View Sample PDF - RBC Direct Investing

Recommended Asset Mix
Asset mix – the allocation within
portfolios to stocks, bonds and cash
– should include both strategic and
tactical elements. Strategic asset mix
addresses the blend of the major asset
classes offering the risk/return tradeoff
best suited to an investor’s profile. It
can be considered to be the benchmark
investment plan that anchors a portfolio
through many business and investment
cycles, independent of a near-term view
of the prospects for the economy and
related expectations for capital markets.
Tactical asset allocation refers to fine
tuning around the strategic setting in an
effort to add value by taking advantage
of shorter term fluctuations in markets.
Every individual has differing return
expectations and tolerances for
volatility, so there is no “one size fits
all” strategic asset mix. Based on a
35-year study of historical returns
and the volatility of returns (the range
around the average return within which
shorter-term results tend to fall), we
have developed five broad profiles
and assigned a benchmark strategic
asset mix for each. These profiles
range from very conservative through
balanced to aggressive growth. It goes
without saying that as investors accept
increasing levels of volatility, and
therefore greater risk that the actual
experience will depart from the longerterm
norm, the potential for returns
rises. The five profiles presented below
may assist investors in selecting a
strategic asset mix best aligned to their
investment goals.
Each quarter, the RBC Investment
Strategy Committee publishes a
recommended asset mix based on
our current view of the economy and
return expectations for the major asset
classes. These weights are further
divided into recommended exposures
to the variety of global fixed income and
equity markets. Our recommendation is
targeted at the Balanced profile where
the benchmark setting is 55% equities,
40% fixed income, 5% cash.
A tactical range of +/- 15% around the
benchmark position allows us to raise or
lower exposure to specific asset classes
Global Asset Mix
Benchmark
Policy
Past
Range
Spring
2012
March 28, April 16,
2012 2012
May 10,
2012
Summer
2012
Cash 5.0% 1.5% – 16% 7.5% 6.5% 6.5% 6.5% 5.5%
Bonds 40.0% 25% – 54% 35.0% 37.0% 36.0% 35.0% 35.0%
Stocks 55.0% 36% – 65% 57.5% 56.5% 57.5% 58.5% 59.5%
Regional Allocation
Global Bonds
CWGBI*
May 2012
Past
Range
Summer
2011
FALL
2011
New year
2012
Spring
2012
Summer
2012
North America 32.5% 18% – 37% 34.8% 35.0% 33.7% 36.9% 29.5%
Europe 35.3% 32% – 56% 35.8% 34.5% 31.7% 32.6% 35.3%
Asia 32.2% 20% – 35% 29.5% 30.5% 34.6% 30.5% 35.3%
Note: Based on anticipated 12-month returns in $US hedged basis
MSCI** Past
Global Equities
May 2012 Range
FALL
2011
New year
2012
Spring
2012
April 16,
2012
Summer
2012
North America 58.5% 51% – 60% 56.0% 58.3% 58.8% 57.0% 59.5%
Europe 23.5% 23% – 35% 24.3% 23.3% 23.3% 24.1% 22.8%
Asia 12.6% 10% – 18% 13.3% 12.5% 12.0% 12.9% 11.5%
Emerging Markets 5.5% 0% – 6.5% 6.5% 6.0% 6.0% 6.0% 6.3%
Global Equity sector allocation
MSCI**
May 2012
RBC ISC
Spring 2012
with a goal of tilting portfolios toward
those markets that offer comparatively
attractive near-term prospects.
This tactical recommendation for the
Balanced profile can serve as a guide
for movement within the ranges allowed
for all other profiles. If, for example, the
recommended current equity exposure
for the Balanced profile is set at 62.5%
RBC ISC Change FROM
summer 2012 spring 2012
Continued on next page...
SAMPLE
WEIGHT vs.
BENCHMARK
Energy 10.97% 11.46% 10.00% (1.46) 91.15%
Materials 7.09% 7.68% 7.00% (0.68) 98.76%
Industrials 11.00% 13.30% 11.00% (2.30) 100.00%
Consumer Discretionary 10.98% 11.54% 12.25% 0.71 111.58%
Consumer Staples 10.80% 10.31% 11.80% 1.48 109.26%
Health Care 10.23% 10.08% 10.25% 0.17 100.17%
Financials 18.51% 17.69% 18.50% 0.81 99.93%
Information Technology 12.80% 14.26% 14.50% 0.24 113.25%
Telecom. Services 3.98% 2.00% 3.20% 1.20 80.37%
Utilities 3.64% 1.67% 1.50% (0.17) 41.26%
*Citigroup World Global Bond Index **MSCI World Index Source: RBC Investment Strategy Committee
The global investment outlook RBC INVESTMENT Strategy coMMITTEE Summer 2012 I 5