iProfile™ Private Discretionary Portfolio – Global Fixed Income Balanced
Portfolio Commentary Q3 2021
Highlights
- Portfolio gains led by North American equities
- Bond yields climb in anticipation of central bank action
- Outlook bullish for equities entering seasonally strongest period
Portfolio Overview
The iProfile™ Private Discretionary Portfolio – Global Fixed Income Balanced grew in the third quarter mainly due to the positive return from its largest component – the iProfile Fixed Income Private Pool – and the strong performance of the iProfile Canadian Equity and U.S. Equity Private Pools. The Canadian pool was especially strong relative to its market benchmark.
Most other major equity components, including the iProfile International Equity, Low-Volatility and ETF Private Pools were also higher and contributed to performance, as did the Active Allocation Private Pool.
The iProfile Emerging Markets Equity and Alternatives Private Pools declined during the period and detracted from returns.
Portfolio: North American equities lead gains
Performance contributors
U.S. Pool
+ The large-cap growth segment (Putnam Investments) was the strongest component of the pool but underperformed the narrow S&P 500 Growth Index. The large-cap value segment (Putnam Investments) delivered the best relative performance compared to its benchmark S&P 500 Value Index.
+ Slightly underperformed its benchmark but delivered the strongest absolute returns among the pools and was top contributor to overall returns.
Canadian Pool
+ All segments of the pool outpaced the benchmark index. The growth portion (Mackenzie Investments) was strongest, mainly due to its significant overweight exposure to the outperforming industrials sector.
Fixed Income Pool
+ Greatest contributor to portfolio returns mainly due to size in the portfolio and strong performance of Investors Real Property Fund segment (Mackenzie Investments) which outperformed all traditional fixed income segments.
Performance detractors
Emerging Markets Pool
- The main portion of the pool (J.P. Morgan Asset Management) fell due to Chinese regulatory crackdowns on several industries and the related sell-off of Hong Kong equities.
Alternatives Pool
- Two of the pool’s liquid alternatives strategies (Mackenzie Investments, J.P. Morgan Asset Management) declined during the period, leading to negative returns for the pool as a whole.
Market Overview: “Taper” talk sinks prices
Global equities were mixed in the third quarter. North America’s major indices touched record highs before giving back nearly all the gains in the final weeks of the period as bond yields rose.
Investors took heart from robust corporate earnings growth and indications from most central banks that they were in no hurry to raise benchmark interest rates, despite signals that asset purchases would be tapered sooner than previously expected.
Growth-oriented stocks and large-capitalization stocks outperformed value-oriented and small-cap stocks in most regions.
Canadian fixed income markets were mostly lower due to rising yields, while most international bond markets made slight gains in Canadian dollar terms. Yields rose as several central banks adopted more hawkish tones, either moving to taper their bond-buying programs or talking about doing so imminently.
The weaker Canadian dollar added to returns from international investments for Canadian investors.
Market Outlook: Continued expansion ahead
The outlook remains bullish for equities heading into what is typically the strongest quarter of the year. The macroeconomic outlook is consistent with continued expansion.
Central bank policies continue to be accommodative, even with a reduction of asset purchases. If pricing pressures prove to be transitory, central banks will not raise benchmark rates anytime soon. Bond markets may still be challenged by higher yields due to economic growth and anticipation of asset purchase tapering.
Volatility will likely remain elevated due to several sources of risk, including economic slowing, pandemic-related uncertainty, U.S. congressional wrangling over spending plans and the debt ceiling, and the possibility that unrest in China becomes a headwind for global markets.
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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. Investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm) and Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund. Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus before investing. Mutual funds are not guaranteed, values change frequently, and past performance may not be repeated.
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