Understanding managed solutions

By: Sound Choices • October 25, 2017 • Personal Finance

Millions of Canadians invest in mutual funds rather than individual securities like stocks or bonds as they can offer one-stop diversification, professional management and low minimum purchases.

Some investors choose to take it a step further and invest in a managed solution. Managed solutions are fund-of-fund products, which means they are composed of carefully selected mutual funds to form one portfolio. An investment management firm that offers managed solutions is responsible for:

  • Determining the right asset allocation for each portfolio
  • Conducting thorough fund research and making the appropriate selections
  • Constructing the portfolio with complementary investment styles to manage risk and enhance return potential
  • Monitoring the portfolio actively and rebalancing when required to maintain optimal positioning in an ever-changing economic environment

Benefits of managed solutions

Choosing a fund-of-fund managed solution simplifies your investment process. Let’s say you want to achieve a high degree of diversification in your investment portfolio because you recognize that effective diversification can lead to better returns with less risk.

You could buy a Canadian equity mutual fund to get some exposure to the Canadian stock market, an international equity fund to gain access to opportunities around the world, a U.S. fixed-income fund for American bonds, a global health care fund to take advantage of shifting demographics, and so on. It’s getting pretty complicated, isn’t it?

On the other hand, you can invest in a managed solution that is well-diversified based on asset class, sector, geography, investment style, credit quality and more. Such a comprehensive investment solution can meet your needs – all in one convenient portfolio. And, since the portfolio construction, monitoring and rebalancing are taken care of by an professional oversight team, you and your financial advisor are free to devote more time to other important aspects of your financial plan such as tax and estate planning.

Investing in a managed solution

Typically, an investment management firm will offer several portfolios in its managed solution lineup, each designed to meet different investment objectives (e.g., to generate an income stream, to provide a mix of income and capital growth, to maximize growth potential, etc.). For greater tax efficiency, some managed solutions are also offered within the corporate class structure.

To invest in a managed solution, your advisor will assess your investment goals, risk tolerance level and time horizon. Based on this assessment, your advisor can then determine the portfolio that best suits your unique needs and circumstances.

To learn more about the benefits of managed solutions, read this investment strategy and talk to your financial advisor.

The contents are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

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