A blend of mandates makes for medalist income

Counsel Portfolio Services approaches income diversity with eight separate strategies from a variety of managers and asset classes  

Diana Cawfield 30 January, 2020 | 1:40AM
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For investors seeking a steady stream of income, the bronze-medallist Counsel Monthly Income Portfolio F offers a unique multi-manager approach, according to Kevin Hurlburt, executive vice-president of product and services at Counsel Portfolio Services Inc. The Mississauga-based Counsel is a subsidiary of Investment Planning Counsel Inc. (IPC), and through IPC, is a member of the IGM Financial Inc. group of companies. 

“Counsel takes a completely objective and impartial approach in building portfolios to fit client needs,” says Hurlburt. "We also don’t have any in-house money managers ourselves. Instead, our portfolio management team researches the globe for investment specialists to select the best fit for each mandate.”

All-star income

In the case of Counsel Monthly Income, eight different mandates make up the portfolio.  Currently, those mandates include investment managers from Franklin Templeton Investments Corp., Mackenzie Investments, RBC Global Asset Management Inc., and Timbercreek Asset Management Inc., representing global fixed income, Canadian core fixed income, Canadian dividend, and global real estate mandates respectively, along with four other investment managers with differing mandates.  

Building the portfolio to achieve the income objective and to try to accumulate and grow wealth over time starts with asset allocation. The portfolio is currently weighted approximately 53% in equities (approximately 37% in Canadians equities and 7% in U.S. equities), and approximately 30% in fixed income.   

The portfolio, launched in January 2004, has evolved over time. Today there is broader geographic exposure because of the addition of a global dividend and global real estate allocation. 

Keeping a home bias

“It’s still very much a North-American tilted and heavily Canadian-exposed portfolio,” says Hurlburt, “because the approach eliminates a lot of the currency risk for investors when they are drawing an income.” In general, the fund would not exceed more than 30% in non-Canadian securities and the regional allocation will change over time.

In general, the asset mix will be weighted between 45% to 65% in equities and between 35% and 55% in fixed income. A significant portion of the equities would be in dividend-paying companies and is consistently a large-cap core approach.

From the fixed income perspective, as “a more conservative portfolio” in terms of its approach, the largest allocation, the Counsel Canadian Core Fixed Income component, among the top three holdings, is invested in very high-quality bonds.

From a sector perspective, the mandate is weighted approximately 35% in financials and 13% in energy. Hurlburt says the weightings are really reflective of the views of the underlying portfolio managers, so it’s not a deliberate top-down allocation decision on behalf of the Counsel portfolio management team. “We’re aware of them and we monitor the portfolio,” says Hurlburt. 

An optimal target mix is diversified by asset classes, geographic regions, market capitalization, investment managers and investment styles. The optimal mix is maintained by strategically and automatically rebalancing the portfolio regularly.

Multi-layered management

To add to risk management, the overall mandate is overseen by a team of eight at Counsel, including portfolio managers and analysts, on top of the teams of each of the underlying investment managers included in the portfolio. In addition, an independent portfolio modelling service is utilized to protect the risk-return profile of the fund.

The Counsel team meets with the portfolio management teams for each of the mandates at least annually. In addition, they conduct quarterly formal reviews with them on their performance and market views. 

The positioning of the fund is relatively consistent but will change over time, making tilts or changes to the underlying managers, depending on market conditions.

The firm is required to report to an index and they use a blended benchmark index. Most importantly, says Hurlburt, they are cognizant of a benchmark but they are also cognizant of the performance of peers within the multiple categories of investing. “We want to make sure,” says Hurlburt, “that we are managing and achieving results within and exceeding those target ranges of returns that are expected over time.”

In terms of an annualized yield, the portfolio is yielding about 3.4% at the moment. That will change from month to month, depending on the composition of the holdings, “but it’s been relatively steady,” says Hurlburt. The portfolio itself is generating a healthy yield to sustain that income, plus the prospect of some capital appreciation, so there is some better comfort that the portfolio is quite sustainable, adds Hurlburt.

Reflecting on 2019, “we saw good strength from the Canadian equity markets,” says Hurlburt, “which we hadn’t seen before, global markets had a very good year, and we saw a lot of strength out of the U.S. and that may continue.”

Moving forward, “this portfolio has some exposure to foreign investments,” says Hurlburt, “which has helped, the domestic exposure has helped certainly, and historically we’ve seen that growth style investing has performed better than value. And we’ve now seen resurgence to value, and if that continues, it will continue to benefit this portfolio.”



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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
IPC Monthly Income Portfolio Sr F8.92 CAD0.19Rating

About Author

Diana Cawfield

Diana Cawfield  An award-winning writer who has been a regular Morningstar contributor since 2000, Diana's numerous publication credits include the Toronto StarAdvisor's Edge and Chatelaine, as well as the Canadian Securities Institute's online educational services.

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