Balanced Strategies


October 2023


Global Balanced Strategy

Pembroke’s global balanced strategy primarily focuses on investments in Pembroke-managed active equity funds, externally managed active equity and fixed income funds, and externally managed passive funds, such as exchange-traded funds (ETFs). This strategy uses a custom-blended benchmark comprising three allocations: 30% to the FTSE Canadian Universe Bond Index, 45% to the MSCI All Country World Index (ACWI), and 25% to the S&P/TSX Composite Index.

The primary goal of this strategy is to achieve long-term capital growth and income by ensuring diversified exposure to global equities and bonds. Additionally, the strategy possesses the flexibility to invest in publicly traded tangible assets like gold. Diversification is achieved across asset classes, regions, sectors, investment styles (value versus growth, or large-cap versus small-cap equity), managers and methodologies (active versus passive).

In the third quarter of 2023, the strategy yielded marginally negative absolute returns, yet it still outperformed its benchmark, which experienced a greater decline. During this quarter, negative contributions stemmed from equities, fixed income and the gold segment. The outperformance relative to the benchmark was attributed mainly to the three bond funds and the gold ETF. However, the strategy’s equity allocations, which lagged behind their specific benchmark components, partially counteracted this.

In this quarter, the bond holdings of the strategy surpassed the benchmark due to the manager’s decision to maintain a shorter average duration amidst rising interest rates. By the close of September 2023, bonds made up approximately 23.8% of the strategy’s holdings, while cash and the gold bullion ETF represented about 2.1% and 4.2%, respectively.

Throughout the twelve-month period concluding on September 30, 2023, the strategy rebounded from its lowest points, ending the period notably higher and slightly surpassing its benchmark, which also saw an increase. Every asset class and underlying fund within the strategy contributed to absolute returns. On a comparative basis, Canadian equities and fixed income exceeded expectations, while U.S. and international equities lagged behind their benchmark counterparts. The performance of the gold allocation was moderate, surpassing fixed income, but falling short of the equity components of the benchmark.

The strategy continues to ensure diversification across asset classes, regions, sectors and styles with its equity and bond managers persistently exploring new investment opportunities.

Canadian Balanced Strategy

Pembroke’s Canadian Balanced strategy declined in value in the third quarter, as persistent inflationary pressures proved to be headwinds to capital market valuations. In the equity portion of the portfolio, represented by the holdings of the Pembroke Dividend Growth Fund (see the article on the Canadian strategies), the selloff was notable in consumer discretionary companies with cyclical exposures, as well as in some interest-sensitive holdings. Meanwhile, the fixed income portion of the portfolio, represented by the Pembroke Canadian Bond Fund (see the article on the fixed income strategies), was in negative territory, as interest rate increases hampered valuations, despite steady credit performance.

Over the past twelve months, the strategy yielded modestly positive returns. The equity segment demonstrated resilience during this time frame, bouncing back from bear market lows. This resurgence occurred as investors, amidst an uncertain economic backdrop, maintained a forward-looking stance towards the prospects of a forthcoming recovery. As for the fixed income segment, it registered minor gains over the past year, despite headwinds from the decline in bond values, a consequence of swiftly escalating interest rates.

Income within the balanced strategy is derived from both dividends and interest. The equity segment currently has an annualized gross yield of 3.7%, whereas the fixed income portion is predominantly invested in securities rated “A+” or better. On average, these securities present a combined yield to maturity of 5.5% and have an adjusted portfolio duration of 6.0 years. There were slight adjustments to the asset composition of Pembroke’s balanced mandates throughout the year. As of September 30, 2023, approximately 28% of the portfolio was allocated to fixed-income securities.


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This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.