CIO Bill Horton on BNN - MD’s Approach to Alternative Investing

September 26, 2013

MD Physician Services Inc. Chief Investment Officer William Horton Jr., CFA, appeared on Business News Network’s "Business Day" to discuss the most recent changes to MD’s tactical asset allocation for MD funds and pools which are engineered exclusively for the benefit of MD’s physician clients.

Mr. Horton provided insight into MD’s most recent tactical asset allocation decision, implemented in September, which tilts MD portfolios to favour equities (relative to fixed income) and to favour U.S. equities, relative to Canadian and international equities. In reviewing the changes to MD’s portfolio allocations, Mr. Horton commented that MD decided to "spend its risk budget" on equities which, based on MD’s review of market signals, present moderately more attractive opportunities compared to fixed income, in the short term.

The interview also explored MD’s inclusion of alternative investments in the portfolios MD constructs for clients, with the BNN interviewer asking whether MD anticipates increasing its allocation to alternative investments.

In response, Mr. Horton noted that MD advises its clients about access to alternative investments through the MDPIM Strategic Opportunities pool and the MDPIM Strategic Yield pool. Both pools are used in the portfolios MD constructs for private investment counsel clients. Each of these pools, in turn, incorporates an active asset allocation process in the management of the underlying alternative investment securities.

In reviewing MD’s overall approach to asset allocation and portfolio construction for its physician clients, the interviewer commented, "I wish we all could manage money as patiently."

At MD, investors can choose to benefit from a combination of tactical and strategic asset allocation in their portfolios. The strategic allocation is the designed, long-term structure of the portfolio. Tactical decisions, made at least quarterly, are incremental changes (or tilts) to the strategic allocation. The tactical decisions are intended to add to performance and are carried out within a defined range and "risk budget," or the amount of risk allowed for each portfolio. Each risk budget is calibrated to correspond to the strategic time horizon of the portfolio.

You can also learn more about MD’s September tactical asset allocation decision here.

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