
5.34 |
14.17 |
21.84 |
6.83 |
7.46 |
Portfolio overview
The iProfile™ Discretionary Portfolio – Global Equity Balanced rose over the period (+5.4%) 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 outperformed its Global Equity Balanced peer group median (+5.1%). 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 therefore contributed significantly to total returns. 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%), which is the largest equity pool in the portfolio and contributed more than one quarter of the total gains. 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 was also especially strong (+8.4%) and 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.
To discuss your investment strategy, speak to your IG Advisor.
Commissions, fees and expenses may be associated with mutual fund investments and the use of iProfileTM Managed Asset Program. Read the prospectus and speak to an IG Advisor before investing. The rate of return is the historical annual compounded total return as of September 30, 2024, including changes in value and reinvestment of all dividends or distributions. It does not take into account sales, redemption, distribution, optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, values change frequently, and past performance may not be repeated. An asset allocation service, iProfile is a managed asset program for clients with a minimum of $250,000 invested in the iProfile program. Mutual funds and investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm). Any additional investment products and brokerage services are offered through Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund.
This commentary may contain forward-looking information which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of September 30, 2024. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
This commentary is published by IG Wealth Management. It represents the views of our Portfolio Managers and is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein.
Trademarks, including IG Wealth Management and IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to subsidiary corporations.
© Investors Group Inc. 2024