Michael Schnitman of Mackenzie Investments talks to WP about the importance of alternative solutions in the current investment environment
As increasing numbers of Canadian investors recognize the value of alternative investments, advisors are under pressure to provide their clients with the most suitable solutions. Fortunately for advisors, one Canadian asset manager is taking a stand and leading the evolution in the Canadian alternative investment space.
With the launch of its new mutual fund in May, Mackenzie Investments is providing retail investors in Canada with access to the first absolute return fund that is consistent with the alternative funds framework proposed by Canadian securities regulators. The Mackenzie Multi-Strategy Absolute Return Fund will deliver strategies that seek a positive total return over a market cycle, regardless of the ups and downs.
Traditionally, alternative investment strategies in Canada were only available through an offering memorandum and were limited to accredited and institutional investors. As a result, the portfolios of retail investors have been severely limited in their scope, until now.
SVP of Product at Mackenzie Investments Michael Schnitman is excited that Canadian retail investors now have the chance to access such strategies.
Mackenzie’s new mutual fund is comprised of a number of different strategies under three principal umbrellas – equity alternative strategies; fixed income alternative strategies; and core diversifiers.
“Under equity alternative strategies there is a 130/30 equity alpha strategy, and then there is a market neutral alpha strategy,” Schnitman says. “Under fixed income there is a credit absolute return strategy, which is comprised of two main components – credit momentum and short credit.”
Added to that is a third principal area of core diversifiers where the fund really distinguishes itself, explains Schnitman.
“This is a global macro strategy and that consists of a number of sub-strategies that derive value from trading markets driven by global, macro-economic data,” he says. “For example, a commodity alpha strategy, a currency alpha strategy, a managed futures strategy, a global tactical allocations strategy, and then a risk parity strategy.”
It’s a complex offering but with easily defined goals – managing risk and volatility while providing diversification and a positive total investment return over a full market cycle, regardless of market conditions or general market direction.
Given that diversification is paramount in any investment portfolio, an absolute return fund may serve as a core holding for any investor.
As a mutual fund, it also offers a transparent approach, simplicity of subscription and redemption, low minimum investments, as well as daily liquidity, which is sure to prove popular with investors, believes Schnitman.
“This fund is for advisors that have clients who are seeking a better risk-return profile with their overall portfolio and looking for a smoother ride,” he says. “It is for any investor looking for an additional source of diversification and downside protection.”
This type of strategy is suited to any investor who is eager to respond to the changing investment environment. Managing risk is crucial when it comes to safeguarding your nest egg, and an absolute return strategy will achieve just that, explains Schnitman.
“Sequence of returns risk is when you are getting close to retirement and a market crash occurs,” he says. “You want to have some strategies in your overall portfolio that will be able to sustain market corrections. Sequence of returns risk, is the risk a portfolio takes of a huge hit in those critical years. An absolute return strategy can help combat that risk.”