Investment Management

Portfolio Performance

Asset Allocation

The three main asset classes that was used to build the portfolio is a combination of equities/stocks, fixed income, and money market instruments. In terms of a percentage breakdown, the portfolio is assertive model with 69.53% equity, 23.31% fixed income and 7.16% in cash by the end of the simulation (Exhibit 1). This investment style aims to profit from aggressive growth from the equity portfolio while weathering fluctuations with an aggregated bond portfolio and minor cash holdings. Although the stock simulation provides a short timeframe, the decision was to not overexpose the portfolio to equity risk for profitability without appropriate risk management. The major advantage of this asset allocation is the ability to generate steady cash flow with low risk while aggressive portfolio strategies with all equity is dependent on capital growth.

Geographically, majority of the holdings of the portfolio is Canada 47.89% and United States 42.45%. However, there is 9.65% allocated to international equity ETF consist of XAW iShare Core MSCI All Country World ex Canada Index ETF and IEMG iShare Core MSCI Emerging Markets ETF. This allows portfolio to gain a wide exposure of equity holdings across countries in Asia and Europe. For instance, IEMG allows the portfolio to gain a small exposure to over 2000 companies across emerging markets in Asia alone. (REFERENCE) This ETF investment brings a mix of large, mid and small cap companies abroad without incurring currency exchange fees to selective purchase in foreign markets.

In terms of the weighting of the asset classes as it was mentioned earlier, it has changed over time that resulted a positive impact to the performance of the portfolio. The portfolio started with a more conservative approach with a weighting consist of 50% equity and 50% cash equivalents in the beginning of the simulation. The priority of the portfolio was finding a balance between risk and reward. Later, fixed income products including Canadian (ZAG) and US (AGG) aggregate bonds were later added in the portfolio to mitigate higher equity risk. As a result of this approach, the portfolio was not impacted by the market downturn when compared to class average as benchmark from Nov 1- Nov 13. The class average dropped from above 8% return to right under 4% return while the portfolio is consistently stable with over 6% return (Exhibit 2).

Returns over the period: which security was the best, which was the worst?

In general, the total portfolio return over the period was 9.44% return by the end of the simulation. Based on Exhibit 2, the portfolio outperformed the class average benchmark return of 8.43%. Furthermore, the top 2 performing securities consist of long position in Square Inc. (SQ) and Qualcomm (QCOM). First, the best performing equity is Square Inc. who yielded 59.85%% ROI from $68,773.27 to $109,935.00, the net profit of $41,161.73 that contributes to 2.25% of the overall portfolio return. Based on Exhibit 3 of individual security return, this stock has drastically outperformed the rest of the portfolio. Next, Qualcomm yielded 32.07% ROI from $70,437.47 to $93,028.50, the net profit $22,591.04 that contributes to 0.95% of the overall portfolio return. The worst performing security was Sleep Country Canada Holdings Inc. (ZZZ). This stock yielded a loss of 15.37% ROI from $69,689.50 to $58,978.00, the net loss of $10,711.50 that contributes to -0.48% of the overall portfolio return.