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UNDERSTANDING PORTFOLIO MANAGEMENT
Portfolio Management Defined
Portfolio managers can be a firm, or a person who manages investment portfolios and ultimately makes final investment decisions on behalf of investors. Portfolio management firms are registered with securities commissions and are regulated directly by them. Their only business is the discretionary management of investment portfolios for individuals, estates and trusts, charitable foundations, corporations, pension funds, and endowment funds.
Why Portfolio Management Makes Sense
Knowledge
Engage a team whose sole focus is investment management and who require the highest level of education and experience in the investment industry.
Hands On
Portfolio managers hold discretionary authority, meaning they handle day-to-day investments decisions based on your personalized objectives and risk tolerance.
Fiduciary Responsibility
Portfolio managers hold discretionary authority, meaning they handle day-to-day investments decisions based on your personalized objectives and risk tolerance.
"The 'Fiduciary Advantage' refers to the higher standard of mandated knowledge, experience, responsibility and reporting provided by Portfolio Managers."
Portfolio Management Association of Canada
How Portfolio Management Works
Portfolio managers make decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance. Portfolio management is all about determining strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other trade-offs encountered in the attempt to maximize return at a given appetite for risk.
Formal Process
Portfolio managers employ an Investment Committee for the management and oversight of client portfolios. Typically, they will meet formally on a weekly basis to deal with all items relating to investment management. The rich diversity of perspectives and uncommon discipline, makes the investment process better and more robust. The benefit for clients is that a better process leads to better investment results.
True Diversification
Portfolio management firms are able to access a breadth of asset classes, investment strategies and unique investment opportunities, due to their structure and size. They have access to asset classes that require specialized knowledge, and, as a result, portfolios are far more diversified than the traditional ‘60/40 stocks and bonds’ model. Clients benefit from a portfolio that adheres to the principal of "Don't put all of your eggs in one basket."
Portfolio Rebalancing
Portfolio rebalancing is the constant monitoring that restores asset classes to their target allocations by selling assets that have appreciated and adding to those that have declined. While rebalancing promotes good investor behaviors, it runs counter to investor psychology. Rebalancing means selling winners and buying losers—something that is exceedingly difficult for many investors to do. At its core it is a risk-minimizing strategy.
Portfolio management "might be the best money management channel that you've never heard of."
MoneySense, April 2011
What Portfolio Management Offers
We believe portfolio managers provide investors with the best level of service in the financial industry. Portfolio managers provide clear and comprehensive portfolio reporting on a scheduled basis, be it monthly and/or quarterly, where they outline the numbers that tell you exactly how your investments performed, and provide commentary on portfolio strategy.
Personalized Service
A portfolio manager develops a written agreement known as an Investment Policy Statement (IPS) that takes into account your specific needs and sets out how you will work with your portfolio manager, including ongoing communication, types of investments, reporting, fees and risk. Your IPS is the basis upon which your portfolio manager selects an appropriate mix of investments and makes discretionary adjustments to your portfolio.
Ongoing Communication
Our portfolio management referral partners keep you up to date on investment strategy through emails and blog postings – as well as phone calls and one-to-one meetings, in person or via webinar. You can expect to hear from them when markets are particularly challenging; as they understand that’s when you want to hear from them the most. You also have online access to your accounts.
Transparent Fees
Portfolio managers charge a transparent fee based on the amount of assets they are managing on your behalf. Fees vary by portfolio manager, and often depend on the total amount of assets. The percentage fee tends to go down as your portfolio of assets grows. We earn a referral fee for our service, which is included in a portfolio manager's fees – not an extra cost over and above the fees disclosed to each client.
Accessing Portfolio Management
Crowbourne is a conduit that connects financial professionals, and their clients, with select portfolio management firms across Canada. We offer investors access to these investment management specialists through our network of independent financial professionals.
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