Toron AMI Global Equity (US$)
Toron AMI's global equity strategy is designed for investors seeking to diversity their porfolios through exposure to international equites. Investors benefit from access to global markets with lower porfolio volatility.
Market Commentary:
The first quarter of 2016 witnessed the same volatility in financial markets that existed for much of 2015. The reflexivity between commodities, currencies and equities has markets going in circles and while central bankers have done their part to accommodate, the seemingly diminishing marginal effect of their efforts may be promulgating the idea of range-bound, volatile markets. Central banks are concerned about the potential pain that could resonate from emerging markets or China, as that unknown may be too large of a variable for developed markets to handle. Janet Yellen seemed to indicate that she would rather wait and see that this unknown variable doesn't inflict global pain at the cost of potentially seeing inflation heat up in the U.S. for a period of time. Toron Asset Management continues to structure the portfolios in a conservative manner to perform consistently in these volatile markets.
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US$
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YTD
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2015
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2014
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2013
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2012
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2011
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2010
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Inception
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| Toron AMI |
1.5
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4.1
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10.1
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19.4
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16.0
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0.0
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10.9
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9.0
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| Benchmark |
-1.0
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-0.3
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4.9
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26.6
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15.8
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-5.5
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11.8
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5.0
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Value
+
/
-
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2.5
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4.4
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5.2
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-7.2
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0.2
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5.5
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-0.9
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4.0
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Toron AMI Global Equity
Inception Jan '98 NAV $4,838 ($1,000@Inception)
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(gross US$)
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Jan
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Feb
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Mar
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Apr
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May
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June
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Jul
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Aug
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Sept
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Oct
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Nov
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Dec
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YTD
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2016
Monthly(%)
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-3.8
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-0.5
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6.0
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(gross US$)
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From Inception
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10Years
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5Years
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3Years
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2Years
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1Year
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Growth of $1,000
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$4,838
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$2,122
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$1,531
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$1,295
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$1,130
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$1,044
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Rate of Return (%Ann)
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9.02
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7.08
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8.9
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9.01
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6.3
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4.4
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Monthly Commentary:
Negative Interest Rates Ahead?
By Arthur Heinmaa, April 11, 2016
Looking solely at the returns for the quarter ended March 31
st
, equity markets hardly changed from the beginning of the year: the S&P returned 0.60%, the MSCI -0.90% , the TSX +4.5% while bonds returned about 1.5%. However the quarter was in fact quite volatile. Equity markets declined over 10% at one point, oil hit a new low at $26.05 and corporate bond yields spiked to levels not seen since 2009. It would have been easy to lose money trying to time the ups and downs of this market. The best results were achieved by resisting the urge to trade.
Media reports and investors focused on the movement in equity markets, but the prevalence of negative interest rates across the globe is an even bigger story. Not long ago, negative interest rates seemed related to concerns over the possibility of a Greek default. However, their persistence, and in some cases their adoption as an explicit monetary policy tool, has real implications. Currently, there is about $7 trillion in bonds which trade at negative yields - not an inconsequential sum. An investor in Switzerland could purchase a 5-year bond for CHF103.50, earn no interest and receive CHF100 in 5 years' time - in effect locking in an annual interest rate of -0.70%. In other words, investors pay CHF3.50 to guarantee CHF100 in 5 years. This situation is entirely foreign to Canadian and US investors.
In Canada, we view current interest rates as extraordinarily low at 0.70% for a 5-year government bond. However, we are a high-yielding country! Most investors would be surprised to discover that among developed countries, only the US, Greece, Portugal and Iceland offer higher yields; even Spain now yields less than Canada. As a result, Canadians should not be so quick to assume that our interest rates will move higher soon and any further economic weakness and Canada may find itself joining the negative interest rate club. But in the global search for yield, Canada currently offers a compelling investment opportunity - positive yields, especially for European institutional investors, for whom negative interest rates are a fact of life. Rather than charge small depositors a negative interest rate, European banks have partially absorbed the interest cost and raised service fees.
So, what does this situation mean for most investors? First, negative interest turns conventional financial wisdom on its head. For example, although deferring taxes on investments has generally been advisable, in the world of negative rates this is no longer the wisest course of action. In fact, you may want to accelerate your tax payments - a dollar today is worth more than it will be in the future. Shrewd Swiss citizens have attempted to prepay taxes, but the government has now forbidden paying anything but current taxes. This is but a small window into the world of negative interest rates.
Second, and most importantly, investors must consider how this kind of interest rate environment impacts retirement plans. Many simple retirement calculators blithely assume that fixed income returns will work out to their long term averages of about 6% per annum. Given the current interest rate levels (0.70% 5 yr. - 1.40% 10 yr.), those returns are simply unrealistic. Even at today's interest rates, many investors are losing money after taxes and inflation are taken into account. To achieve higher rates, investors must consider corporate bonds, preferred shares and alternative investments as part of their overall bond allocation. Our team is focused on finding companies with the ability to increase dividends at rates well above inflation and on constructing preferred portfolios that avoid common mistakes with this asset class, thus reducing potential future problems for our clients.
Negative interest rates, once considered a historic anomaly, have become a common fixture in today's fixed income markets. We can no longer assume that Canada will follow its own path to higher rates. To be successful, investors have to consider the implications of negative rates to understand how to alter their current portfolio or what action to take if Canadian rates fall, gulp, below zero.
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More Information:
If you would like to receive additional information about Toron AMI's investment programs please do not hesitate to call or send me an email. I would be happy to follow up at your convenience.
Best Regards,
James Rider
Direct: 604-565-7129
Cell: 778-882-4773
Skype: jamesrider1
As of Sept 2014 Toron AMI is a registered investment adviser with the U.S. Securities and Exchange Commission ("SEC") under the Investment Advisers Act of 1940 ("Advisers Act").
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Past performance should not be interpreted as a guarantee of future results.
Toron
AMI performance is reported gross of management fees.
The information contained in this report has been reviewed for compliance purposes by Toron AMI, should you have any questions please contact James Porter : [email protected]
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Toron AMI
James Rider
Tel :DD 604-565-7129
Cell 778-882-4773
skype:
jamesrider1
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