MD Financial Management Inc. (MD) has increased its portfolio allocation to international equities, where it expects greater potential growth in the short term compared with Canada and the United States.
Appearing on the Business News Network, Chief Investment Officer William R. Horton, Jr. said the move to overweight international equities—despite what is happening in Greece—is part of the tactical asset allocation decision announced on June 22, 2015.
“Our asset allocation filters through a lot of noise,” Mr. Horton explained. “We look at signals that will give us a way to structure our portfolios over the next six to 24 months, above and below strategic allocation.”
Central banks in Europe and Japan are signaling significant quantitative easing, whereas the Fed in the U.S. is expected to raise rates while in Canada, rates will likely fall in the short term. “Those are tremendously influential on markets, not just economies,” Mr. Horton said. “And they give us more credence going forward to be overweight in Europe, Australasia, and the Far East.”
MD, which is owned by the Canadian Medical Association, implements tactical asset allocation decisions on a quarterly basis, or as market conditions dictate, in order to take advantage of short-term market opportunities. Currency factors come into play at the individual pool level and are reflected in the tactical asset allocation decision.
Overall, the strategic asset allocation for all portfolios remains at the long-term structure for equity and fixed income. For this period, in the 10-year time horizon portfolio, Canadian equities represent 25.5%, international equities 18.5%, U.S. equities 3%, and emerging markets 3%. Equity-oriented alternative investments represent a 6% holding.
Asked why Canadian equities are a fundamental part of the portfolio, Mr. Horton said, “Canadian physicians and their families are our clients. Understanding that they’re Canadian residents and they’ll be influenced by what’s going in Canada, we want to structure our portfolios to reflect their individual needs, their longer-term needs and some of their tax needs as well.”
About MD Financial Management
MD Financial Management, with more than $40 billion in assets under administration, is a wholly owned subsidiary of the Canadian Medical Association. MD is dedicated to serving physicians and their families. MD Financial Management 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.
Manager, External Communications
MD Financial Management