Alternative investments can enhance overall returns, increase income and/or reduce risk in their portfolios. When we believe a client can benefit, we look to add alternative investments as a complement to the portfolio.
We maintain a preferred list of alternative investments and typically differentiate them as ‘growth alternatives’ or ‘income alternatives’.
In 2013, TriDelta Investment Counsel launched its own hedge fund, which was designed to deliver high income with broad diversification. Our view is that new investment asset classes are always worth reviewing. If we find an alternative asset class or strategy that we believe will be beneficial to our clients’ portfolios, we will incorporate it into our overall recommendations.
One common theme to alternative investments is that they often have low correlations to traditional investments such as stocks and bonds. This benefits portfolios by increasing diversification. Research has revealed that many large institutional funds such as pensions and private endowments have begun to allocate meaningful amounts of their portfolios to alternative investments such as hedge funds.
Investments in real estate, mortgages, hedge funds, infrastructure, private debt and equity, and the like, continue to grow as a percentage of overall assets for some of the biggest pension funds. They comprise of over 30% of the overall portfolio at pension plans, such as the Ontario Teacher’s Plan (OTTP), Harvard Endowment Fund and the Canadian Pension Plan Investment Board (CPPIB), which manages the funds for CPP payments.
TriDelta High Income Balanced Fund was developed to provide high income with broad diversification. The Fund seeks to provide investors with superior investment returns over the long-term, emphasizing income, capital preservation and capital appreciation. The Fund invests primarily in North American equities, corporate and high yield bonds, global bonds, foreign exchange and employs options and futures.
The TriDelta High Income Balanced Fund has had a very strong year in 2016, with returns over 12% year to date, and annualized returns of 9% since the fund was launched December 1, 2013.
This month, we were gratified to see that others had noticed, as it is now a 5 star rated fund by the Globe and Mail.
The fixed income portfolio is managed to generate returns through a variety of strategies: active duration management, credit quality rotation, shifts in the yield curve, global opportunities and market anomalies.
The equity strategy uses a quantitative investment approach for Canadian equities and an option overlay strategy to invest in the US market to provide growth potential, while reducing volatility. The Fund may use leverage to enhance income or total return; options and futures may be used to increase income, reduce volatility and/or enhance returns.