NCM Pension Portfolios - 2019 Year in Review
January 16, 2020
Review of 2019
2019 was a decent year across most assets as they performed well after largely negative returns in 2018. Not surprisingly, equities were the best in 2019, however, that was not the case during the first half of the year as rates shifted lower and long-duration bonds were the place to be in the cross-asset performance contest. With regards to equities specifically, for most of the year, low volatility stocks led the global equity performance race but in Q4 the overall S&P 500 index took the lead due to its exposure to growth stocks. It is interesting to note that Cash was the only Asset Class that posted a positive performance in both 2018 and 2019.
Now is an appropriate time to take a few moments to review what the NCM Pension Portfolios are all about. From the outset, the program was specifically designed to be simple, concise and adhere to the four principles noted previously in last month’s commentary. Namely:
- Have a plan for the portfolio
- Embrace the power of compounding
- Volatility is normal
- Diversification works
The three NCM Pension Portfolios address the differing needs for wealth preservation, income, and capital appreciation. The key benefits as follows:
- A single investment in a diversified portfolio of award-winning NCM Funds and top-tier exchange-traded funds (ETFs)
- Disciplined portfolio management approached through a pension fund investment-style
- Dynamically managed asset allocation that encompasses Cash & Fixed Income, Global Equities, and Real Assets
- Offers exposure to global markets through active and passive investments and geographic and sector diversification beyond the domestic market
- Three separate portfolio structures designed to maximize return for a given tolerance for risk
NCM Conservative Income Portfolio
A global fixed-income balanced fund that aims to provide investors with wealth preservation and capital appreciation. Primarily invests in fixed income with equity opportunities for long-term growth and diversification.
NCM Balanced Income Portfolio
A global neutral balanced fund that combines longterm capital appreciation and stable income. Providing investors with geographic and sector exposures beyond the Canadian marketplace.
NCM Growth and Income Portfolio
A global equity balanced fund that aims to provide investors long-term capital appreciation and stable income. A multi-asset model that tactically blends several unique mandates.
While 2019 has been a strong year from a performance perspective, the Investment Committee has been especially pleased with the risk management the program has exhibited. In particular, the disciplined nature of the program has proven effective as the CIFSC Risk Ratings for all three mandates have been lowered from a Low to Medium at inception to a Low Risk Rating.
Since the NCM Pension Portfolios favour active management and global exposure the core coverage in these areas is delivered through the following NCM funds:
NCM Short Term Income Fund
A fixed income fund investing in a wide range of debt securities with a monthly dividend.
NCM Norrep Fund
A Canadian small cap equity fund, focusing on fast-growing companies trading at reasonable valuations in an asset class that has historically outperformed.
NCM Core Canadian
NCM Core Canadian offers investors a portfolio of stable, high quality Canadian large-cap equities. The Fund targets an attractive long-term return with lower volatility than the market.
NCM Core Global
NCM Core Global offers investors exposure to the global markets, targeting an attractive long-term return with lower volatility than the market.
As mentioned above, while the NCM Funds make up the lion’s share of investments in the Pension Portfolios, in order to achieve a comprehensive, proper and total global solution, ETFs have been utilized in areas deemed critical to diversification of the portfolios. Specifically, where we do not hold “in-house” expertise, the Pension Portfolios employs ETFs to provide necessary exposures. Currently, Global Water, Global Infrastructure, Global Real Estate, and U.S. Investment Grade Bonds have been added just to name a few of the investment overlays.
Exchange Traded Funds (ETFs)
BMO High Yield US Corp Bond (Hedged) ETF – ZHY CN
BMO Mid US IG Corp Bond (Hedged) ETF – ZMU CN
BMO Short-Term Corp Bond Index ETF – ZSU CN
BMO Global Infrastructure ETF – ZGI CN
iShares Global Real Estate ETF – CGR CN
iShares Global Water Index ETF – CWW CN
Vanguard FTSE DAC ex-NA ETF – VI CN
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Notice to Reader:
Unless otherwise stated, opinions expressed in this document are those of the author and are not endorsed by the author’s employer. No guarantee, either express or implied, is made that the information in this document is accurate, complete or up-to-date. The contents of this document are for informational purposes only and are not intended to provide financial, legal, accounting or tax advice and should not be relied upon in that regard. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.