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Chhad Aul of SLGI Asset Management.The Globe and Mail

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While some investors are reluctant to buy equities right now given the stock markets’ choppy performance, money manager Chhad Aul has been busy adding names in certain sectors.

“We took advantage of some of the weakness through August and September and increased our equity weighting,” says the chief investment officer and head of multi-asset solutions at Toronto-based SLGI Asset Management Inc., the investment manager of the Sun Life family of mutual funds.

“We think that after the reset from the past few months, the fourth quarter might be a pretty decent period for stocks,” adds Mr. Aul, who oversees about $23-billion of the firm’s $34.4-billion in assets.

His active investment strategy has helped keep many of his investments in the black. For instance, Sun Life Granite Growth Portfolio has returned 9.4 per cent over the past 12 months as of Sept. 30. The fund’s five-year annualized return is 4 per cent, while its 10-year annualized return is 7 per cent. The performance is based on total returns and net of fees.

The Globe spoke with Mr. Aul recently about his market outlook and what sectors he’s been buying and selling.

Describe your investing style.

We use a multi-asset approach, which means we’re broadly diversified. We can invest globally across asset classes including large-, mid- and small-cap equities and various fixed-income and alternative products. We invest to meet specific investor needs such as growth, income or capital preservation. We have a three-step investment process. The first step is building an asset allocation to meet an investor’s specific risk-return requirements. The second is adding alpha, or outperformance. We hire external managers to pick stocks and bonds in their areas of expertise. The third step is tactical asset allocation – or an active strategy – to reduce risk and add some additional value. We tend to shy away from new asset classes that are speculative, like cryptocurrency, for example. We’re trying to build all-weather portfolios for a broad range of investors.

What’s your take on the current market environment?

The global economy has been more resilient than expected so far this year. There are signs of fraying in certain regions, but places such as the U.S. show relative strength. We’re watching to see whether the longer-term effect of higher interest rates will cause some financial instability as we move into next year. We’re also looking for signs of pain in the labour market before we get too cautious.

What have you been buying or adding?

We have added more large-cap liquid stocks and high-quality growth companies with resilient earnings. These companies perform relatively well when the economy is slowing. Most of what we’ve been adding are U.S. equities including technology, communication services and consumer discretionary. The consumer discretionary move is more of a short-term trade. If we see more signs of a slowdown, we will shift toward more defensive sectors such as consumer staples and health care. It does feel a bit early to be pivoting that way.

What have you been selling or trimming?

We’ve been reducing some riskier parts of our credit exposure within fixed income, reducing higher-yielding credit in favour of investment grade. We’ve also been reducing some of our bond exposure in favour of cash. We think the market is in the process of resetting where the yield curve will sit, so we’ve taken some exposure off the table and will watch for better entry points.

What sector do you wish you’d bought more of?

I wish we had overweighted the energy sector around mid-year. It would have been a short-term play. In June, we saw that the energy sector was oversold – both commodities and stocks. There was a good rally in oil prices and energy stocks, and it outperformed during the third quarter. So, that one would have been a nice tactical play. The longer-term play isn’t as favourable, in our view.

What advice do you have for new investors?

Start as early as possible and focus on what you can control. Also, have a plan and stick with it – getting expert advice from an advisor can help. Avoid trying to time the market and be overly exposed to a single stock or sector. A multi-asset solution takes a lot of the guesswork out of investing.

This interview has been edited and condensed.

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