Celebrating years of success

This article was produced in partnership with Canada Life

As markets become increasingly volatile, investors demand a well-thought-out strategy aiming to protect their assets and striving for consistent growth. One of the firms leading this drive is Canada Life, partnering with Irish Life Investment Managers (ILIM), with its multi-asset investment approach. Leonie MacCann, Senior Multi Asset Portfolio Manager in the Multi Asset Solutions team of ILIM broke down their approach and some of the specific risk management strategies they use in the  Canada Life Risk-Managed PortfoliosTM in a conversation with Wealth Professional.

Canada Life’s philosophy is straightforward: to aggregate the prowess of leading investment managers to curate a fund lineup that’s both relevant and diverse. These managers offer distinct investment methods, ensuring depth and expertise. A significant partnership in this endeavor has been with ILIM, recognized for their experienced team and a commendable track record in multi-asset investing, to bring a unique managed solution to the market.

Coming up on their three-year anniversary (inception date: Nov. 4, 2020), ILIM lends their data-driven techniques in managing the Canada Life Risk-Managed Portfolios.

MacCann emphasized the uniqueness of the Canada Life Risk-Managed portfolios, which strive to ensure a smoother investment journey – simple enough – yet utilizing a combination of active, passive and risk management strategies in the process. Considering the unpredictable swings of equity markets, their goal is to mitigate those sharp downturns that can spook investors.

The trident risk management strategy

The portfolio manager highlights, “The Canada Life Risk-Managed Portfolios are designed to deliver a smoother journey for investors. If you think about equity markets and markets in general, they can be very volatile. Often the investor journey can be akin to a rollercoaster ride and while we all know the rational thing to do is to stay invested - a lot of people can't stomach that volatility.

“If you consider how you can deliver that smoother investment journey, you're trying to provide a level of protection on the downside, while still delivering growth. The aim is to provide a more consistent experience by minimizing the peaks and troughs, while delivering investors’ goals over the medium to longer term.”

MacCann emphasised their focus on longer term strategic asset allocation that looks to incorporate diversification and risk management. She specifically broke down the three core risk management strategies that are used as part of the broader Risk-Managed Portfolios.

The Global Tactical Fund - This systematic strategy dynamically shifts assets between equity markets and cash based on underlying market indicators. The fund's signal is based on a comprehensive mix of market indicators, encompassing areas like fundamental, macro, and technical indicators.

When this signal deteriorates past a certain threshold, it suggests an expected drop in equity markets paired with heightened volatility. In response, the strategy reallocates a segment of your equity-invested assets into cash, offering a buffer against potential market downturns.

The second strategy is the Risk Reduction Pool - Essentially an 'equity collar strategy', it ensures equity market exposure while simultaneously buying protection against market downturns using put options. To offset the cost of these put options, call options are sold, effectively "collaring" potential returns.

The third strategy involves low volatility equities - Harnessing the low volatility anomaly, this strategy targets stocks that historically offer higher risk-adjusted returns.

“We believe we are now in an environment of greater volatility and greater dislocation than the past decade. In such an environment your core investment principles –strategic asset allocation, diversification, risk management – all still matter but you need enhancements. This can be fertile ground for good active managers to be dynamic and add value. We incorporate both enhancements on top of those core investment principles into our portfolio construction,” MacCann notes.

Integrating Canada Life’s platform of premier active managers, alongside ILIM’s expertise in asset allocation and risk management, and presenting it as a unified managed solution across three distinct risk tiers offers a pronounced benefit to advisors. This approach not only ensures clients remain invested but also circumvents erratic decision-making often witnessed during market fluctuations, culminating in enhanced financial results for the clientele.

“In essence, the risk managed portfolios deliver an interface of simplicity for users via a managed solution, but beneath the surface lies ILIM investment expertise guided by our long-term strategic outlook.”

Reflecting on achievements

MacCann highlights, “Approaching our third anniversary is something we’re excited about. While three years might seem brief, and our gaze is typically set on the long term, it's noteworthy how much has unfolded in this span. Investors usually refrain from placing too much emphasis on short durations. However, the past  years have been particularly illuminating.”

In tumultuous 2022, while global markets dipped heavily, the Canada Life Risk-Managed portfolios were down, alongside the market, but delivered a level of protection, just as they were designed to do. Fast forward to 2023, we’ve seen markets rally back strongly. In this environment the portfolios have delivered growth.

“Unforeseeably, when we initiated these funds, we didn't expect to witness two contrasting market environments. In 2022, we observed both equities and bonds taking a hit, alongside the most aggressive fed rate hiking cycle in four decades. Contrarily, this year showcased a robust market rally, albeit with a slight setback post-August.

“Experiencing such polar opposite markets within such a brief window was unexpected and a test of robustness for multi asset portfolios. This was certainly an unforeseen turn of events. Yet, a silver lining emerged: our risk management portfolios exhibited resilience, aligning perfectly with our expectations.”

The shift in the underlying macroeconomic regime post-COVID has ushered in challenges and opportunities. MacCann believes that the traditional "set and forget" or “60/40” strategy may not be as effective going forward emphasising the importance of a managed solution.

Want to get more insights on Canada Life Risk-Managed Portfolios?

Canada Life Investment Management Ltd. brings together leading investment managers to offer a relevant and diverse fund line-up that meets your needs through today’s changing market dynamics.  Register today for the Canada Life™ Portfolio Manager Connect Series, Irish Life will be featured on our next call on Nov. 9 at 11a.m ET.

Have a question about the investment manager and their mandates?  
Contact your Canada Life Wealth Wholesaling team.

This interview is part of an ongoing series about Canada Life’s approach to investing with its partners around the world. Previous stories discussed value investing, fixed income, performance and real assets).

^Disclaimers: 

^{As of Sept. 28, 2023.}

^{The views expressed in this commentary are those of this investment manager as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice.}

^{Canada Life Risk-Managed Portfolios are available through a segregated funds policy issued by The Canada Life Assurance Company or as a mutual fund managed by Canada Life Investment Management Ltd. offered exclusively through Quadrus Investment Services Ltd. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. A description of the key features of the segregated fund policy is contained in the information folder. Any amount allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value.}

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