All About Estates

2017 – Fake News & Fidget Spinners

This is my 8th annual year end investment review for Trusts.

As I have indicated in the past, Trustees are accountable for a prudent investment policy. This includes a review of the performance of the investments in the Trust. For Trusts that hold a portfolio of marketable securities, a fundamental element of the review includes a comparison of the performance of the investments in the Trust against relevant benchmarks. For the past several years I have typically suggested the following for benchmarking purposes;

as at December 31,2017                                  1 Yr % return       5 Yr % return

FTSE/TMX Canada Universe Bond Index (in $Cdn)         2.5                      3.0
S&P/TSX Composite (expressed in $Cdn)                         9.1                       8.6
MSCI World Index (expressed in $Cdn)                             5.0                     17.6
S&P 500 (expressed in $Cdn)                                             13.8                     21.3

The specific portfolio objective would dictate the relative weightings of these benchmarks. A ‘growth’ portfolio might have a large percentage in equities, including U.S. and international stocks. Whereas ‘conservative balanced’ portfolio, might have less equities and more bonds.

Over the past year, equity markets continued to show good performance despite a number of global concerns including U.S. trade protectionism, escalating tensions between the U.S. and North Korea, and some extreme weather events. It is worth noting that the U.S. equity markets have now had positive performance for 9 straight years.

In 2017 the Bank of Canada twice raised the overnight rate to its current target of 1%. As a result, the yields on Bonds increased during the year. For example, the yield on 10-year Canada Bonds moved up from 1.72% to 2.06%.

The Canadian dollar appreciated 7.1% against the U.S. dollar beating most pundit’s forecasts closing at $.7971.

The benchmark performance review however, is not the only consideration when reviewing the performance of the Investment Advisor for Trust. The Trustee(s) should seek confirmation from the investment advisor that the portfolio has been compliant with the investment policy statement over the past period(s). In addition, the Trustee needs to be satisfied with the degree of risk, diversification, volatility and liquidity. And finally, I would recommend that a Trustee be  comfortable that the Advisor who is providing the advice and direction, doing what they said they would do. For example, if the Advisor said they are a ‘value’ type investor, did they purchase stocks with a relatively lower P.E. ratio and did they maintain a low turnover.

About Paul Fensom
Scotiatrust offers a full range of estate, trust and philanthropic advisory services designed to meet a client’s personal objectives and designed to evolve across a variety of life stages and financial events. Email:


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