Q4 2017 | Portfolio Commentary

Volume 1 | Issue 4

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Dear Clients,

Happy New Year! We hope that you enjoyed a fantastic holiday season surrounded by family and friends.  

2017 RECAP

2017 was a banner year for Westmount Wealth Group investors. Our two model portfolios (Westmount Income & Westmount Growth) were well-positioned and took advantage of the growth trends in 2017, while mitigating and dampening most of the volatility throughout the year. 

Just how good was 2017?  For the first time in the history, the S&P500 TR showed positive returns in every month with S&P500 up 11.5% (in CAD).  The TSX Composite Index also ended the year in the black up a more modest 6.0%.

Source: (https://ycharts.com/indicators/sp_500_monthly_total_return), Bloomberg

Let’s take a look at some of the major winners in our portfolio during 2017:

  • Brookfield Infrastructure Partners up 32.5%

  • Trimark International Companies up 21.4%

  • First Asset Canadian REIT ETF up 11.7%

  • First Asset US & Canada Lifeco ETF up 11.5%

  • Picton Mahoney Income Opportunities up 10.1%

Source: TMX Quotesream, Morningstar AWS

While we look forward in 2018, we reiterate our view that clients should stay the course as the global economy strengthens.  

However we will exercise more caution moving forward, following a stellar 2017.  Mean reversion, late cycle fundamentals, receding central bank liquidity, and stretched valuations all argue for a more vigilant approach.  Furthermore, 2017 presented historically low volatility; 2018 could see volatility return reminding investors to prioritize diversification to manage risk. Therefore the changes to our model portfolios outlined below will result in a more defensive portfolio for Westmount Wealth Group clients in 2018. 

Here is a summary of the changes we are making to the Westmount Income Model:


  • Increase of Fixed Income from 40% to 50%

    • This will protect the portfolio from major equity corrections. Furthermore, we are reintroducing more conservative / traditional fixed income back into the portfolio.

  • Increase International Equity Exposure from 10% to 15%

    • Accommodative monetary policies in the US has stretched North American valuations to record highs. International equites have not appreciated to the same extent despite favourable policies in Europe. Therefore, on a relative basis international equities look more attractive from a return and risk view, so we have increased our International exposure.

    • This also provides greater opportunity to increase emerging market exposure. Developing countries haven’t fully recovered from the crisis of 2008. As a result, many market watchers still see room for upside on profits and better valuations.

  • Reconstitution back to Strategic Fixed Income & Equity Weights

    • We start each year with default exposure to each investment category. For example, 7.5% exposure to large cap Canadian equities. Throughout the year these weights will shift as equity markets rise and fall. A reconstitution will effectively trim your winners and add to your laggards. This is a fundamental principal of responsible portfolio management and helps ensure portfolio risks are kept in check. The following trades were made to bring our Income model back in line.


* click to enlarge



  • BMO US Put Write ETF (ZPH)

    • This investment makes money selling puts on mid-large cap US stocks while being hedged back in Canadian dollars. It is essentially a way to make money on volatility by selling insurance on stocks. While it has performed as expected during the holding period, we worry about the potential capital losses in the event of a large S&P500 downturn.


  • iShares Core Canadian Short Term Corporate + Maple Bond ETF (XSH) (yes, long in name but short in duration)

    • To further protect the portfolio in the event of a significant market correction, we have added a position in low cost (0.09%), short term, Canadian investment grade bonds. These high quality bonds tend to perform well when regular equities do not. However, these positions tend to struggle in a rising rate environment. Therefore, to minimize the effect we have opted for bonds that mature within 3 years.


The Q1 2018 Portfolio Rebalancing listed above was made to your accounts this week.  If you have any questions about the trades or your portfolio, we would love to hear from you.


We look forward to working with you in 2018.


Matthew Evans, CFP®, CIM®  | Portfolio Manager
HollisWealth®, a division of Industrial Alliance Securities Inc.

Lorenzo Pederzani, CFA, CFP®, FCSI®  | Portfolio Manager
HollisWealth®, a division of Industrial Alliance Securities Inc.


This information has been prepared by Lorenzo Pederzani and Matthew Evans who are  Investment Advisors/Portfolio Managers for HollisWealth® and does not necessarily reflect the opinion of HollisWealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisors/Portfolio Managers can open accounts only in the provinces in which they are registered.

HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.