Performance of Balanced PortfoliosOur typical client is an individual with an investment objective that includes long-term capital growth and a moderate tolerance to risk or volatility. Since 1990, our typical client has a portfolio composed on average of 50% fixed income securities and 50% in equity. Some 60% of our customers have such a profile. We have been calculating the typical return of our typical client since 1998. These results are presented below and are compared with those obtained by the best balanced portfolio managers in Canada for each year. Under the Balanced Funds - 1st Quartile / Median heading, we indicate the yearly performance since 1990 of the first quartile (the best 25%) and of the median (best 50%) for the best balanced portfolio managers. The managers are usually different from one year to another, but the figures represent only the best for each year. For example, the return of the best 25% of balanced portfolio managers in 1998 was 6.3% (median: 4.0%) while it had been 12.9% (median: 8.1%) in 1999. In eleven of the last twelve years, our performance has attained the first quartile, an exceptional result. An investor who would have had the insight to choose, in each of the past 12 years, the best 25% of managers for the upcoming year (an almost impossible task) would have obtained a compound annual return of 4.2% (median: 1.6%). During this same period, our typical client achieved a compound annual return of 6.3%. The table below shows these results for 12, 10, 7, 3, and 1 year periods ending December 31, 2009. In short, our typical client achieved a competitive performance in every type of environment. We believe that this was made possible thanks to the dynamism of our management, the effectiveness of our geographic distribution and to the selection of Canadian stocks that generally outperform the overall market. For the past 12 years, our Canadian stocks have yielded a compound annual return of 12.2% versus 4.8% for the TSX/SPX, more than double. This record places us in very rare company within Canadian equity managers. Our statistics over ten years for our balanced portfolio speak for themselves. This period includes the ascent to heaven from 1998-2000, the descent into hell from 2001-2002, the resurrection of 2003-2006, the difficult year of 2007 and the exceptional years of 2008 and 2009. Our typical client obtained about 60% more than the compound annual return of the best managers (1st quartile) for each individual year. Considering that the best managers changed regularly from one year to the next in this particularly volatile period, this was far from easy to achieve. Another way to see if our portfolio management has contributed favourably to the enrichment of our clients is to compare our performance with that of various market indices. The following table shows the performance achieved by a portfolio of the same profile as that of our typical client (50% fixed income / 50% equity) over the years, assuming that the fixed income and equity components had experienced the same return as the relevant indices (Scotia/DEX Universe for fixed income and Morgan Stanley World Index for equity). As can be noticed, over each period, our active management has outperformed what the markets would have achieved given the same profile.
For example, over the last 10 years, the active management of the portfolio of our typical client has produced a favourable spread of 4.4% a year with respect to the performance of comparable indices, with the same asset allocation. Considering the fact that most portfolio managers are not able to achieve the returns of the indices to which they are compared, our record is more than satisfactory. Over 10 years, 60% of the return of our typical client is not explained by market movements but by our investment decisions, an exceptionally high ratio.
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