FIERA CAPITAL
Basics
Let us start by assuming that the allocation of assets of an investor is similar to that of the larger
population investing. This means that the portfolio is dominated by shares and equity risk. Assume that
a hedge fund is allocated by an investor in order to generate a higher return per risk unit, i.e. an efficient
portfolio. For a more efficient portfolio, any allocation of hedge funds must include a certain mixture of
the following (for the whole portfolio):
• Slight volatility
• Small correlation
Mandate for investment
In terms of stakeholders and investors, Fiera Capital is one of the leading professional, committed and
responsible, while our investment mandate is to invest in these portfolios and therefore make the most
out of customer satisfaction and build a more trustworthy relation between company and investor
(Fiera Capital, 2017). The aim of the policy is to outline the approach of Fiera Capital to incorporate ESG
evaluations into our investment processes, because we believe that it can bring a great many value
benefits to securities assessments, including improving our knowledge of companies, better controlling
the risk of our portfolios and helping enterprises to improve their performance over time.
Capital Fiera has a strong ethical investment history. Ethical investment solutions have been available to
the company's customers since 2004. In 2009, Fiera Capital signed the UN Responsible Investment
Principles (UN PRI).
Fiera Capital offers a range of investment solutions across asset categories, styles and levels of
capitalisation. We are one of the few independent investment firms that provide significant knowledge
through a variety of strategies and services in Canada's active and structured income, Canado's and
foreign stock, asset asset assignment and non-traditional investment solutions. (Capital Fiera, 2017)
Object of investment
In today's environment, the integration of the assessment of environmental, social and governance
(ESG) risk factors into how we manage assets on behalf of customers – particularly for the Fiera Capital
sector and banking organisations. Everything will benefit shareholders, clients, employees, and other
stakes.
Return streams which satisfy
all three of these needs are
.
best allocated in an ideal
Multi‐Strategy, 2%
world: better returns, less
Convertible Arbitrage, 2%
volatility and less correlation.
Equity Market Neutral, 2%
MBS Strategies, 4%
That's really hard to achieve
Managed Futures, 5%
in the real world. There
Equity Hedge, 29%
should always be
Directional Credit, 5%
complications. The recipients
accept sacrifices under
Global Macro, 9%
certain circumstances to
maximise the opportunity to
achieve specific aims. For
Relative Value, 9%
Event Driven, 23%
example, they can fail to
return on investing in a less
Distressed, 10%
anticipated volatility and
correlation strategy, thereby
reducing risks to the overall efficiency of the portfolio. In order to achieve their objective, they also can
employ higher return technologies and therefore accept increased risk and volatility in their portfolio.
The recipients take these types of decisions every day. It is clear from an analysis of management assets
where investors allocate their investments in hedge funds and the flows into special hedge funds
strategies.
EXHIBIT1: HEDGE FUND AUM BY STRATEGY
Our investment objective to invest in below portfolio is a type of aggressive as in all these stocks, bonds
and share there is high risk that will end result in high returns whereas as the current situations are in
negative but have a positive impact in future as per forecasted by economic indicators of the US
Mandate for investment
Investing in such portfolios is our investment mandate to maximize the benefits for our customers and
build a more reliable business-investor relationship. Fiera Capital is one of the leading professionals and
investors (Fiera Capital, 2017). This policy aims to explain the approach taken by Fiera Capital with
regard to ESG assessments in our investment processes, because we believe that this can bring many
benefits, including enhanced business knowledges and greater risk control for our portfolios.
Capital The history of ethical investment is strong for Fiera. Ethical investment solutions have been
available to its customers since 2004. Fiera Capital signed the United Nations Responsible Investment
Principles in 2009 (UN PRI).
Fiera Capital offers a range of investment solutions covering capitalization categories, styles and levels.
We are one of a few independent investors with a substantial understanding of the active and
structured Canadian fixed incomes, foreign and Canadian stocks and the allotment of assets and nontraditional investment solutions through different strategies, services and services. (Capital of Fiera,
2017)
It is essential that ESG is integrated in our management of customer assets today, especially for the
banking and investment sector organizations like Fiera Capital. Everybody will be of benefit to
shareholders, clients, employees and others.
In the ideal world, the flow of revenues would satisfy three criteria: higher returns, lower volatility and
less correlation. In the real world, this is really hard to achieve. Trafficking is always necessary. Under
certain circumstances, distributors accept sacrifices to maximise opportunities for achieving certain
goals. They may forget, for example, a return to improving portfolio efficiency by reducing the risks to
investing in a strategy with less expected volatility and correspondence. They can also identify more
effective technologies and take risks or volatility which will increase their portfolios and achieve their
objectives. These types of decisions are taken daily by the recipients. Analyzing management assets and
transferring investors to certain Hedge Funds strategies shows clearly where investors invest in hedge
funds. The left figures show that equity-specific strategies like stock capture and event-focused
investment are the biggest assignment to increase global portfolios so that investment allocations are
not as effective as possible. We will discuss why beneficiaries can take such poor decisions in the
following sections.
Efficiency of hedged portfolios The main reason why investors are involved in hedge funds is for
developing more efficient portfolios is for years to archive suboptimal allocation decisions. The
"efficiency" return stream idea is presented in Exhibit 2. The graph shows how each strategy is
correlated with the main risks factor (the stock market) and how each strategy returns the risk ratio. The
Sharpe Ratio1 is the Sharpe Ratio acronym. The lower strategic connections and the higher their sharp
ratio the better.
HFRI S&P 500 Indices Relationship Sharp Ratio
Equity Market Neutral
0.26
1.09
Macro (Total)
0.32
1.02
Systematic Diversified
0.39
0.87
Rel Val Fixed Inc ‐ Convtble Arb
0.47
0.82
Merger Arbitrage
0.52
1.22
Distressed/ Restructuring
0.52
1.19
Relative Value Multi‐Strategy
0.53
1.16
Rel Value Fixed Income Corp
0.53
0.72
Emerging Markets
0.62
0.62
Event Driven (Total)
0.7
1.12
Equity Hedge
0.73
0.96
0.74
1.03
0.79
0.68
While the Sharpe Ratios of
the various techniques are
comparable, the correlation
advantages vary substantially
Fund Weighted Composite
Equity Quantitative Directional
Object of investment
The evaluation of environmental and social risk factors (ESG) in the way we operate assets on behalf of
customers is critical in the contemporary environment – in particular for organisations such as Fiera
Capital which operate in the banking and investment fields. The shareholders, customers, staff and
other stakeholders will benefit from all of it.
Returns to an ideal world meet all three criteria: better returns, less volatility and lower correlation
would be found by the finest recipients. This is truly difficult to achieve in the real world. There is always
need of trafficking. Distributors accept sacrifices to maximise their opportunity to achieve certain
objectives. Under certain circumstances. For example, they can forget about a return on the overall
portfolio effectiveness by lowering risks in order to invest in a strategy with lower expected volatility
and correlation. They can also identify higher rent technologies and must accept risking or increasing
volatility in their portfolios, achieving their goal. The allocators take these types of decisions each day.
We can see clearly where investors invest their hedge funds by analysing assets of management and
transferring them to specific hedge funds strategies. The data from the left indicate that stock-capping
and event-oriented strategies are the biggest allocation and therefore that investor allocations are not
as effective as possible. We will look at why recipients are able to make such poor decisions in the
following sections.
Hedged portfolio efficiency As the primary motivation for participating in hedge funds, investors can
archive suboptimal allocation decisions for years to build more effective portfolios. Exhibit 2 presents
the idea of a "efficiency" return stream. The diagram shows how the main risk factor (the stock market)
for investors is correlated with every strategy and how each strategy is returned to a risk ratio. The
Sharpe Ratio1 is an acronym for the Sharpe Ratio. The lower the ties of a strategy and the higher your
strong ratio, the better your portfolio strategy.
HFRI Indices S&P 500 Correlation Sharpe ratio. Investors who want to improve the efficiency of a
"typical" portfolio (usually high equity risk) should be sensible in assigning market neutral, macroeconomic and systemically diversified policies in their relationship to the bond market.
However, as shown in Figure 1, the current distributions reflect the opposite. The majority of Hedge
Fund dollars have been spent on strategies that have strong stock correlations. Many of the AUM
industries have adopted long-standing equity policies, which means that share-hows have 'duplicated'
their risk factor, to which they have been over-exposed.
Capital safeguards and event-driven policies rely unexpectedly on an increasing stock markets for profit.
The HFRI Fund Weighted Composite Index, a popular benchmark for hedge funds strategies, is also
highly linked with the stock market. From an efficiency perspective, if Sharpe Ratio increased
considerably, a strong correlation could be accepted, but as shown in Figure 2.
How the portfolio weakness is addressed
We do not wish that investors give in a systemic, market-neutral macro-related equity strategies. The
world equity market and the most effective way to capture the alpha are a major source for any active
manager. For any active manager. Overconcentration, on the other hand, is a serious matter we feel.
Different asset classes and trade strategies could have more reasonable opportunities. This
diversification should be the best opportunity in various economic and market situations for coherent
performance.
Hedge funds diversification
Target return, volatility, correlation and liquidity assumptions usually start the development of a
portfolio. The assumptions vary between investments and investments. For instance, an alternative
allocation from an investor could target a risk return of 0.7 or higher with little or no equivalency and
strong liquidity. Once an assumption is established, an investor may begin to develop a strategy for
achieving this goal. For the implementation of the plan, a number of investment options and combined
methods are important.
Diversifications can take several forms such as a cash chance or asset class, the duration and any mix of
these factors as well as the analysis process used by a manager to make decisions about investment.
Ideally, a portfolio combines a range of dynamic and specialized strategies to avoid focused bets and to
diversify all bets to as many investments as possible. Our experience with investment by hedge funds
has shown that each hedge fund strategy has been and continues to respect its performance and failure
periods.
As it is difficult to predict when and how long this phase will occur, we believe that a rigorous strategy to
effectively integrate various strategies into a portfolio results in the most consistent performance
throughout the market cycles. We therefore regard portfolios as a risk-balanced approach to creating
and allocating strategies. The aim of balance a number of options within the portfolio's risk budget
(represented by different classes of acquisition, time trading horizons and investment methodologies)
reduces the attempt to focus on specific strategies.
Strategy for investment
Our structure fosters excellence within our specialty investment teams by combining a multi-style
investment manager's flexible and efficient environment with the scale of resources provided by a
prominent investment company in order to maximize investing wealth. Investment teams are selfemployed, taking advantage of pooled knowledge, risk and research.
The first idea is to generate ideas of external resources and journals, to screen best among all the ideas
and then initial property rankings to invest. A detailed investment process is underway to develop a best
and rapidly growing investment strategy under highly qualified holders of the Financial Charter.
Furthermore, fundamental research on inventory volatility and assurance quality is examined in relation
to inventories and then, following their detailed analysis, different stocks are finally built into a portfolio.
All of this is based on the focused portfolios that offer the best, in our opinion, of all. (Capital Fiera,
2021)
Strategy for equity growth
This strategy seeks both stable and growing growth companies in well positioned industries and sectors
to benefit from secular global growth trends.
Manager Importance
As seen, in the hedge fund universe, the dispersion of managers' returns is often greater than in
conventional methods. Exhibit 3
Macro
Event
Driven
Fund of
Funds
Equity
Hedge
Large Core
Equities
Small Core
Equities
Internationa
l Equities
Core Plus
Fixed
Income
16.6%
13.9%
12.3%
7.0%
13.9%
3.9%
5.2%
5.1%
2.7%
4.4%
4.4%
3.18%
2.2%
4.8%
1.7%
2.1%
1.6%
0.9%
Manager Dispersion
Relative
Value
Top 5% to Bottom 5%
Top 25% to Bottom 5%
There are 400 basic points between the best and worst performing big business core manager for the
10-year period ending June 2017. Compare with the 1390 base point the difference between the best
and most efficient global macro manager in the same period! We believe that due diligence is more
important than traditional long-term hedge funds strategies.
Strong managers must be selected, who follow strict and repeatable processes. The portfolio philosophy
and risk supervision policies of hedge funds managers are unworkable for most consultants and
investors in analyses of the investment approaches. The advantages of investment in products managed
by professional consultants who conduct proper research are thus highlighted. In order to identify
managers who supply new Hedge Funds products almost on a daily basis, the methodological and
systemic approach is crucial.
Asset distribution
Fiera Capital is an investment company based on research. Independent research is a key element of our
investment methodology, including important ESG factors in our processes of investment. The internal
experience and analysis is complemented by the research and advice of third parties from various
external ESG providers.
Optimizing portfolios in asset classes is a popular financial strategy. Assets should be strategically
distributed. The most common method is the 1952 average variance framework proposed by
Markowitz, an approach that depends essentially on investors understanding future returns on their
assets.
Portfolio optimization can also be done by using stochastic projections and an anticipating scenario for
other non-linear portfolio performance results, such as expected asset (and responsibility) values, a
chance to meet targeted cash requirements, maximum drawdowns, and other risks in order to satisfy
specific investor needs.
Portfolio 1
Ticker
Name
Allocation
GDXD
Micro Sectors Gold Mns 3X Inv Lvrgd ETN
10.00%
NRGD
MicroSectors US Big Oil -3X Ivs Lgd ETN
20.00%
DRIP
Direxion Dly S&P Oil&Gs Ex&Prd Br 2X ETF
10.00%
CL
Colgate-Palmolive Company
5.00%
SI
Silvergate Cap Corp
5.00%
BMI
Badger Meter, Inc.
10.00%
BP
BP p.l.c.
5.00%
ABB
ABB Ltd
10.00%
NG
Novagold Resources Inc.
15.00%
S
ABBV
AbbVie
Inc.
10.00%
Start Balance
$10,000
End Balance
$8,038
End Balance (inflation adjusted)
$7,706
Return
-19.62%
Return (inflation adjusted)
-22.94%
Stdev
Max. Drawdown
Sharpe Ratio
Sortino Ratio
US Stock Market Correlation
Results based on historical returns. Expected return is the annualized monthly arithmetic mean return
6.35%
-19.62%
-6.72
-3.13
-0.02
Asset Allocation for Portfolio 1
Category
Weight
US Stocks
60.86%
Intl Stocks
15.00%
US Bonds
0.00%
Intl Bonds
0.00%
Other
10.00%
Conclusion
In the ten years ending in June 2017, 400 basis points are available for the 10 years ending in June 2017
from the highest to the lowest performing large business core manager. Compare the difference
between the best world macro manager and the most efficient in the same period with the 1390 base
point. We think due diligence is important more than traditional strategies for long-term hedge funds.
Strong, strict and repeatable managers must be chosen. For most consultants and investment analysts,
the philosophy of portfolio and risk management policies are not workable. It highlights the advantages
of investing in professional research advisors' products. A methodical and systematic approach is
essential to identify managers who supply Alpha with new hedge funds almost on a daily basis.
Distribution of assets
Fiera Capital is a research-driven investment company. Independent research is an integral part of our
investment methodology and includes essential elements in our investment processes of ESG. Research
and consultation from several external ESG service providers from third parties complements
experience and analysis.
Another popular financial strategy is the optimization of portfolios in asset classes. The allocation of
assets should be strategic. The most widely used method is Markowitz's proposed 1952 medium
variance framework, which relies heavily on investors' understanding of future capital gains.
Further improvements can be achieved through the use of stochastic projections and scenarios for other
non-linear portfolio results such as projected asset (and accountability), chance that specific cash needs
are met, maximum drawdown, and other risks in order to respond specific investor needs.
A new generation of investment provides access to hedge funds and alternative investment strategies.
Choosing a strategy that takes into account the current composition of our portfolio is important. Many
investors can improve the whole strategic mix of hedge funds. Increased liquid alternative product
availability requires investors to understand the interaction between different strategy hedge funds and
existing investments and how certain changes can be made in the allocation of assets.
It is essential to use the best technology to improve portfolio efficiency and to choose the best
managers to implement these strategies. Professionals who know about the management of hedge
funds and can carry out proper diligence and supervision in their alternative allocation may be an
important advantage to achieving investors' objectives.
Bibliography
Fiera Capital, 2017. Fiera Capital Corporation. Responsible Investment Strategy.
Fiera Capital, 2017. Fiera Corportaion. [Online]
Available at: https://www.fieracapital.com/en/about-fiera-capital/investment-philosophy
Fiera Capital, 2021. Fiera Capital Global Equity Factsheet Mar 21, s.l.: Fiera.