Every investment manager knows the concept of portfolio diversification, but not everyone can execute it to perfection. But Yves Choueifaty, head of Paris-based Think Out of the Box Active Management (TOBAM), believes he has cracked the code, according to a report in The Star
A mathematician and career asset manager, Choueifaty developed his approach from a realization that most fund managers focus on beating a benchmark index, such as the S&P/TSX Composite, when they should create wealth by driving the benchmark higher while decreasing risk.
From this, he developed an “anti-benchmark” strategy that relies on the selection of low-correlation stocks to achieve higher risk-adjusted returns. It is not a fundamentally revolutionary idea, but Choueifaty has sold his services in several countries worldwide, with Mackenzie using it in five ETFs and five mutual funds that focus on Canada, the US, Europe, international, and global markets.
The fund strategy made its Canadian debut in late June. It may be too early to empirically determine and declare their success, “although the company’s back-tested data to 2001 looks impressive and the formula has had success in other parts of the world,” according to the article.
Few Canadian investors have bought into the strategy so far: the five ETFs have assets of only about $30 million to date, while the mutual funds have about $9 million. TOBAM manages $8 billion worldwide.
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