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Performance review: Canaccord cuts equities and property
by Elsa Buchanan on Mar 31, 2014 at 13:01
Anticipating an uptick in volatility, Edward Smith, global strategist at Canaccord Genuity Wealth Management, has reduced his equity allocation by 7%, rotating into cash, currency plays and bonds.
‘Our forward looking measure of portfolio risk increased, so we’ve sold down positions in property, oil and European equities accordingly,’ he said.
In the firm’s balanced portfolio, Smith has recycled some of these proceeds into a new position in a long US/short Canadian dollar exchange traded fund (ETF).
‘As profitable investment opportunities in commodities have dried up, we believe money will start flowing out of Canada and back into the US.
‘The Canadian private sector is dangerously over-indebted and our fair value model suggests the US dollar could appreciate by more than 10% against the Canadian, irrespective of the general direction of equity markets,’ he added.
The remainder of the proceeds went into cash, and the Ignis Absolute Return Government Bond fund.
‘So has the whole City’s. The fund’s £1 billion inflows are a slight concern in terms of capacity,’ Smith said, ‘but it doesn’t bother me too much.’
Late last year, he bought an iShares ETF for European equity exposure after the BlackRock Dynamic Europe hard-closed in autumn. He also upped the portfolio’s allocation to US large cap and UK ETFs as ‘a tactical play’.
Over the last year, he has doubled his exposure to the US to 20%. The portfolio holds the Vanguard US Opportunities fund to get exposure to small and mid caps, alongside a S&P 500 tracker.
In fixed income, Smith sold out of his 6% government bond exposure and reduced the portfolio’s corporate bond allocation by 6% over the last year. He still believes bonds have a place in multi-asset portfolios, despite ‘no more than low single digit’ return expectations.
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