Will the Bank of Canada
raise interest rates in 2017?
No. I think the Bank of Canada wants the Canadian dollar lower. They are worried that exports have not come back, and they seem
to be more and more worried about the Canadian economy. Therefore, some people think they may actually be cutting interest rates. But remember, next March for instance, things might be different, and we may then have a different outlook.
Do you see any risks in having a narrow Canadian stock market?
Part of our job is picking securities that have the potential to go up, but another part of our job that rarely gets talked about is the idea of diversifying the Portfolio by business ideas. We look at real world risks and try to make sure that the Portfolio isn’t correlated too
much with those risks.
Let’s look at the Canadian market, for example. Every so often, Canadians who own an index product based on the S&P/TSX Composite Index believe they are broadly diversified, when in fact, the exact opposite is true.
“The Canadian market happens to be a bit narrower than the average market. That is why you have to pay extra attention to diversify the Portfolio by business ideas. We have always done this with the EdgePoint Canadian Portfolio, and it’s contributed to the outperformance over time.”
THE CHALLENGES OF CONSTRUCTING AND MANAGING A CANADIAN EQUITY PORTFOLIO
Each investment is based on a well-researched proprietary idea. We don’t construct the Portfolio with the index in mind. We build it from a bottom-up perspective and, as a result, typically look different than the index. We believe that investing in businesses with competitive advantages in their respective industries is a more effective approach to diversification than focusing on traditional sector allocations.
“We see Canada through global eyes, and the challenges to the Canadian economy are profound and deeply rooted.”
Richard Jenkins - Black Creek International Equity Fund
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