To my fellow stakeholders and business partners,
As we begin a new year, I wish to take this opportunity to update you on GLC’s business progress and developments in 2017, and share GLC’s business strategy as a leading asset management firm to take us through 2018 and beyond.
2017 was an exceptional year for both capital markets and GLC Asset Management Group alike. In each case, great progress was made. New opportunities emerged, and challenges overcome.
Capital markets rewarded investors in 2017. New equity market highs were achieved repeatedly through the course of the year, helped by strong corporate earnings amidst synchronized global growth. The strong growth environment saw equities significantly outperforming bonds, but even bond market returns surpassed expectations. We saw contained inflation, credit spreads narrowing, and continued accommodative monetary policies in Europe and Japan, while our North American central banks were measured and cautious on the path to normalizing interest rates. From a money manager’s perspective, the most remarkable aspect of 2017 was the low level of volatility experienced across capital markets. This is not to say there weren’t market disruptors, rather their effects tended to be isolated to a given subset of stocks or largely ignored by investors. Even in the midst of political uncertainty, devastating weather events, and acts of war, terror and protest, investors kept up their optimism for stocks in general. As outlined in our recent 2018 Capital Market Outlook report, we don’t expect the good times to roll indefinitely. We offer some guidance into how investors might strike a balance in moderating their overweight position in equities and their underweight positions in fixed income.
I’m particularly proud of our GLC investment teams’ performance in 2017. We executed at a high level, keeping consistent, strong investment performance our primary focus. Last year I stated that 2017 was setting up to be a good year for active managers, and indeed this was the case.
We saw strong investment performance from each of GLC’s five investment divisions, as well as from GLC’s Asset Mix Committee. You can plainly see the benefits of active management playing out in many of our Canadian and U.S. equity portfolios, as well as our fixed income portfolios. The GWLIM Canadian All Cap Growth Equity mandate, London Capital Canadian Large Cap Equity mandate, Laketon Canadian Concentrated Growth Equity mandate, and the Laketon Canadian Enhanced Dividend mandate each beat the benchmark on a gross return basis and were above median performers versus peers. Investors in GLC’s US large cap growth equity and US mid cap equity mandates experienced exceptional performance in 2017 on both an absolute and relative basis, compared to benchmark and peers. GLC has a broad and diverse fixed income offering, and I’m pleased to say that across the board our fixed income portfolios outperformed their benchmarks on a gross return basis.
With a risk-on market in full flight, 2017 posed a bigger challenge for US value stocks, and portfolios designed to mitigate market risks and volatility. In the US, value-style stocks lagged their growth-oriented peers by a significant margin, which weighed heavily on the absolute and relative performance of the US value mandate. The style bias abated somewhat in the final quarter of 2017, but not enough to reverse the effects of the earlier style headwind. The Canadian Low-Volatility portfolio performed as expected and by design in 2017, by cutting the volatility experienced by more than 20% when compared to investing in the S&P/TSX Composite directly. Likewise, our asset allocation portfolios also functioned as we would expect, by preserving capital when downturns occurred (for example in Canadian stocks during the first half of 2017), and capturing much, but not all, of the gains when markets soared in the second half of the year. It’s a longer term approach to attractive risk-adjusted returns, and designed for those investors who prefer a smoother ride to reaching their long-term investment goals.
In 2017 our assets under management (AUM) grew by 7%, a combination of the market growth of our portfolio holdings and positive cash flow. Our AUM is now $54.8 billion, and most recently Benefits Canada magazine ranked us as the 12th largest money manager of Canadian pension assets and the 2nd largest manager of capital accumulation plan assets in the Canadian pension space – a testament to our growing prominence in the institutional investor and group wealth markets.
The pace of change in the world has increased. Market and industry disruptors are emerging quickly, with greater unpredictability and complexity. As asset managers, we see daily shifts in the competitive landscape of the sectors, industries and companies we invest in. We are accustomed to change. We understand change. We adapt, learn and move forward. Our accomplishments in 2017, and our key initiatives for 2018 revolve around forward-looking business strategies that build on next steps with new knowledge, resilience, optimism and robust critical thinking:
Invest in areas of future growth and opportunity
In 2017 we broadened the scope of our investment offerings by launching an Institutional Private Debt fund and an Institutional Commercial Mortgage fund. These new alternative fixed income investment funds focus on investments with higher yield over comparably rated public market bonds while providing strong credit quality. We have the unique opportunity to partner with our corporate partners within the GWL Private Debt and Commercial Mortgage areas to the benefit of investors, leveraging their expertise in sourcing, structuring, underwriting and managing private institutional investment deals. Beyond being a true competitive advantage for GLC, it’s a unique opportunity for institutional investors to add alpha to their portfolio.
Much work went on last year to deepen our capabilities in quantitative investment strategies. Our London Capital investment division continues to be a centre of excellence for quantitative investing, and this past year we expanded the fundamental factor modeling and portfolio optimization tools to our US large cap growth equity portfolio. To say the areas of quantitative investing, artificial intelligence and machine learning are fast evolving is a gross understatement. So this year, as with last year, we will continue to explore new capabilities and ways to harness opportunities within the marketplace.
Elevate core areas of strength and differentiation
GLC’s asset allocation portfolios are designed to deliver strong, risk-adjusted returns aligned with a stated target date, target risk tolerance and/or target outcome (like an income-generating focus). With broad choice, active management and rigorous oversight, we’ve experienced growing assets within these diversified, outcome-oriented solutions. We augmented our approach and ability to implement top fund level active management for our target-date and target-risk asset allocation portfolios.
Plan to hear more about GLC’s balanced investment solutions and outcome-based asset allocation options in 2018. Our sophisticated portfolios go well beyond the ‘one-size fits all’ approach, and allow investors to narrow in on their goals and risk profile, while still benefiting from professional portfolio construction, active management and rigorous oversight.
Dedicate ourselves to responsive support for our business partners and investors
One of our most visible initiatives of 2017 was the launch of GLC’s new website and logo. The website is modern, easy to navigate and packed full of information about GLC and the portfolios we manage. Investors, financial advisors and consultants will find a great resource for staying current on GLC’s portfolio strategies and investment approaches, and an easy way to share GLC’s market views. Our enhanced online presence will create new opportunities for us in 2018 by supporting podcasts, videos, shareable content and connecting with social media.
Last year, many of our industry colleagues and business friends were impacted by organizational transformation and change. It was more important than ever that GLC be that steady and reliable partner they could count on for strong long-term investment performance and straightforward expert insights into matters that moved markets. Our business development team, portfolio managers and investment strategy team were committed to maintaining their relationships and building new ones as they criss-crossed the country. Close to 2000 financial advisor, institutional investor and consultant connections were made in 2017, with hundreds now following GLC’s news and posts on LinkedIn.
In 2018, our communication strategy will ensure you continue to feel connected to GLC and have access to portfolio information and our market, economic and industry insights – the things that help you make good decisions about your investments.
Pursue responsible investing and responsible leadership
At GLC, we consider environmental, social and governance (ESG) factors in all our investment decisions. We believe GLC's ESG analysis can identify both risks and opportunities to enhance long term returns because it is ADDITIVE, rather than an alternative approach to GLC's existing disciplined investment processes. In 2016 we formalized our commitment to responsible investing by becoming a signatory to the United Nations supported Principles of Responsible Investing (UN PRI). By doing so, we committed to transparent reporting of our responsible investment activities and practices on a yearly basis. The UN PRI will make available GLC’s first Public Transparency Report on Responsible Investing (reporting on our activities in 2017) in late summer of 2018. In the meantime, you can find GLC’s Responsible Investing Policy on our website.
Power and gender equality were infamously in the news in 2017. Late in 2017, I was asked to share my views on the topic, and so here it is: It’s no secret that I cut my teeth in a male dominated industry at a time when the culture, temperament and expectations for women were wildly different then they are today. But key to understanding where we need to be in terms of creating a gender-neutral workplace, is understanding that power, leadership, talent or drive are not gender-specific attributes. It’s about the person carrying those attributes, not about the gender! Peter Drucker, a prolific management consultant, educator and author from 70s and 80s, once said “Rank does not confer privilege or give power. It imposes responsibility." Being powerful, at its best, is about the ability to bring people together, to find the power in collaboration and team work, and to inspire people to reach further than they might have thought they could. If you can inspire people to be better at what they do, and to see how they can be better together as a team, that’s powerful! The most successful captains of industry, leaders of people, heads of companies and households alike, know that therein lies their greatest opportunity to affect change for the better.
In closing, I owe a number of thank yous. First and foremost, I want to thank everyone on the GLC team. This formidable group of men and women dedicate themselves to making GLC a premier investment management firm through their pursuit of strong investment performance and by doing what is right for investors. I am always impressed by their hard work, abilities and dedication.
Likewise, I want to say thank you to all our stakeholders and business partners. Your support inspires and guides us every day. We are more passionate than ever about our future and the positive impact we can make by partnering with you to provide industry leading investment solutions for clients. We see tremendous opportunity ahead and look forward to continuing on the journey with you.
Ruth Ann McConkey
President, GLC Asset Management Group Ltd.
Copyright 2017 GLC. You may not reproduce, distribute, or otherwise use any of this article without the prior written consent of GLC Asset Management Group Ltd. (GLC).
This commentary represents GLC’s views at the date of publication, which are subject to change without notice. Furthermore, there can be no assurance that any trends described in this material will continue or that forecasts will occur; economic and market conditions change frequently. This commentary is intended as a general source of information and is not intended to be a solicitation to buy or sell specific investments, nor tax or legal advice. Before making any investment decision, prospective investors should carefully review the relevant offering documents and seek input from their advisor.