Ballard Mudge Financial Group
The need for the Canadian Focused Equity Portfolio arose because we had a practice that was growing quickly and becoming difficult to manage. Making a single investment decision meant that we had to be on the phone explaining the reason for the change and why we felt that the clients would benefit. Connecting by phone had many inefficiencies; missed calls, voicemail, and clients not always waiting eagerly by the phone for us to call. Sometimes, it could take a week or two to fully implement a single change. We were limited to buy or sell decision on entire positions and we couldn’t help clients easily take advantage of smaller fluctuations in prices.
On August 3, 2018, we moved the first client money into the Canadian Focused Equity Portfolio, and nearly immediately, we noticed some important changes. We quickly became more efficient. We freed up our time and the time of our clients. With more time for research and increased agility, we were able to help clients achieve better outcomes. Our conversations also shifted from individual investment decisions to deeper conversations that matter more to our clients. Win-Win!
This isn’t the only tool in our toolbox, but it is one that has helped us serve clients better.
Clients only have so much money to invest. We want to ensure that clients who entrust their money to us are getting investments in great businesses in return. We look for companies that have a sustainable competitive advantage that enjoy some sort of barrier which makes competing with them difficult. These companies can charge a higher price for their products and enjoy heightened profitability.
Sadly though, owning great businesses is not enough. We must balance the desire to own great businesses with a keen eye on how much we are willing to pay for them. We are willing to pay more for great businesses but we must be careful not to overpay. At times, we will also buy other assets that we believe are trading far below their intrinsic value.
We prefer predictable earnings. Yes, this helps us sleep at night but also we want to hold investments for the long term. Long-term holdings help us reduce the tax exposure for clients and compound capital that otherwise would have been used to pay taxes.
Our goal was always to run a portfolio that outperforms its benchmark. However, the above investment philosophies have led to a reduced exposure to commodity companies and a portfolio that would rate well with most Environmental, Social and Governance (ESG) criteria.
The Canadian Focused Equity Portfolio is the first discretionary model portfolio managed by The Ballard Mudge Financial Group. The portfolio's target allocation is 70% Canadian Equity, 30% US Equity and the goal is to beat the blended benchmark index on a rolling 5 year period.
