Resource World Magazine

insights & investments E r ic H oe sg e n & D e nnis H oe s g e n Introducing Canaccord ETF portfolios M ost of our new clients often complain that their previous advisors almost exclusively put them into a basket of mutual funds that never made them any real money. Most often, this is followed by "What are Exchange-Traded Funds (ETFs)?" and "Would ETFs make sense for my portfolio?" ETFs are open-ended funds that track a basket of investments (or an index) and trade like a stock. This is an important fundamental difference between ETFs and Mutual Funds as Mutual Funds do not trade like a stock. ETFs are rapidly growing investment vehicles which offer investors access to inexpensive beta (i.e., systematic risk or return attributable to market movement) as well as certain trends, sectors or asset classes. They can offer significant cost, tax and trading advantages relative to mutual funds. We often use ETFs for clients to reduce costs, diversify risk and access particular sectors or trends. We feel ETFs are a complementary tool that, when used correctly, can accentuate risk-adjusted performance and lower portfolio management expenses. Exchange-traded funds are tailor-made for investors who have fallen out of love with mutual funds. Buy-and-hold investors, time-pressed investors and those without much interest in managing their own investments should also find ETFs attractive. Canadian ETF suppliers offer Mandate about 185 ETFs covering all the major asset classes. Canadians can also invest in any of the more than 800 ETFs listed on American stock exchanges. So, where do you start? When we build an ETF portfolio, we look for certain criteria: Longevity: We look for funds that have been around long enough (ideally at least three years) to have a track record to examine. The benchmark index on which the ETF is based: Does the index contain the assets we want to own, and does the index design methodology make sense? Tracking error: Does the performance closely track the returns of the benchmark index? Management expense ratio: All things being equal, choose the ETF with the lowest management expense ratio (MER). Make sure you are comparing MERs, not just management fees. At Canaccord Wealth Management, we have done the research for you. We offer this to our clients under a platform called Complete Canaccord. The Complete Canaccord Fee-Based Account program provides our clients with a non‐discretionary fee-based investment option for your portfolio. It appeals to those clients who value a disciplined and traditional full‐service approach, but wish to pay a recurring fee that is tied to account value, not account activity. There is an ETF portfolio for everyone: 2011 Return Benchmark Difference Since Inception Benchmark Difference Capital Preservation 4.78% 4.12% 0.66% 5.80% 4.77% 1.03% Conservative 4.85% 2.21% 2.64% 6.42% 4.77% 1.65% Balanced 3.68% 0.56% 3.12% 6.23% 3.84% 2.39% Growth 2.27% -1.34% 3.61% 5.89% 3.38% 2.51% Capital Appreciation 1.28% -3.24% 4.52% 6.27% 2.92% 3.35% Enhanced Income 26 www.resourceworld.com N/A Choose from six Complete Canaccord ETF Portfolios: • CC Capital Preservation Portfolio – designed to generate current income and preserve capital. • CCConservativePortfolio–designedto achieve a total return from fixed-income investments (60%) and capital appreciation from equity investments (40%). • CC Balanced Portfolio – designed to achieve a balance between long-term growth, long-term capital preservation and income. • CC Growth Portfolio – designed to achieve long-term capital growth from predominantly equity-based investments. • CC Capital Appreciation Portfolio – designed to achieve an aggressive rate of return over the long term. • CCEnhancedETFPortfolio–designedto provide investors with a consistent stream of income that should be significantly higher than either Guaranteed Investment Certificates (GICs) or government bonds. (Launched in Sept 2012) What sets the Complete Canaccord ETF Portfolios apart is that they add pensionstyle asset management to your portfolio. That has resulted in five portfolios that have all outperformed their benchmarks in 2011 and since their inception in November 2009. See table for the results to December 31, 2011. When constructing portfolios, Canaccord uses a dynamic asset allocation methodology to determine optimal weights for asset classes, equity styles, fixed-income duration and credit. The objective is to minimize risk and maximize returns while carefully managing turnover and taxes to reduce costs. Our team believes that asset allocation is the most important factor in portfolio return, so we focus a great deal of attention on getting the mix right. The result is a group of six portfolios that bring risk management and secuNOVEMBER 2012

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