There are a wide assortment of investment vehicles and opportunities available to investors today. They can use banks, ETFs, hedge funds, equities, bonds, REITS, investment counsels, independent investment dealers, and more. This is why we appreciate the trust our clients have placed in us to assess their financial goals and our help to achieve them.

The purpose of this article is to show what CHF’s investment philosophy is and how we execute on it.

Philosophy

We are firm believers that management matters, both in individual companies and in proper portfolio construction. We are willing to look different from the market benchmarks (such as the TSX, Dow Jones or S&P500), by hiring asset managers that employ time-tested processes and tools to help them find and avoid the greatest risks in the market. In our experience this discipline has helped our clients generate greater wealth while simultaneously enjoying greater peace of mind.

Process

No two clients are alike, so we don’t believe in a one shoe-fits-all approach. Each portfolio is built based on the client’s financial goals, their investment risk, and where they are in their life cycle. The flexibility of having a customized portfolio allows us to make changes to their portfolio as financial milestones are reached, goals change or the unexpected happens. In order to build customized portfolios for each client, we partner with a limited number of fund managers and continuously monitor and evaluate both the mutual funds’ mandates and performances. Each portfolio is typically composed of the following components:

  • Canadian fixed income
  • International fixed income
  • Real estate income
  • Alternative strategy
  • Canadian large cap equity
  • International large cap equity
  • Small cap equity

Using the client’s tolerance for risk, time horizon and financial goals we first determine the appropriate asset allocation and weightings within the portfolio. The advisor then customizes the portfolio using our suite of fund managers. By keeping the number of funds small (we actively use between 10-15 funds) we are able to maintain close partnerships with each manager while monitoring their performance.

So how do we decide that a fund may need to be replaced, and what is the process we go through to do so? If a fund has a poor performance year, we will discuss it with the fund manager and their team to see what caused this poor relative performance and what actions they are taking to address it. If the fund continues to underperform the following year, or on a rolling three-year average, we will then make a decision on whether or not to suspend new purchases into that specific fund and begin the process to find a replacement.

We do this by sending out a formal Request for Proposal (RFP) to fund companies outlining the characteristics of the new fund we wish to use. The RFP is sent out with strict parameters of what the mutual fund must have, along with a deadline for when their proposal must be submitted. Our Chief Investment Officer (CIO), Brian Trafford, together with our Investment Review Committee (IRC) will then review each proposal through a detailed analysis of the recommended funds, interviews with the portfolio managers, and an evaluation of how each would complement our other mandates and determine which will work best for our clients. From all this data we then use a point system to give us a standardized set of criteria to rank each fund. Finally, the IRC meets to choose the replacement fund.

Once a replacement is chosen, we will use our one-on-one review meetings with each client to move them out of the mutual fund we are replacing and into the new one. During that meeting the advisor will go through with the client the reasons for replacing their current fund and why we have selected the replacement fund. This gives our clients a chance to ask questions and to better understand how we manage their portfolio.

As you can see, we take great pride in our investment process and the time proven results it has generated in helping us construct the best possible portfolio for each of our clients. We also look forward to seeing you again in the upcoming Fall review meeting season. If you should have any questions or comments please let us know, as we are always happy to hear from you.