Connect with us

Investment

Opinion | Consumers should know investment performance and costs – TheSpec.com

Published

 on


This is the time of year when most Canadians receive their financial reports.

Everybody is concerned about the shape of their finances. A retired family asks their adviser: “Will we have enough income to live on?” A charitable foundation CEO asks her Treasurer: “Warn me before our cash flow turns negative.” Both want the same thing — the bottom line.

For a long time, clients of dealers and managers received statements showing the current value of their investments compared with the previous month.

But those snapshots didn’t show if the overall portfolio made any progress from year to year. Even for the do-it-yourself investor, yearly comparisons are too important to be scribbled on the back of an envelope.

Fortunately, things are changing for the better.

The Canadian Securities Administrators believe investors should know how their investments performed over time. They also think it’s important to know the cost of fees and services that affected that performance. So, all advisers now must provide two performance and costs summaries, each year.

The investment performance report presents the annual percentage return for the first year and at Dec. 31 for the last three, five and 10 years when an account was open. That way each client can see how the portfolio performed over several years.

A special advantage is the way performance is calculated after all withdrawals and contributions. It’s too easy to forget the withdrawal covering 20 per cent of a dental bill that the insurance plan didn’t reimburse, or the deposit of a Christmas cheque from Nana.

This will also help to compare the portfolio’s progress with an index representing similar securities. We usually see various indexes on TV or smartphone or newspaper, but without such comparison we can’t determine whether our investments are keeping pace.

Much more importantly, it reveals if that progress matches what we want to achieve. That’s the objective clients must specify at the beginning, in the information form that authorizes the adviser. The performance report shows if the adviser’s guidance met our objectives.

Some people let the bull market roll on until the panic last March. Then they sold. When the market rallied sharply, they climbed aboard again. Sounds like a crapshoot? In-and-outers will now be able to see how costly the commissions were and how much they eroded the net results.

A previous article reported that computers, algorithms and passive managers are responsible for 60 per cent of transaction volumes. Trading is idealized in TV commercials. Shallow acquaintances boast of their trading successes; smart friends don’t go there. Consistent trading gains are rare and involve costs. During the COVID-19 panic, investors sold and repurchased funds in seismic proportions. Advisers seemed absent, while commissions shaved their clients’ net returns.

That’s why investors look for a reliable measure that summarizes costs, and does it simply too — their net results.

The cost of advice report is just as important as the performance report. Advisers are required to disclose the total of all fees and commissions charged to your account.

The Investor Office of the Ontario Securities Commission states in their Investment Performance and the Cost of Advice report: “No matter what type of investment you buy or advice you receive, you will be charged fees.”

For investment fund accounts, there are operating charges, transaction charges, third-party payments and trailing commissions. For managed portfolios, there are management fees.

The last 10-year data show investors made large purchases of mutual funds and ETFs each January-February (probably for deductible RRSP contributions) and almost as large March-April reductions. Commissions minimized investors’ returns. Who benefited more, clients or advisers?

The purpose of these regulatory requirements for fund dealers and portfolio managers is to ensure transparency in their communications with clients. With tens of thousands of advisers across Canada, the regulators leave it to investors to become informed and to take the initiative to pursue any questions.

Loading…

Loading…Loading…Loading…Loading…Loading…

As technology opens up the seamy side, cybersecurity threats are an emerging risk. The regulators try to protect investors from unfair, improper or outright fraudulent advisory practices.

How advisers cope with fraud to preserve client confidence will be another chapter in the story, as they prepare for more stock market turbulence.

A future report will analyze whether the foregoing reports measure the client’s or the adviser’s performance.

Norm Stefnitz is a retired financial analyst and portfolio manager. Now a freelance writer, he analyzes economic and investment options for families, endowments and charities, and can be reached at n.stefnitz @cogeco.ca

Let’s block ads! (Why?)



Source link

Continue Reading

Investment

Reflecting on Pro Real Estate Investment Trust's (TSE:PRV.UN) Share Price Returns Over The Last Year – Simply Wall St

Published

 on


Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Pro Real Estate Investment Trust (TSE:PRV.UN) share price is down 14% in the last year. That falls noticeably short of the market return of around 17%. At least the damage isn’t so bad if you look at the last three years, since the stock is down 8.6% in that time.

See our latest analysis for Pro Real Estate Investment Trust

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unhappily, Pro Real Estate Investment Trust had to report a 23% decline in EPS over the last year. The share price fall of 14% isn’t as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth

TSX:PRV.UN Earnings Per Share Growth March 1st 2021

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Pro Real Estate Investment Trust the TSR over the last year was -4.8%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 17% in the last year, Pro Real Estate Investment Trust shareholders lost 4.8% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example – Pro Real Estate Investment Trust has 4 warning signs (and 1 which is concerning) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

Promoted
If you decide to trade Pro Real Estate Investment Trust, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Let’s block ads! (Why?)



Source link

Continue Reading

Investment

New investment firm InCap invited to join board at Strategic Education – TheChronicleHerald.ca

Published

 on


BOSTON (Reuters) – Inclusive Capital Partners, an environmental and social impact investment firm launched in 2020, said on Monday that one of its partners will join the board at Strategic Education Inc.

William Slocum has been invited by the company and has agreed to serve as a nominee for election to the company’s board at the 2021 annual meeting, Inclusive Capital, called InCap, said in a regulatory filing on Monday.

It is the second InCap board appointment in a day after ExxonMobil said earlier it had tapped Jeffrey Ubben, InCap’s co-founder, as a director amid fresh pressure from investors for it to focus more on clean energy and improve its financial performance.

The regulatory filing announcing Slocum’s directorship also said that InCap raised its ownership stake in Strategic Education, valued at $2.1 billion, to 6.14% from 5.65%. InCap is Strategic Education’s fourth largest owner.

InCap bought 121,784 shares on December 31, February 26 and March 1, when the stock traded between $87.79 and $95.17 a share, the filing said. In the last 52 weeks the stock has lost 41.31% and it closed trading at $86.49, having lost 4.87%.

While Slocum’s move attracted less notice than Ubben’s, it is noteworthy at a time InCap is building its credentials as a new firm and seeks to raise as much as $8 billion in capital for a new portfolio.

Two decades ago, Ubben founded ValueAct Capital and shaped the firm’s reputation as a friendlier activist whose partners work collaboratively with management behind the scenes on boards ranging from Microsoft to AES. He left last year to found InCap.

Slocum and fellow partners Eva Zlotnicka and Sarah Farrell are being groomed as the next generation of leaders at InCap. Slocum worked with Ubben at ValueAct before moving to Golden Gate Capital from 2011 to 2020.

(Reporting by Svea Herbst-Bayliss; editing by Richard Pullin)

Let’s block ads! (Why?)



Source link

Continue Reading

Investment

Why interest in ESG investing is set to explode – BNN

Published

 on


If there’s any silver lining to come out of the COVID-19 pandemic, it’s that an increasing number of investors are thinking more carefully about the impact their holdings are having on the world.

In 2020, inflows into Canadian-based environmental, social and governance (ESG) funds topped $3.2 billion, while total net assets in ESG funds topped $22 billion, a 37% increase over the year before. The company also found that 12.3% of global asset managers have put a greater importance on ESG considerations since the pandemic began[1].

While interest in ESG investing was on the rise before the COVID-19 pandemic, people are paying even more attention to everything from climate change to the treatment of employees to pressing social causes. Combined with a push from CEOs of major corporations to identify ESG risks within their own businesses, and with more regulations – in Europe, but soon elsewhere – around sustainable finance-related disclosure requirements, interest in ESG will likely continue well into the future, says Priti Shokeen, head of ESG Research and Engagement at TD Asset Management Inc.(TDAM).

“There’s an ever-growing awareness about systemic risks that we are facing as a society such as our rapidly changing climate and social inequalities, and an unwillingness to keep the status quo, whether that’s through our personal values or through our investments.” she says. “The industry also reached an inflection point over the last two- three years with maturing ESG strategies and funds showing that ESG does not take away from investment performance. The COVID-19 pandemic was the first true test of that and ESG showed potential for downside protection.”

ESG’s evolution

Currently, assets under management (AUM) in Canadian-listed ESG-focused funds account for less than 1% of AUM in all Canadian funds – $22 billion compared to about $2 trillion, according to ISS – but that number could see a dramatic increase over the next several years.

For one thing, the market continues to evolve from its traditional do-no-harm focus, which mainly involved companies taking action against issues that could hurt their business, to one that’s more purpose focused, where doing something good – for communities, customers and the planet at large – drives business decisions.

With more people wanting to understand how companies they are investing in, are being responsible – that may be reducing their carbon footprint or offering staff at least minimum wage – businesses will need to be more transparent about their ESG risks, says Shokeen.

“Companies will be disclosing ESG risks more systematically, and that information will help people make better investment decisions,” she says.

It also helps that millennials are more ESG minded. Morgan Stanley found that while the interest in sustainable investing among all investors climbed to 85% in 2019 from 71% in 2015, it jumped to 95% in 2019 from 84% in 2015 among millennials[2]. That’s important because this generation will inherit billions of dollars from their boomer parents over the next decade.

Given their interest in ESG, much of that money will go into ESG-related funds and to the advisors who embrace sustainable investing.   

“There is a greater willingness among millennials and increasingly among high net worth investors to act through their spending and investing,” notes Shokeen. “Advisors need to educate themselves so they can talk knowledgeably about these products, especially given the proliferation of ESG.”

More options for investors

As interest in ESG increases, so too will the kinds of products investors can buy. While a number of ESG-focused mutual funds have been created over the years, the ESG ETF market is one area that many investors and advisors are now focused on. ETFs by their nature are low-cost, highly liquid and easy to buy, which is ideal for someone who wants to build any portfolio, but especially one that has a particular focus.

Over the last few years, a number of ESG ETFs have come to market globally with different approaches – some focus on gender parity among executives or technologies that advance renewable energy, others simply remove fossil fuels from existing funds. TDAM, which has long been implementing ESG practices into its various mutual funds, has recently launched three ETFs that incorporate a variety of ESG approaches into one investment vehicle.

The three funds – TD Morningstar ESG Canada Equity Index ETF (TMEC), TD Morningstar ESG U.S. Equity Index ETF (TMEU) and TD Morningstar ESG International Equity Index ETF (TMEI) – give investors exposure to companies with high ESG ratings across a broad number of factors, including alignment of management compensation with shareholder returns, health and safety issues, environmental impact and more. The funds, which follow indexes designed by Morningstar, using ESG ratings provided by Sustainalytics, a Morningstar Company, also stay away from tobacco, weapons and gambling operations, as well as those companies that have been embroiled in controversies, such as bribery, corruption and human rights violations.

“With these ETFs, investors can access best-in-class ESG companies and also closely track the broad parent index,” she says. “The main idea is to provide a low-cost solution, that provides market-like return while having positive ESG exposure and aligns with your values”

As more companies take ESG into account, and as a greater number of investors seek out more responsible products, there may come a point when ESG will be fully integrated into investing mindset, however, says Shokeen, “the levels of integration within companies, and investment process will provide room for differentiated ESG investment strategies.”

Until then, Shokeen thinks that over the next five to 10 years, ESG related disclosures will remain a focus and we’ll see an increasing push towards standardization, while responsible investing will go even more mainstream.

“At a simple level, this is common sense,” she says. “Companies that negatively impact their environment or people will get penalized, while the ones who take it seriously will get more attention from investors.”

The information contained herein has been provided by TD Asset Management Inc. and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. Certain statements in this document may contain forward-looking statements (“FLS”) that are predictive in nature and may include words such as “expects”, “anticipates”, “intends”, “believes”, “estimates” and similar forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest and foreign exchange rates, equity and capital markets, the general business environment, assuming no changes to tax or other laws or government regulation or catastrophic events. Expectations and projections about future events are inherently subject to risks and uncertainties, which may be unforeseeable and may be incorrect in the future. FLS are not guarantees of future performance. Actual events could differ materially from those expressed or implied in any FLS. A number of important factors including those factors set out above can contribute to these digressions. You should avoid placing any reliance on FLS. Commissions, management fees and expenses all may be associated with investments in ETFs. Please read the prospectus and ETF Facts before investing. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. TD ETFs are managed by TD Asset Management Inc., a wholly-owned subsidiary of The Toronto-Dominion Bank. Morningstar® Canada Sustainability Extended IndexSM, Morningstar® US Sustainability Extended IndexSM and Morningstar® Developed Markets ex-North America Sustainability Extended IndexSM are service marks of Morningstar, Inc. and have been licensed for use for certain purposes by TD Asset Management Inc. The TD Morningstar ESG Canada Equity Index ETF, TD Morningstar ESG International Equity Index ETF and TD Morningstar ESG U.S. Equity Index ETF (collectively, the “TD ESG ETFs”) are not sponsored, endorsed, sold or promoted by Morningstar, and Morningstar makes no representation regarding the advisability of investing in the TD ESG ETFs. ®©2020 Morningstar is a registered mark of Morningstar Research Inc. All rights reserved. All trademarks are the property of their respective owners. ®The TD logo and other trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.

1 SIMFUND Canada, ©Institutional Shareholder Services Canada Inc. (Investor Economics, A Division of ISS Market Intelligence) 2021. All rights reserved. 
2 Morgan Stanley. Sustainable Signals: Individual Investor Interest Driven by Impact, Conviction and Choice

 

Let’s block ads! (Why?)



Source link

Continue Reading

Trending