Since you are using the 5i Research Inc., Investor Suite, Portfolio Analytics, and/or ETF and Mutual Fund Update (referred to as 5i herein) websites, you are likely to come across some of our model portfolios that are offered.
Any model portfolios contained within the services are intended to be an educational tool and a starting point for an investor with which to make their own portfolio decisions on their own or with the help of an advisor. While employees of 5i Research cannot trade in Canadian securities (and in turn the stock holdings in the equity portfolios), they may own positions in funds/ETFs that are held within any model portfolio. There is no requirement or need for the member to follow any model portfolio as it is presented. They can be used, adapted and/or changed as the individual sees fit.
Aside from management fees/MER on any underlying funds/ETFs (none of which 5i is a beneficiary of), 5i Research does not receive or charge any fees on the model portfolios aside from the standard annual subscription fee to access the services.
Members are notified of any changes to the model portfolios via e-mail. These changes could be rebalancing related or additions or removals from a portfolio. 5i Research and related services cannot be held responsible for e-mails that are missed or not received. It is up to the member to ensure their e-mail information is up to date and in good order.
Members will generally find model portfolios in three different places:
Three model portfolios for the basic 5i Research service – These are all equity portfolios focused on Canadian stocks and cater to standard investor types (Income, Growth and Balanced). It is up to the member to determine which portfolio, if any, are appropriate for them and how best to utilize them. These are intended to only make up the Canadian allocation (and in some cases just a piece of the Canadian allocation) and do not cover areas such as geographic and asset class diversification. These are monitored regularly and changes to these portfolios are notified to respective members via e-mail.
ETF Model Portfolios for the ETF Update Newsletter – These typically consist of low-cost ETFs focused on more passive portfolios for three different types of investors (Conservative, Balanced, Growth) while having some ETFs to add some potential for outperformance (Alpha). Commentary on these portfolios are provided on a quarterly basis but are updated on an annual basis. Any changes, if applicable, will be disclosed via e-mail.
ETF Model Portfolios for Portfolio Analytics – These consist of 9 model portfolios across a spectrum of investor types. While underlying holdings are generally the same, the allocations differ across the spectrum of these model portfolios. These are constructed with a focus on passive, low-cost ETFs that are diversified. These are intended to show how to build a portfolio so that it reflects an investor style but are not intended to optimize or maximize returns. These are not tracked for performance and are reviewed on an annual basis. While the ETF model portfolios are provided, it does not mean that an ETF portfolio is the right choice for the member or that the allocations suggested are right for the member. These are one example of how to construct a broadly diversified portfolio. If changes are made, they will be notified via e-mail to the appropriate audience. These portfolios are constructed by using average allocations provided by large Canadian asset managers and then adding ‘tilts’ to any allocations that 5i Research views as appropriate. Regardless, allocations are anchored by the average of Canadian asset managers. For more information on how this group of model portfolios are constructed, you can learn more here.
Model Portfolio Construction
The team of analysts at 5i Research are responsible for the model portfolio construction and monitoring. The equity model portfolios take a more concentrated approach to investing (~20-30 securities) with target weights between 2.5% and 5%. The portfolio aims to have exposure to most industries as well as diversified by style and market-cap but generally are tilted more toward growing sectors and companies.
Rebalancing is done on a discretionary basis but typically a holding will be rebalanced once it is above a 5% weight (although some cases a stock will be allowed to go higher) or below 2%. We strive to maintain low cash balances but cash balances do depend on opportunities the team sees for the model portfolios. New holdings into the mode portfolios or any rebalancing will be communicated via e-mail. Distributions are 'held' as cash and eventually reinvested as the team sees fit.
The ETF model portfolios will generally see higher weightings in the model portfolios due to the diversified nature of the funds. Often times a holding will be above 10% of the portfolio. The focus on construction of the ETF model portfolios revolves around cost, our view of potential returns of certain exposures, size of the fund and length of time the fund has been traded. Generally, these are intended to be more passive model portfolios with slight ‘tilts’ to active exposures for potential to generate differentiated performance. Distributions are ‘held’ as cash and eventually reinvested.
While there is no minimum amount required to invest in any of these model portfolios, we typically suggest an amount of $50,000 is a good starting point. This mitigates risks of transaction costs eating away at potential returns. Of course, what the right number is depends on the individual and there is no requirement to mimic the portfolio at the outset (or at all).
There are no ongoing fees charged by 5i Research for access to these portfolios. 5i Research does charge an annual subscription fee in order to be able to view and access the holdings though, which is included with the basic subscription price to access 5i Research or other related services. Of course, any funds within the model portfolios will have their own fees/MERs that are charged. While we take fees and costs into consideration it is the responsibility of the member to understand the fee structure of items within the model portfolios.
We do not track returns for model portfolios within Portfolio Analytics as these are for illustrative purposes. Returns on other portfolios are tracked and posted for members to see. While we do our best to ensure accuracy of returns on a monthly/quarterly/annual basis, the returns are unofficial and not audited by a third party. 5i Research cannot guarantee the reliability of returns and will not be held liable if the returns are found to be erroneous. Mistakes happen from time to time and members are encouraged to notify 5i Research if they believe to have found an error or typo at which point 5i Research will correct the error to the best of their ability.
Model portfolios are meant to be an educational tool to help users understand portfolio management concepts and act as a building block or starting point for building one’s own portfolio. Members must understand that any model portfolios made available on any of our Services are for informational purposes only; not to be used or construed as an offer to sell, a solicitation of an offer to buy, or an endorsement, or sponsorship of any entity or security. It is imperative that you do your own due diligence before selling or purchasing any security or following any model portfolio in any manner. In no way is any model portfolio within the 5i services intended to be construed as a recommendation of how any individual should manage or structure their own portfolio(s).
You can learn more about our disclosure policy here.