Vincent Tonietto of Fiduciary Trust Canada is part of Wealth Professional Canada' Outstanding Portfolio Managers 2018
Firm: Fiduciary Trust Canada
Position: Vice-president, portfolio manager
Years in wealth management: 11
Years as a portfolio manager: 11
Certifications: CFA, CAIA, PRM
For portforlio managers, dips in the market are only an issue if you’re ill-prepared. Judicious asset allocation will typically protect a portfolio against volatility, as was the case earlier this year for Vincent Tonietto. With more than a decade of experience as a PM – first with Lombard Odier, then Industrial Alliance and MD Financial Management, and now Fiduciary Trust Canada – Tonietto has realized that market cycles mean downturns are an inevitability.
“We usually make changes in our portfolio with regard to the long-term outlook of the markets as opposed to reacting to short-term events,” he says. “That said, we started the year having a defensive position in Canadian equities, to the benefit of fixed income. That served us well during the market turmoil in February."
Creating a strategy in fixed income is challenging right now, in light of the different signals emanating from central banks. The current rising-rate environment means Tonietto is emphasizing investment-grade corporate bonds and shorter-term maturities. He sees Canada in general as a risk currently, which is why he's adopting a cautious approach.
“While WTI crude oil prices have appreciated, Canadian crude oil prices are significantly lower due to ongoing supply bottlenecks into the United States,” Tonietto says. “In addition, an increasingly vulnerable housing market, high consumer debt levels and fears surrounding NAFTA negotiations remain risks for the Canadian economy in 2018."
“We prefer international equities over Canadian equities, as they seem to present the best opportunities, particularly in Europe and emerging markets. Their economies continue to catch up with North America’s”
Going underweight domestically leaves Tonietto room to manoeuvre within a portfolio, increasing global exposure wherever he can find value. After years in the doldrums, Europe has recently sparked back to life, which has attracted his attention.
“We prefer international equities over Canadian equities, as they seem to present the best opportunities, particularly in Europe and emerging markets,” he says. “Their economies continue to catch up with North America’s. In Europe, financial conditions remain accommodating, and the region is experiencing strong economic growth. In emerging markets, attractive valuations and strong corporate earnings growth continue to attract capital away from developed markets.
Like many of the portfolio managers featured here, Tonietto sees emerging markets as an increasingly attractive segment. The potential returns put many North American companies in the shade, but the strategy isn’t without risk.
“We expect growth to be higher than in developed markets, but they will also be more volatile,” Tonietto says. “For instance, the ripple effects of the trade politics between the United States and China are worth monitoring.”
Alternatives are another option for his high-net-worth clients seeking diversification, but, as Tonietto explains, certain asset classes fit certain investor profiles.
“Alternatives are not a ‘one size fits all’ solution,” he says. “We offer customized solutions for our clients, which may include alternatives such as real estate, infrastructure or hedge funds – but ultimately, it depends on the client’s specific situation.”
