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Vice-president and portfolio manager
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In formulating an investment strategy, there’s a lot more choice out there now when it comes to products, particularly in light of the growing popularity of ETFs. This is an advantage for modern-day PMs, but only if they fully understand the myriad investment vehicles available. François Têtu of Desjardins Securities explains how this has shifted his selection process in recent years.
“ETFs are more than simple, passive investments – they are key portfolio tools,” he says. “Fixed-income offerings have become scarce as bond desks hold lower inventories; this is another area where ETFs have added value.”
Another major change for Têtu has been the increased level of competition as more and more advisors elect to become portfolio managers. For those who decide to go that route, there is a lot to consider before making that leap, he says. “Even though the advisor benefits from the operational efficiencies that come from using a discretionary business model, some clients can be anxious at the onset.”
When it comes to the nuts and bolts of stock selection, ETFs have become a valuable tool for Têtu, especially when it comes to making contrarian calls.
“In early 2016 we added the Brazil index (EWZ) as one of our positions,” he says. “Brazil was experiencing a difficult political situation, and therefore their currency was pressured downwards.”
Brazil is a major commodity exporter, so the devalued real was a boon for exporters and investors who knew where the smart money lay. Têtu divested from Brazil last November, putting the profits he made into the Mexico Index (EWW), which had plunged after the US election. It proved to be a savvy move – since then, Mexican stocks have bounced back strongly.
Closer to home, Têtu decided to take some profits from the US banks and technology firms in his portfolios. He is confident the bull market will continue to gather steam, so he is currently holding a larger cash position until he finds good opportunities using a bottom-up, economic-value-added [EVA] approach.
“Even though the advisor benefits from the operational efficiencies that come from using a discretionary business model, some clients can be anxious at the onset”
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