ETF Portfolio X-Ray: Forstrong's Special Opportunities Focus

Jul 05, 2016

Reviewed by: Cinthia Murphy

Edited by: Cinthia Murphy

There is no single recipe to building an ETF portfolio. But understanding how a portfolio is built is key to picking the right one. And choices certainly abound, with hundreds of ETF strategist portfolios commanding nearly $100 billion in combined assets today.

For that reason, we are setting out to better understand how ETF strategists go about creating these portfolios in a series of interviews that look under the hood of some of the ETF portfolios available to retail, institutional and advisor clients alike.

Today’s Portfolio: Forstrong Special Opportunities Focus

Provider: Forstrong Global Asset Management, Toronto

Who We Talked To: Tyler Mordy, Chief Investment Officer & President

Portfolio AUM: $110 Million

Primary Goal: This portfolio is designed to provide investors with diversification that goes beyond equities and bonds. The Forstrong Special Opportunities Focus strategy uses a flexible global tactical asset allocation that seeks long-term growth and protection against downside risk. The portfolio aims to produce returns with a low correlation to traditional balanced portfolios.

Methodology: The Forstrong Special Opportunities Focus strategy is a unique asset allocation portfolio that’s designed to express Forstrong’s macro views across major asset classes, including global equities, global bonds, currencies and commodities, real estate and others. The strategy looks into everything from muted growth in the West, to significant market volatility, to recurring balance sheet issues and continued income and wealth convergence between the emerging world and the developed world. The strategy not only diversifies across asset classes, but also across global risk factors.

Another key differentiating feature of the investment strategy is the use of numerous approaches to tail-risk hedging, seeking to protect the portfolio against sudden market shocks.

Target Client: The portfolio can be viewed as a "diversifier" to traditional core balanced holdings, functioning as a "satellite" in a core/satellite portfolio construct for retail and institutional investors alike.

Asset Allocation Breakdown:

ETFs in the Portfolio:

Cash and Equivalents: 5.00%

U.S. Fixed Income: 10.00%

Emerging Markets Fixed Income: 15.00%

US Equities: 3.50%

*IOO’s underlying exposure was approximately 60% U.S. equities and 40% international equities at the time of writing.

**TAN’s underlying exposure was approximately 40% U.S. equities, 35% emerging market equities and 25% international equities at the time of writing.

International Equities: 24.75%

Emerging and Frontier Market Equities: 31.75%

Alternatives (Real Estate, Commodities, etc.): 10.00%

All ETFs? Yes

Fees: They depend on the distribution channel. An actively managed ETF of the portfolio is available on the TSX, the Horizons Managed Global Opportunities ETF, with a management fee of 0.85%.

Performance (YTD or 1 Yr):

YTD: -4.16%; 1 Year: -4.75%; Since Inception: 22.5% (inception date of Jan. 1, 2014). All performance figures are as of May 31, 2016 and are in Canadian dollars.

Contact Cinthia Murphy at [email protected].

Cinthia Murphy

| Contact: [email protected]

Cinthia Murphy is head of digital experience, advocating for the user in all that etf.com does. She previously served as managing editor and writer for etf.com, specializing in ETF content and multimedia. Cinthia’s experience includes time at Dow Jones and former BridgeNews, covering commodity futures markets in Chicago and Brazil equities in Sao Paulo. She has a bachelor’s degree in journalism from the University of Missouri-Columbia.

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