Highstreet Asset Management Inc.
Income Options with the Highstreet Dividend Income Fund

Canadian Low Volatility

Approach

The investment objective of the Fund is to provide investors with:

  • A long-term rate of return similar or slightly in excess of the rate of return of the benchmark index (S&P TSX Composite)
  • Reduced risk vs. the benchmark (volatility calculated on a 4 year rolling basis)
  • Strong downside protection

Process

Looking at the recent history of the S&P/TSX index, returns on MORE volatile equities have not exceeded the historical returns on LESS volatile equities:

Ratio of Average Returns to Standard Deviation

Our research has shown us that, over the long term, less volatile equities have delivered better risk-adjusted returns.

Stocks in the Fund are selected to minimize the portfolio volatility. Highstreet is using a "Minimum Variance Approach" with respect to the construction of the portfolio. The portfolio's variance is minimized by considering the covariance (or the measure of how much two random variables move together) among stocks, as proposed by Markowitz (1952). Factor Models and Quadratic Programming Solvers are then utilized to construct the Minimum Variance Portfolio.

At the same time, the stocks selected need to satisfy various constraints so that the Fund maintains a similar industry and size profile relative to the benchmark.

The fund will be invested in a minimum of 50-100 stocks with representation in most market sectors and across all market-cap bands.