Three Canadian portfolio managers are set for a philanthropic showdown that will raise money and invest to benefit a children's hospital.
The Change for Kids Investor Challenge will put the professional skills of these investment pros to work for Holland Bloorview Kids Rehabilitation Hospital. This Toronto-based facility is focused on improving the lives of children and youth with disabilities –from acquired brain injuries, to amputees, to autism – as well as being a research hub and innovator in using technology in treatments.
Leading the fundraising and investment efforts are George Lewis, group head of RBC Wealth Management, Lesley Marks, chief investment officer of fundamental Canadian equities at BMO Asset Management, and John Wilson, chief executive officer of Sprott Asset Management.
These three started with an initial investment of $25,000 from their firms and are reaching out to their communities, colleagues and friends in search of donations of cash or securities, which can be made through changeforkids.ca. The money will be invested in a fund chosen by the manager with the challenge officially beginning on January first.
All three managers have different investment strategies and market outlooks for the coming year, as well as personal motivations for participating. But although their views differ, they are united in their pursuit of positive returns for the charity.
It will be no easy task given the volatility in the global financial markets, with sinking oil prices and a flagging Canadian dollar eroding opportunities for some companies in Canada and beyond, while other businesses are poised to benefit. Factors such as Europe's ongoing economic struggles and policy changes in the United States are likely to effect returns in the coming year, the managers say.
We will check in with these three strategies throughout 2015.
The Manager: Lesley Marks, chief investment officer of fundamental Canadian equities at BMO Asset Management.
The Fund: BMO Asset Allocation fund. This is a Canadian neutral balanced fund invested in between 40-60 stocks and 60-80 bonds, with the potential to invest up to 30 per cent of holdings in foreign securities. This fund is co-managed by five portfolio managers at BMO.
Outlook: Ms. Marks expects that the fund's strategy will do well in most market environments. "We're optimistic about the U.S. stock market," Ms. Marks said, adding that she thinks the fund will benefit from its international exposure this year. "But there are many Canadian companies that will benefit from lower oil prices or the lower Canadian dollar." She highlights manufacturing, information technology, consumer goods and health care as sectors worth watching in the coming months.
She's also interested in financial companies outside of the banks, where share price growth may be cooling off. "The focus has been so much on the banks that people forget we have a large non-bank financial sector too, which isn't as impacted by the volatility and the downturn in oil prices." She sights property and casualty insurer Intact Financial Corp. as an example.
The Manager: John Wilson, chief executive officer of Sprott Asset Management.
The Fund: Sprott Enhanced Equity Class fund. The fund invests in large cap equities listed in North America, usually divided equally between Canada and the U.S. Mr. Wilson manages this fund.
Outlook: The market should brace for a bumpy ride in 2015 now that the U.S. Federal Reserve has wound up its asset purchases aimed at stimulating the economy, Mr. Wilson said. It's also unclear what impact a potential increase in interest rates will have.
"We still think, given the economic outlook and ability for earnings and multiples to probably go higher, you can make money in the stock market next year," Mr. Wilson said, "I just think there are more risks than there have been in the last few years and there are certainly going to be more ups and downs along the way."
The Manager: George Lewis, group head of RBC Wealth Management and Insurance.
The Fund: RBC Global Dividend Growth fund. This equity fund is invested globally in between 40 and 60 non-Canadian stocks. Mr. Lewis co-manages this fund.
Outlook: The fund looks for steady dividend-paying companies with strong competitive positions in attractive industries generating increasing cash flows, Mr. Lewis said.
RBC foresees equity investment opportunities, particularly in the U.S., in the coming year. The country already accounts for nearly half of investments, with companies such as pharmacy chain CVS Health Corp. favoured by Mr. Lewis – the stock has already climbed more than 35 per cent in the past year.
While growth of North America's GDP may exceed that of Europe, companies with European headquarters with multinational operations are poised to benefit from a lower Euro, especially those with significant U.S. sales, Mr. Lewis notes.
The fund has benefited in recent months from holdings in health care and IT, and Mr. Lewis expects that to continue.
The stock pickers:
(Top holdings as of 30-Sep-14)
- 1. BMO S&P 500 INDEX ETF
- 2. Gov't of Canada 1.25% FEB/01/16
- 3. BMO MSCI EAFE Hedged to CAD INDEX ETF
- 4. TD Bank
- 5. BMO MSCI EUR HI QLTY HDG C INDEX ETF
(Top holdings as of 28-Nov-14)
- 1. Cash and Cash Equivalents
- 2. Government of Canada, 1.0%, 11/01/15
- 3. Intercontinental Exchange, Inc.
- 4. Alimentation Couche-Tard Inc.
- 5. CGI Group Inc.
RBC Global Dividend Growth Fund:
(Top holdings as of 30-Nov-14)
- 1. Verizon Communications Inc.
- 2. Seagate Technology PLC
- 3. CVS Health Corp.
- 4. UnitedHealth Group Inc.
- 5. Union Pacific Corp.