2023 Market Year in Review

In this update, we explore the highlights of 2023 and take a closer look at the market and recent activities in our investment portfolios.

Economy and markets

2023 provided good returns to investors, including our Veritable families. Given a dour mood as we entered the year, markets proved once again the folly of short-term forecasts. At the start of the year, it was expected that higher interest rates would reduce spending and investment, leading to an increase in unemployment. Everyone was braced for a recession that never emerged. Thanks to strong corporate balance sheets, household savings, and government spending, both the US and Canada ended the year with greater economic activity and more people working with higher wages. Yet, there was no smooth path between dour and delighted. Despite early excitement surviving a springtime US banking crisis, a horrific terror attack on Israel sent markets tumbling through October. However, with data indicating inflation was under control, the markets reversed course and surged into the year-end.

Key Actions

Within our investment organization, we continue to deepen our processes and build more robustness into the portfolios. During the year we allocated 48 million dollars across new and existing partners. We invested those dollars throughout the year, even when fear was heightened. We’re confident in our investments and often see falling prices as increased opportunity, not higher risk. We added one new investment partner during the year. This was our largest allocation of new capital, and it went to a new diversification strategy within the Pillar Portfolio. We added a quantitative hedge fund strategy that is managed by one of the largest hedge funds in the world, AQR; which stands for Applied Quantitative Research. AQR has deep technical and trading resources and a multi-decade history of creating value for investors. Our due diligence process ran 18 months before we invested our first dollars. This new strategy takes 4 different systematic approaches to investing across dozens of markets and thousands of stocks. We expect it to do particularly well when most markets are struggling. This AQR investment marks the second time in two years that Veritable was a founding investor in a new or new-to-Canada investment strategy.

We withdrew capital from two of our partners, both of which proved to be profitable investments throughout our relationship. So why did we redeem? In the first case, the investment opportunity set became significantly reduced. This change was caused by shifting market sentiment and new regulations. Although we were satisfied with how our investment partner navigated both favorable and challenging times, we concluded that reallocating our capital to other areas of the portfolio would be more beneficial. In the second case, we had a strategy that could invest in or against companies and markets. The team managed well against their mandate, especially during the early drawdowns of 2022. However, the lead portfolio manager made a personal decision to leave the firm, prompting our decision to allocate elsewhere.

We have established a strong network of global partners to reach private and public investment opportunities. By staying informed and conducting thorough research on the assets we manage, along with the economy as a whole; we will act decisively when needed.

Looking forward, we remain committed to navigating through various economic scenarios with our diversified portfolio approach. While the future market landscape is uncertain, as we enter 2024, we feel confident that our portfolio of assets and strong partners are well positioned for our Veritable families to achieve their financial goals.

From everyone at Veritable, we wish you and your family the very best for 2024. Let’s make it a wonderful year!

Douglas Schein

Chief Investment Officer for Veritable Wealth Advisory

Veritable Investment Management is an approved trade name of Aligned Capital Partners Inc. (“ACPI”). This material is provided for general information and should not be considered individual investment or construed as an offer or solicitation to buy or sell securities. The statements and opinions expressed are those of the presenter(s) and not necessarily those of ACPI. All opinions expressed and information provided herein are subject to change without notice. Every effort has been made to compile this material from reliable sources as at the date indicated however, no warranty can be made as to its accuracy or completeness Market conditions may change which may impact the information contained herein. All charts and illustrations in this document are for illustrative purposes only and they are not intended to predict or project investment results. In considering any particular investment or investment strategy, please remember that past performance is no guarantee of future performance. The information contained herein may not apply to all types of investors. Before acting on the information presented, please seek professional financial advice based on your personal circumstances. ACPI is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and the Canadian Investment Regulatory Organization (“CIRO”). Investment services are provided through Veritable Investment Management of Aligned Capital Partners Inc. Only investment-related products and services are offered through Veritable Investment Management and covered by the CIPF.