PORTFOLIO MANAGEMENT
Balancing traditional research techniques with modern portfolio science allows our team to find companies that demonstrate and maintain solid investing fundamentals.
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A Research-Centric Approach to Investing
Direct Stock-Holding Portfolio
Qube’s direct stock-holding portfolio—Kaleo—provides an alternative to mass market investment products.
Kaleo consists of a portfolio of stocks that are selected using an investment approach that applies company-specific fundamental analysis and strategic macroeconomic positioning. The model invests in a mix of domestic and international equities, with geographic weighting subject to change intermittently.
One aspect that sets Qube apart from other wealth managers is the complement of additional services included in our management fees. Clients can trust that we are viewing their wealth management through a holistic lens, focused on their own personal needs.
One Portfolio, Two Variations
Our Kaleo Full model is composed of 40 equally-weighted equity positions. From time to time, Qube may hold multiple positions in a single equity.
For clients with invested assets between $500K and $1M, we offer a subset of this model, called Kaleo A, which is composed of 28 equally-weighted positions. Kaleo A is offered in order to reduce brokerage fees. Returns since inception for each of our Kaleo models are similar by design.
We aim to hold a stock for 3-5 years in our Kaleo models. This means that we have an average portfolio turnover of 25%.
Our benchmark for Kaleo is defined as 50% of the MSCI World Index and 50% of the S&P TSX Composite Index. We chose our benchmark to more accurately represent the broad geographic diversification of our holdings in Kaleo.
A Look Inside Our Portfolio
Returns
Returns are after trading costs but before management fees on a model portfolio of $500,000. All returns for a period of more than one year are reported as annualized returns. Reported returns are for the period ending June 28, 2024. Kaleo Full and Kaleo A portfolio inception is January 3, 2011.
Mitigating Risk Through Diversification
The charts below provide a snapshot of the model’s investments on June 28, 2024. Please note Qube reviews and rebalances all of their portfolios on a scheduled basis; as such, the composition of this model may change.
Geographic Positioning by Revenue
Kaleo A
Kaleo Full
Sector Position
Kaleo A
Kaleo Full
Which Should You Invest In?
Qube has rated both of these models as “medium risk.” This rating is based on how much the portfolio’s returns have changed from year to year. It doesn’t tell you how volatile the portfolio will be in the future. The rating can change over time. A fund with a low-risk rating can still lose money. This investment model does not have any guarantees. You may not get back the amount of money you initially invested.
Or, as we endeavour to optimize our strategy, the value of the model can go down as well as up. One way to gauge risk is to look at how much a fund’s returns change over time. This is called “volatility.” In general, investments with higher volatility will have returns that change over time. They typically have a greater chance of losing money and may have a greater chance of higher returns. Investments with lower volatility tend to have returns that change less over time, and typically have lower returns and a lower chance of losing money.
Tailored to You
Qube’s team would love to discuss your personal risk tolerance with you, along with other details unique to you like your financial priorities and retirement goals.
Fees
Qube charges a monthly management fee based on your total assets under administration and reported on your statement—part of our commitment to being transparent and competitive. Custodial charges are separately charged and reported. We aim to keep all custodial and trading charges under 0.10-0.25% per annum wherever possible. We also provide you with a 0.3% loyalty discount automatically after your first 36 months of investment.
Valuable In-House Research
A PROPRIETARY VALUATION METHODOLOGY
We have spent over a decade taking insights discovered in the academic world and extending them into the investing space.
We do this by employing a dedicated team of equity analysts. Under the mentorship of our professional staff, this team applies our valuation model to a universe of quality public corporations seeking to discover a narrative and locate probable undervaluation.
THE RESEARCH PROCESS
We hire third and fourth-year Finance students from various post-secondary institutions to enact our in-house research, as envisioned and developed by Portfolio Manager Ian Quigley, MBA, CFA and overseen by Associate Portfolio Manager Patrick Choi, CFA. Incoming students undertake a 13-week training bootcamp that familiarizes them with Qube’s investing philosophy and practices. Our program is inspired by the methodology taught in both the CFA (Chartered Financial Analyst) as well as the CBV (Chartered Business Valuator) program.
Our research universe consists of roughly 250 companies. This pool of opportunities, coming from over 7500 potential stocks in North America, is created using a thoughtful statistical process using crafted metrics, including:
Shares Outstanding
Earnings Growth
Dividend Yield
Market Cap
Return on Assets/Invested Capital
Gross/Operating Margins
While our defined universe functions, we always remain open to potential deviations and will consider out-of-universe companies from time to time. Depending on the needs of our greater portfolio, our portfolio managers might also direct the analysts toward a specific industry.
To the side is the simple version of a complex process that includes many discussions between our analysts, portfolio managers, and investment counsellors. We have milestones in the research process that allow Qube’s ICPMs to check in with our analysts—from the initial valuation to the Steering Committee pitch.
STEERING COMMITTEE
Our Steering Committee is comprised of our registered associate and portfolio managers. The purpose of the committee is to consider the final reports generated from the research team and determine how best to implement the recommendation into the portfolio and clients’ accounts.
Not every company that gets pitched to the Steering Committee enters client portfolios. For example, the Steering Committee recently decided against a recommended purchase due to the stock’s illiquidity. Another positive recommendation was passed by because it had less upside than similar holdings already in the portfolio.
Pause for Reflection
The investment world is always changing, so we often pause to reflect on our valuation methodologies and to measure success. For example, in recent years, we have re-visioned how we value banks and REITs based on success indicators. Investment valuation is a craft and a never-ending quest of discovery. Thanks to the confidence of our investors, we have the privilege to journey on.