Recap & Macro Outlook: Building a Client Portfolio
Since the end of January, we have been writing about our investment process, which has included the following four topics: 1. Company Management (meeting with senior management of the companies we own.); 2. Valuation (putting a fair value on the companies we own with a strict buy and sell target.); 3. Finding our investments (how we systematically identify companies that might be a potential investment.); and 4. Building mandate portfolios (how each of our portfolio managers constructs a portfolio to meet a specific mandate.) This week, we tie it all together with Part 5 of our discussion – “Building Client Portfolios.”
As we discussed in last week’s issue, we have an investment management process to construct each mandate. Our investment counsellors then work closely with each of our clients, customizing a portfolio using our various investment mandates to meet each individual client’s unique needs. This is different than the classic mutual fund or robo-advisor approach, where a one size fits all model is used. In our opinion, plugging each client into the same low, medium or high-risk model works very well from an operational standpoint for the money manager, but it isn’t necessarily what is best suited for the investor.
Our clients have a wide range of needs. Some are focused on growth, some are conservative, some are aggressive, some require regular income, some have unique tax situations due to their citizenship or geographic location, etc. The investment counsellor’s role is to determine how best to construct the portfolio to satisfy those goals on an after-tax basis. We use all the tools we can to first focus on investment performance and then piece it together for the client’s specific situation. In the industry, so much focus is put on the planning process and then the investment performance takes a back seat as once the plan is constructed, clients are just plugged into the same old cookie cutter model.
Clients generally have a range of accounts: RRSP’s, TFSA’s, Corporate Accounts, Non-registered accounts, etc. When we construct a portfolio, we do our best to optimize it from a tax standpoint to maximize the potential return. Our most aggressive mandates are held within client’s TFSA’s (which are all topped up with $5,500 on January 1 of every year), fixed income & US dividend paying equities are held within registered accounts to shelter interest income and eliminate US withholding tax, and capital gains & Canadian dividend paying investments are held in non-registered accounts to take advantage of their tax favorable treatment.
“This means that” Our corporate structure allows the portfolio managers to focus 100% on the mandate and investment performance while the investment counsellor works directly with the client to construct a portfolio using our investment mandates in the best possible way to meet client’s unique needs.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.