Multi-Asset Strategies Commentary: As at March 31, 2024*

Picton Mahoney Fortified Multi-Asset Fund

The Picton Mahoney Fortified Multi-Asset Fund Class F (“the Multi-Asset Fund”) increased by 6.21% in the first quarter of 2024, outperforming its blended benchmark return of 4.91%.

Whereas U.S. government bond yields (as represented by 10-Year tenors) have been rising year-to-date, stock indices have also generally risen, notwithstanding. As inflation has moderated from last year, the sensitivity of equity valuations to interest rates has likely calmed. That said, broader participation of sectors and themes in equity-land has been a welcome feature in the period.

As “balanced” strategies go, lagging fixed income assets have been offset by the broadening of equity markets as the “hard or soft landing” debate in the economy gives way to “steady as she goes”, for the most part. That said, balanced investors should not have to rely so much on one asset class to pull all the weight in their portfolios. We believe the Multi-Asset Fund can offer investors more diversification opportunity; still targeting very competitive returns all while generally being “underweight” traditional market risks, via lower beta to Developed Market Equities and Interest Rates asset classes.

To wit, the dedicated exposure to inflation-sensitive assets in the portfolio has demonstrated its raison-d’etre, as a means of redistributing equity risk toward economically-sensitive assets which have the dual benefit of hedging against the ongoing erosion of purchasing power. We believe investors will be more sensitive to real returns going forward, after multiple decades of contained disinflation and the Multi-Asset Fund is purpose-built to both manage risks and seek opportunities many traditional balanced mandates do not seem to consider.

In terms of shifts in asset allocation, a modest move from active fixed income exposure via the Picton Mahoney Fortified Income Fund toward more benchmark-like government bond exposure (as interest rates rose in the period) exhibits a modest neutralization of our generally lower sensitivity to interest rates. This should not be viewed as a “call” on the direction of rates, per se, but rather an acknowledgement of diversification opportunities and risk-contribution within the strategy overall.


Picton Mahoney Fortified Multi-Strategy Alternative Fund

The Picton Mahoney Fortified Multi-Strategy Fund Class F (“the Multi-Strategy Fund”) returned 5.01% in the first quarter of 2024.

Q1 2024 was generally positive for risk assets with dispersion across asset classes. The character of the markets changed as the quarter progressed with improved breadth and a return of inflationary dynamics.

The beginning of the quarter maintained the ongoing theme from the end of 2023 of narrow equity leadership and a focus on large cap US technology companies. However, as the quarter progressed several other asset classes began to trend higher in addition to more breadth becoming evident in the equity markets. Both characteristics helped performance given the diversified nature of the portfolio.

A consistent theme throughout the quarter was weakness in government bonds due to the ongoing resilience of U.S. and global economic data, as well as several higher than anticipated inflation data points. As a result, the number of central bank rate cuts anticipated by the market decreased and moved further out in time putting upward pressure on bond yields. An inflationary theme began to enter the markets as the first quarter ended.

The largest contribution to portfolio performance in the first quarter was from the active uncorrelated components of the portfolio. The funds benefited from positive return contributions from all the core uncorrelated active strategies as well as the Quantitative Equity Factor risk premia.

The largest contribution to the Asset Allocation portion of the portfolio was from Equity markets. Other large contributors to positive performance were Energy commodities, Precious Metals as well as Grains and other soft commodities. The largest detractor was due to the Rates asset class – reflecting the rising bond yields mentioned above.

We believe maintaining exposure to tail risk hedging is prudent as our economic cycle model continues to indicate late-stage dynamics.

Diversification across asset classes and strategies is likely the best long-term approach and is expected to be rewarded over longer time horizons.

We maintained a larger than model weight exposure to the uncorrelated active strategies we manage here at Picton Mahoney Asset Management, namely the Picton Mahoney Fortified Market Neutral Alternative Fund, the Picton Mahoney Fortified Income Alternative Fund and Picton Mahoney Fortified Arbitrage Plus Alternative Fund. Diversification of styles and approaches over the long term can help reduce the impact of poor performance within a specific style or asset class.

Across the active strategies, the largest contributor to positive performance in Q1 was the Picton Mahoney Fortified Market Neutral Alternative Fund.

The portfolio slightly trailed the benchmark as well as generic 60/40 approaches in Q1 2024 but decreased the gap significantly in the later parts of the quarter as the inflationary dynamic emerged and equity market breadth improved. This normalization of behavior increased the probability of the fund to outperform the benchmark as well as generic 60/40 models. As the current market environment continues to evolve, our approach to source returns both directional (asset classes) and non-directional (uncorrelated strategies) will likely result in improved portfolio construction imperatives such as risk diversification, lower correlation, and quality of returns.




Our proprietary economic cycle model continues to ebb and flow with incoming economic data between a mild recessionary environment and a reacceleration environment while our inflation cycle model points to a slowing in the moderation of inflation. Regarding the economic cycle, we are inclined to let the evidence continue to bear out before making more decisive asset allocation calls with the intent of embracing risk. As noted above, our process remains squarely focused on mitigating downside capture, so as not to be compelled to achieve all (or greater) upside capture when traditional risk asset markets are in gear.

We expect the ongoing sensitivity of markets to bond yields to moderate as growth data becomes more important than inflation data. And we believe our Fortified Portfolio Construction process offers an objective and repeatable allocation process that is evidence-based and progressive in nature. Maintaining smoother transitions through economic cycle phases and market regimes is critical in delivering target returns with lower risk than traditional “balanced” / “diversified” portfolio construction models.


  1M (%) 3M (%) 6M (%) 1YR (%) 3YR* (%) 5YR* (%) Since Inception* (%)
Picton Mahoney Fortified Multi-Asset Fund (Class F) 2,50 6,21 11,47 11,40 4,55 7,76 7,09
(Oct. 29, 2015)
Blended Benchmark1 1,94 4,91 11,90 13,04 4,89 6,41 6,37
(Oct. 29, 2015)
Picton Mahoney Fortified Multi-Strategy Alternative Fund (Class F) 3,84 5,01 8,82 5,36 3,13 4,55 4,64
(Sept. 27, 2018)
Blended Benchmark2 2,60 5,25 11,21 13,05 5,62 6,73 6,11
(Sept. 27, 2018)
Traditional 60/40 Portfolio3 2,12 6,71 14,80 6,71 15,41 5,55 6,86
(Oct. 29, 2015)


(*) Annualized performance

Source: Picton Mahoney Asset Management

1Blended Benchmark = 15% S&P/TSX Composite Index (TR), 30% MSCI World Index (Net Returns) (in CAD), 10% FTSE TMX Canada 30 Day TBill Index (TR), 25% ICE BofA Merrill Lynch Global High Yield Index (TR) (Hedged to CAD), 5% ICE BofA Merrill Lynch Global Corporate Index (TR) (Hedged to CAD), 15% ICE BofA Merrill Lynch G7 Global Government Index (TR) (Hedged to CAD)

2Blended Benchmark = 5% FTSE TMX Canada 30 Day T-Bill Index, 40% MSCI World 100% Hedged to CAD Net Total Return Index, 5% LMBA Gold Price, 40% ICE BofAML Global Broad Market Index (Hedge to CAD), 10% S&P GSCI Canadian Dollar Hedged Index TR

3Traditional 60/40 Portfolio = 60% MSCI World Index (Net Returns) (in CAD), 40% ICE BofAML Global Broad Market Index (Hedge to CAD)

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Le présent document a été publié par Gestion d’actifs Picton Mahoney (« GAPM ») le April 16, 2024

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