CIO Bill Horton on BNN: “Risk-On” Positioning

March 29, 2016

MD Portfolios continue to maintain a slight overweight in overall equity exposure versus bonds.

MD Financial Management Inc. (MD) has increased U.S. equity exposure to a neutral underweight position at the expense of Canadian and EAFE (Europe, Australasia and Far East) equities, which are now underweight and overweight respectively.

Appearing on the Business News Network, Chief Investment Officer William R. Horton, Jr. discussed the recent updates to MD’s Tactical Asset Allocation.

 

When asked about the rationale behind the positioning, Mr. Horton pointed towards diverging monetary policy between the U.S. and other developed countries in the world. “That gives more credence to the idea that there is potential growth in EAFE regions by lowering the shorter term rates.”

Furthermore, Mr. Horton said there is increased evidence of federal government policy coming into play. “Fiscal policy makers are taking more of an aggressive stance on how to stimulate economies, taking some of the weight off of monetary policy.”

“If you remember, we were strongly underweight in the U.S., so this brings us up closer to our strategic weight in the U.S. We’re looking to manage the risk of the portfolio by being closer with the U.S. component and the Canadian component of our strategic weight which is the long term view. EAFE we are overweighting because we think there are better opportunities there. Everything in that weighting, underweight or overweight, is relative to other sectors.”

Tactical Asset Allocation and Strategic Asset Allocation

MD Portfolios allow investors to benefit from a combination of tactical and strategic asset allocation decisions. “The tactical asset allocation is managing up and down from the strategic asset allocation to add value over the shorter term, 6 to 24 months,” explained Mr. Horton. The strategic asset allocation reflects your long term investment goals and objectives. Tactical asset allocation decisions are overlaid on the strategic asset allocations, which means weights may temporarily deviate from the strategic allocations to take advantage of short term opportunities within risk tolerance.

MD Dividend Growth Mandate

Addressing the issue of MD Dividend Growth Mandate performance against benchmarks, Mr. Horton clarified that MD’s Dividend Growth mandates have had strong long-term performance, but have struggled over the past 18 months. “We announced changes last week to relax the dividend target which had caused a certain amount of volatility against the benchmark,” Mr. Horton explained. The overall goal is to explore more areas of opportunity, such as broader sector diversification and foreign securities to enhance risk management without sacrificing all of the dividends.

About MD Financial Management

Owned by the Canadian Medical Association, MD has the only business imperative to enhance physicians’ financial outcomes by focusing on their distinctive needs and operating in their best interests.

MD has more than $40 billion in assets under administration and is dedicated to serving Canada’s physicians and their families. MD provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. For a detailed list of these companies, visit md.cma.ca.

Media Contacts

Maria Grant
Lead, External Communications
MD Financial Management
maria.grant@cma.ca
613 809-0657

Deborah Thompson
DT Communications
deborah@dt-communications.ca
416 918-9551

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