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As an investor, you probably have two types of assets in your portfolio: bonds and stocks.
Companies and different levels of government can issue bonds to meet the need to borrow money to finance their activities or projects. If you hold bonds in your portfolio, then you have lent money to these issuers. In return, you receive interest.
Public companies issue shares on the stock market. By holding share of a company in your portfolio, you are a shareholder of this compan and you participate in its growth.
Companies and different levels of government can issue bonds to meet the need to borrow money to finance their activities or projects. If you hold bonds in your portfolio, then you have lent money to these issuers. In return, you receive interest.
Public companies issue shares on the stock market. By holding share of a company in your portfolio, you are a shareholder of this compan and you participate in its growth.
Portfolio Breakdown1
Traditionally, bonds have been known to offer lower long-term returns than stocks, but also lower risk. The allocation of equities versus bonds in your portfolio is adjusted taking into account several factors, including your level of risk tolerance. Generally, the higher your tolerance to risk, the higher the proportion of equities in your portfolio. Conversely, the lower your tolerance, the more important bonds will be.
If, like a traditional investor, your portfolio consists almost entirely of stocks and bonds, you may be missing out on other opportunities currently capitalized by pensin funds. These investors, known as institutional investors, hold an average of 37% of their investments in alternative investments. In other words, while most traditional investors invest 100% of their portfolio in stocks and bonds, institutional investors only invest 63% of their holdings in stocks and bonds, allocating the remainder to alternatives for better total risk-adjusted returns.
We can define alternative investments as other investment opportunites that are not traditional investments. In other words, these are investments that are not traditional stocks and bonds like the ones you probably hold in your portfolio today. Institutional investors and pension funds often use alternative investments to improve the risk/return ratio of the portfolio.
Better risk-reward tradeoff 3
The following hypothetical comparison demonstrates the improvements obtained by integrating 40% allocation of alternative investments into a traditional portfolio. For the same 11-year period, the portfolio with alternative investments obtains the same average return of 7.5%, while reducing the risk by nearly 26%.
Portfolio breakdown:
In 2018, an important change in regulations opened new opportunities for retail investors. Previously reserved for pension fund & ultra-high-net-worth investors, liquid alternative funds now allow individual investors to access alternative strategies with much lower barriers. This regulatory update allows you to add alternative strategies to your existing investment portfolio.
Convenient, multi-manager solution that combines the best alternative strategies in the industry
100% Independant Selection
Built to be an optimal complement to traditional bonds
For our portfolio, we have chosen leaders in the field of alternative investments. They were chosen for their strong expertise, their track record of success, and the complementarity of their strategies.
Legal notes
The information in this document is provided for illustrative purposes only and should not be construed as a recommendation to buy or sell. Alternative investments are not suitable for all types of investors. Please consult an advisor about your personal financial situation. The opinions and thoughts expressed herein are those of RGP Investments and are subject to change at its discretion based on market dynamics or other considerations. Reasonable steps are taken to provide current,accurate and reliable information, and we believe it to be accurate at the time of production. All information contained herein has been obtained by RGP Investments from several sources. This information is believed to be reliable, but neither RGP Investments, its affiliates nor any other person expressly or impliedly warrants its accuracy, completeness or timeliness. RGP Investments and its a liates assume no responsibility for errors or omissions.
1) Portfolio allocations are provided for illustrative purposes only and should not be construed as a recommendation to buy or sell. They do not replace the process of analyzing a client’s needs, or any other regulatory requirements.
2) Data as of December 31, 2020. Source: Financial Services Regulatory Authority of Ontario, Alternative Assets and Risk Management: Insights into Practices Observed from FSRA’s Review of Six Large Public Sector Pension Plans in Ontario, November 10, 2021. https://www.fsrao.ca/media/4946/download
3) Best risk/return ratio
This hypothetical example is provided for illustrative purposes only. It does not represent actual returns and should not be attributed to the RGP Alternative Income Portfolio. We caution you not to place undue reliance on this data, as a number of important factors could cause actual results to differ materially from those expressed or implied. This example presents a hypothetical comparison of a portfolio without alternative investments (“Without ALT Inv.”) and a portfolio with alternative investments (“With ALT Inv.”). Hypothetical results have certain limitations and are neither indicative nor a guarantee of future performance. Furthermore, as no transactions are actually executed, hypothetical results cannot take into account the impact of certain economic and market risks, such as a lack of liquidity that may have influenced the decision-making process. Many other factors related to the market in general or to the implementation of a given investment strategy cannot be fully taken into account in the calculation of hypothetical results, and could have the e ect of exaggerating the performance of the With P. Alternatives portfolio compared to that of the Without ALT Inv. portfolio. Alternatives portfolio. All these factors could have a negative impact on actual results. The hypothetical results assume that asset allocations would not have changed over time or in response to market conditions that might have arisen had a true strategy been implemented during the period. Hypothetical results do not take into account management fees, transaction costs, expenses or taxes. Actual performance could differ significantly.
The data used to calculate the hypothetical comparison between the Without ALT Inv. portfolio and the With ALT Inv. portfolio are derived from monthly returns from December 31, 2011 to December 31, 2022 (the “period”) for the following items:
Without ALT Inv. Portfolio : 5% MSCI EM (Emerging Markets) Index ($CAD), 25% Russell 2000 Index ($CAD), 40% S&P/TSX Canada Composite Index ($CAD) and 30% S&P Canada Aggregate Bond Index ($CAD).
With ALT Inv. Portfolio : 3% MSCI EM (Emerging Markets) Index ($CAD), 15% Russell 2000 Index ($CAD), 24% Canada S&P/ TSX Composite Index ($CAD), 18% S&P Canada Aggregate Bond Index ($CAD) and 40% in alternative investments. The alternative investments portion is composed equally (10% each) of the average monthly returns of all Series F funds (fee-based accounts) available in Morningstar in the following fund categories: Mainly Credit Alternative, Private Debt Alternative, Mainly Equity Alternative and Market Neutral Alternative.
4) Di erence between the standard deviation of the With ALT Inv. Portfolio and the Without ALT Inv. Portfolio. We use standard deviation to demonstrate how portfolio performance varies on an annual basis. The lower the volatility, the easier it is to hold an investment (fewer ups and downs).
5) For information purposes only. The investment objective and strategies of the RGP Alternative Income Portfolio fund are described in detail in the fund’s prospectus. Please read a fund’s prospectus before investing.
6) The list of underlying fund managers is subject to change without notice. All marks are trademarks of their owners and are used under license.
Forward-looking statements.
This document may contain forward-looking statements about future performance, strategies or prospects, and possible future actions. The words “may”, “could”, “should”, “would”, “suspect”, “outlook”, “believe”, “plan”, “anticipate”, “estimate”, “expect”, “intend”, “forecast”, “objective” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risk and uncertainties with respect to general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may a ect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully.
The RGP Alternative Income Portfolio is managed by RGP Investments. Please read a fund’s prospectus before investing. Mutual funds are not guaranteed. Their values change frequently, and past performance may not be repeated. Investors will pay management fees and expenses, may pay commissions or trailing commission. Investors may experience a gain or loss.
RGP Investments 2021. All Rights Reserved. (TM) Trademarks of R.E.G.A.R. Investment Management Inc.