By Canada Life Investment Management | Nov. 22, 2023

Darragh O’Dowd, Head of the Multi-Asset Solutions Team at Irish Life Investment Managers (ILIM), joined us for a closer look at Canada Life Risk-Managed Portfolios™. This suite of all-in-one investment solutions uses a blend of risk management strategies to help protect and grow savings. He explained how the ILIM team and these strategies work to limit the impacts of portfolio volatility, helping Canadians stay invested and off the sidelines.

What’s in this article:

1. Modern challenges demand modern solutions
2. The mechanics of Canada Life Risk-Managed Portfolios
3. Portfolio modelling approach
4. A unique combination of risk management strategies
5. ILIM’s proven track record
   

Today's investors face unique challenges due to shifting market conditions, changing outlooks and low expected returns. In this environment, it’s easy for emotions to get in the way of their financial goals.

And who could blame them? With all the recent uncertainty, it’s hard to believe overall market volatility has fallen (the CBOE Market Volatility Index has fallen nearly 50% since October 2022).

But recent market shocks loom large in the minds of investors. The volatility of returns, combined with tight financial conditions and a shaky economic prognosis – it’s enough for many to retreat from the markets entirely. Canada Life Risk-Managed Portfolios gives them a way to invest in a single-fund solution that aims to protect and grow their savings.

ILIM’s approach to strategic asset allocation, diversification and risk management form a bedrock for the portfolios. But today’s environment demands more from portfolio managers, which is why ILIM combines active management with passive strategies to suit each portfolio. 

A smoother investment experience sounds great, but how does that work? By minimizing peaks and troughs in returns, we’re able to provide a more consistent experience than equity strategies that aren’t protected. ILIM remains focused on delivering investors’ goals over a medium- to long-term time horizon. And with fewer ups and downs in the experience, investors stay focused on their goals too.  

ILIM’s modelling approach is another key part of the portfolios’ foundation. Its team uses thousands of simulations to investigate how the portfolios might have performed during previous times of market stress, and how they’d withstand potential future scenarios.

Their proprietary, multi-asset modelling engine incorporates four key elements:

• Forward-looking portfolio analysis: They boil down thousands of simulations to produce summary statistics, which help them analyze each portfolio allocation over various time horizons.
• Historical back-tested analysis: They simulate how different asset mixes would have performed historically to get a sense of how the solution would fare against similar scenarios in the future.
• Portfolio risk decomposition: They examine the risks of each part of the portfolio in isolation as well as together. Doing so offers insight on how individual asset classes contribute to overall risk and returns, and how they fared during specific market events.
• Currency: They consider how funds in the portfolios take different approaches to currency risk management, and what the aggregate effect is on the portfolios.
  

The portfolios use an option collar strategy. This strategy acts as the portfolios’ central defense system, providing a cushion against volatility that effectively hedges investors’ exposure to the stock market. This strategy has two parts: buying a put option to offer protection when the market falls beyond a certain level, and offsetting the put by selling call options. ILIM uses this to “collar” returns, offering some upside to protect on the downside.

The asset reallocation strategy used by the portfolios also helps them deal with volatility. When equity markets drop and volatility spikes, ILIM is able to quickly reallocate assets into cash to offer a buffer in the event of a downturn.

Lastly, ILIM incorporates a focus on lower volatility equity funds. They aim to drive higher risk-adjusted returns by investing in equity funds that focus on low volatility equities, such as dividend-paying stocks.  

Investors can depend on ILIM’s award-winning, highly experienced team. We’re excited to celebrate three years of winning moments for Canada Life Risk-Managed Portfolios! The funds continue to deliver the resilience they were designed for, having been put to the test by the COVID-19 pandemic.

Portfolio performance

ILIM manages more than $145 billion across a broad range of asset classes and investment strategies for institutional clients from around the world (as of Sept. 30, 2023). In fact, they’re helping over 1.3 million customers meet their goals – that’s about the population of New Hampshire. The industry has taken note, with ILIM garnering multiple awards for its expertise over the years. Most recently, ILIM was named Investment Manager of the Year for 2022 by the Irish Pensions Awards.

Talk to your Canada Life wealth wholesaler for more information. And check out this featured article in Wealth Professional, “Three years of achievement”, to hear more about the performance of Canada Life Risk-Managed Portfolios from Leonie MacCann, Senior Multi-Asset Portfolio Manager.

Access the expertise of this investment manager with Canada Life™ funds: View fund feature sheet

This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice.

This example should not be taken as an indication, assurance, estimate or forecast of actual or future results. This presentation is not an offer to sell nor a solicitation of an offer to purchase interests in Canada Life Risk-Managed Portfolios. The indicated rates of return are the historical annual compounded total returns as of Sept. 29, 2023, including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The returns shown are subject to inherent risks and limitations, and do not take into account trading costs, management fees and expenses.

Canada Life Risk-Managed Portfolios are available through a segregated funds policy issued by The Canada Life Assurance Company or as a mutual fund managed by Canada Life Investment Management Ltd. offered exclusively through Quadrus Investment Services Ltd. Make your investment decisions wisely. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. A description of the key features of the segregated fund policy is contained in the information folder. Any amount allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value.

Canada Life and design, and Canada Life Investment Management and design are trademarks of The Canada Life Assurance Company.