The year 2020 has begun in dramatic fashion, with many newsworthy stories arising locally and internationally. There is no way to predict the events that occur or their outcome, and we humbly recognize this. We at Alitis strongly believe in our ability to protect and grow your investments over a longer time horizon. This includes times where markets are extremely volatile and that is exactly where we see ourselves today.
Last week Kevin Kirkwood, our President & Chief Investment Officer, wrote an update on the Coronavirus and its expected impacts on the Pools. This week, we would like to highlight how the Alitis Pools have performed during this recent period to show the benefits of investing across both traditional and alternative asset classes.
Here is a look at how the traditional stock and bond markets have fared over the week, the month of February 2020, as well as how they have performed over a trailing 1-year period:
|Investment Returns||Category||1 Week||1 Month||1 Year|
|Vanguard Total Bond Market Index||US Bonds||+1.12%||+1.67%||+12.05%|
|iShares Core Canadian Universe Bond Index||Canadian Bonds||-0.15%||+0.53%||+8.78%|
|iShares S&P/TSX 60 Index||Canadian Stocks||-8.16%||-5.41%||+4.94%|
|SPDR S&P 500 ETF||US Stocks||-11.16%||-7.92%||+7.65%|
|Vanguard FTSE Emerging Market Index||Emerging Markets Stocks||-6.25%||-3.55%||+0.61%|
|Vanguard FTSE Pacific Index||Asian Stocks||-6.83%||-7.42%||-3.14%|
|Vanguard FTSE Europe Index||European Stocks||-9.96%||-7.96%||+0.48%|
In looking across these traditional investments, the top performers were fixed income investments, with BND and XBB both positive over the month of February. Fixed income investments often play the role as a diversifier and safety net from stocks, and the month of February shows quite clearly why they deserve a place in a portfolio. Bonds have also benefited from the continued downward pressure on interest rates, which could carry through to the end of the year.
In addition to bonds, Alitis uses non-traditional or alternative asset classes to further diversify and protect client’s wealth. Our allocations to private real estate, private mortgage and private debt help insulate our portfolio from market shocks that occur.
The US stock market had been driving higher through 2019 and because of that we have been cautious on US equity valuations for several months now. In our models, we continue to see better value in equity markets outside the US than we see inside the US.
Now let’s look at how the Alitis Pools have performed, and keep in mind that we allocate across both traditional and alternative investments:
|Alitis Pool Returns||1 week||1 month||1 year|
|Alitis Strategic Income Pool||-0.06%||+0.46%||+6.05%|
|Alitis Income & Growth Pool||-1.43%||-0.76%||+7.56%|
|Alitis Growth Pool||-4.20%||-3.95%||+2.56%|
|Alitis Mortgage Plus Fund||-0.08%||+6.96%|
|Alitis Private REIT||+0.36%||+8.18%|
|Alitis Private Real Estate LP||+0.42%||+7.72%|
As you might expect, our fixed income and alternative investments performed well over the last week, month and since 2019. The Alitis Strategic Income Pool lead the way, increasing 0.46% for the month but the real estate (REIT and RELP) and mortgage pools were not far behind.
Alitis’ Income and Growth pool was down only 0.76% over the week compared to its benchmark1 which was down 4.49% over the same period. This highlights the diversification and downside protection that we build into our balanced pool.
As mentioned above and in the prior publication, we reduced the equity exposure in Alitis’ Growth Pool in late January. We worried that the equity markets didn’t fully appreciate the risks and uncertainty of the Coronavirus. This cautious stance and our legacy private real estate holdings helped the Growth Pool and over the week as it declined 4.20% vs its benchmark2 which declined 9.49%.
Only two months in, 2020 is proving to be an exciting year for financial markets and is showing no signs of stopping. It is still too early to see the full economic impact of the Coronavirus and how quickly a recovery will occur. Beyond this, there is a US election occurring in the Fall which could prove to be as polarizing as the 2016 election.
We continue to monitor these events as they develop and keep an eye out for other issues that may impact your portfolios. As Kevin mentioned in his update last week, it is a hallmark of Alitis to be prepared for potential risks. The Alitis process for managing your investments has been operating for over 10 years now and is built off our team’s experience dating back decades.
If you have any concerns, please contact your adviser and we will work with you to address them.
- Benchmark may change over time. Benchmark is currently: 30.00% FTSE TMX Bond Universe, 30.00% MSCI World Index (C$), 15.00% TSX Capped Real Estate, 5.00% Dow Jones Real Estate (C$), 20.00 FTSE TMX All Corporate Bond
- Benchmark may change over time. Benchmark is currently: 100% MSCI World Index ($C)