August 23, 2016

Assiduous Readers will remember my rants about risk; risk is not something dumb, like “monthly volatility of portfolio value” (which, by the way, implicitly assumes that the critical consideration is Preservation of Capital); risk is the chance that a portfolio will not meet its objectives and hence cause the portfolio holder to revise his lifestyle downward from the expected level. I was pleased to find an essay today on this topic by Jean L.P. Brunel, titled Goals-Based Wealth Management in Practice:

Wealth management processes have not always been responsive to individual clients’ priorities and modes of thinking. A model is presented and evaluated that uses goals-based wealth management concepts to generate module-built portfolios, each of which is driven by a client’s expressed goals. This model allows for a high degree of flexibility and responsiveness to client needs with a practical level of standardization.

I can’t say I’m a fan of the module-based approach to implementation, however:

GenSpring uses four sets of goals-focused modules in creating portfolios:
1. Tax aware with nontraditional strategies,
2. Tax agnostic with nontraditional strategies,
3. Tax aware with only traditional strategies, and
4. Tax agnostic with only traditional strategies.

Goals-Focused Modules. Each of the four sets consists of nine modules that address all the categories of a client family’s needs. The modules are contiguous, but each module must be sufficiently different to distinguish it from the others. Each module must also be optimal within the constraints created by inevitable trade-offs while leaving room for flexibility.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.6146 % 1,702.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.6146 % 3,110.3
Floater 4.82 % 4.51 % 78,079 16.20 4 -0.6146 % 1,792.5
OpRet 4.84 % -10.34 % 62,390 0.08 1 0.0000 % 2,881.5
SplitShare 5.06 % 4.30 % 113,950 2.25 5 0.2470 % 3,436.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2470 % 2,681.5
Perpetual-Premium 5.45 % 2.17 % 76,429 0.19 12 -0.1063 % 2,701.0
Perpetual-Discount 5.11 % 4.96 % 107,615 14.93 26 -0.1541 % 2,913.2
FixedReset 4.93 % 4.16 % 150,219 7.10 89 -0.9843 % 2,068.8
Deemed-Retractible 4.97 % 1.61 % 118,365 0.26 32 -0.1722 % 2,806.9
FloatingReset 2.87 % 3.97 % 31,856 5.08 11 -0.4748 % 2,207.3
Performance Highlights
Issue Index Change Notes
TRP.PR.B FixedReset -2.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 11.81
Evaluated at bid price : 11.81
Bid-YTW : 4.17 %
BAM.PR.S FloatingReset -2.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 14.36
Evaluated at bid price : 14.36
Bid-YTW : 4.96 %
SLF.PR.G FixedReset -2.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.43
Bid-YTW : 9.69 %
TRP.PR.E FixedReset -2.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 18.51
Evaluated at bid price : 18.51
Bid-YTW : 4.33 %
HSE.PR.A FixedReset -2.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 12.30
Evaluated at bid price : 12.30
Bid-YTW : 4.86 %
TRP.PR.D FixedReset -2.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 17.66
Evaluated at bid price : 17.66
Bid-YTW : 4.48 %
BAM.PF.F FixedReset -2.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 4.46 %
MFC.PR.K FixedReset -2.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.75
Bid-YTW : 7.86 %
TRP.PR.A FixedReset -2.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 14.94
Evaluated at bid price : 14.94
Bid-YTW : 4.54 %
BAM.PF.G FixedReset -2.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 21.07
Evaluated at bid price : 21.07
Bid-YTW : 4.42 %
HSE.PR.E FixedReset -2.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 20.67
Evaluated at bid price : 20.67
Bid-YTW : 5.23 %
FTS.PR.H FixedReset -2.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 13.75
Evaluated at bid price : 13.75
Bid-YTW : 3.91 %
BAM.PF.B FixedReset -2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 18.42
Evaluated at bid price : 18.42
Bid-YTW : 4.68 %
MFC.PR.F FixedReset -2.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.25
Bid-YTW : 9.70 %
TRP.PR.F FloatingReset -2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 13.78
Evaluated at bid price : 13.78
Bid-YTW : 4.46 %
BAM.PR.Z FixedReset -2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 4.79 %
NA.PR.Q FixedReset -2.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 3.95 %
FTS.PR.G FixedReset -1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 18.32
Evaluated at bid price : 18.32
Bid-YTW : 3.91 %
BAM.PR.T FixedReset -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 4.74 %
CM.PR.Q FixedReset -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 20.89
Evaluated at bid price : 20.89
Bid-YTW : 4.16 %
IFC.PR.C FixedReset -1.78 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.17
Bid-YTW : 7.88 %
MFC.PR.I FixedReset -1.76 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.65
Bid-YTW : 6.26 %
BAM.PF.A FixedReset -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 4.55 %
TRP.PR.H FloatingReset -1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 10.59
Evaluated at bid price : 10.59
Bid-YTW : 4.27 %
RY.PR.J FixedReset -1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 20.64
Evaluated at bid price : 20.64
Bid-YTW : 4.14 %
MFC.PR.N FixedReset -1.66 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.91
Bid-YTW : 7.23 %
BAM.PF.E FixedReset -1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 19.75
Evaluated at bid price : 19.75
Bid-YTW : 4.39 %
FTS.PR.K FixedReset -1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 18.57
Evaluated at bid price : 18.57
Bid-YTW : 3.82 %
RY.PR.H FixedReset -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 19.01
Evaluated at bid price : 19.01
Bid-YTW : 4.00 %
TD.PF.A FixedReset -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 4.00 %
MFC.PR.L FixedReset -1.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.75
Bid-YTW : 7.18 %
BAM.PF.H FixedReset -1.42 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.40
Bid-YTW : 3.80 %
BAM.PR.X FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 14.22
Evaluated at bid price : 14.22
Bid-YTW : 4.48 %
PWF.PR.O Perpetual-Premium -1.30 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-31
Maturity Price : 25.50
Evaluated at bid price : 25.76
Bid-YTW : 2.17 %
BAM.PR.R FixedReset -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 4.64 %
NA.PR.X FixedReset -1.24 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-15
Maturity Price : 25.00
Evaluated at bid price : 26.27
Bid-YTW : 4.45 %
TRP.PR.C FixedReset -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 13.01
Evaluated at bid price : 13.01
Bid-YTW : 4.22 %
TD.PF.B FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 18.90
Evaluated at bid price : 18.90
Bid-YTW : 4.03 %
TD.PF.E FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 21.35
Evaluated at bid price : 21.65
Bid-YTW : 4.08 %
BAM.PR.C Floater -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 10.44
Evaluated at bid price : 10.44
Bid-YTW : 4.58 %
RY.PR.M FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 20.36
Evaluated at bid price : 20.36
Bid-YTW : 4.08 %
TD.PF.C FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 18.78
Evaluated at bid price : 18.78
Bid-YTW : 4.05 %
BAM.PR.K Floater -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 10.46
Evaluated at bid price : 10.46
Bid-YTW : 4.57 %
BNS.PR.Q FixedReset -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.08
Bid-YTW : 3.67 %
BAM.PR.B Floater -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 10.60
Evaluated at bid price : 10.60
Bid-YTW : 4.51 %
GWO.PR.N FixedReset -1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.55
Bid-YTW : 9.45 %
SLF.PR.H FixedReset -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.60
Bid-YTW : 8.56 %
CCS.PR.C Deemed-Retractible -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 5.44 %
PWF.PR.P FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 13.79
Evaluated at bid price : 13.79
Bid-YTW : 4.08 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PR.K Floater 199,415 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 10.46
Evaluated at bid price : 10.46
Bid-YTW : 4.57 %
SLF.PR.I FixedReset 146,945 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.72
Bid-YTW : 6.86 %
BIP.PR.C FixedReset 78,455 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 5.14 %
TRP.PR.J FixedReset 61,368 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 4.15 %
BMO.PR.T FixedReset 59,480 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 19.01
Evaluated at bid price : 19.01
Bid-YTW : 3.98 %
BAM.PR.R FixedReset 54,819 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 4.64 %
There were 55 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.M Deemed-Retractible Quote: 26.66 – 27.25
Spot Rate : 0.5900
Average : 0.4140

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-09-22
Maturity Price : 25.75
Evaluated at bid price : 26.66
Bid-YTW : -24.93 %

HSE.PR.E FixedReset Quote: 20.67 – 21.15
Spot Rate : 0.4800
Average : 0.3112

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 20.67
Evaluated at bid price : 20.67
Bid-YTW : 5.23 %

RY.PR.F Deemed-Retractible Quote: 25.15 – 25.55
Spot Rate : 0.4000
Average : 0.2406

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-09-22
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : -2.97 %

NA.PR.Q FixedReset Quote: 24.15 – 24.64
Spot Rate : 0.4900
Average : 0.3370

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 3.95 %

MFC.PR.M FixedReset Quote: 19.03 – 19.47
Spot Rate : 0.4400
Average : 0.2993

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.03
Bid-YTW : 7.19 %

CU.PR.F Perpetual-Discount Quote: 22.75 – 23.17
Spot Rate : 0.4200
Average : 0.2969

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-08-23
Maturity Price : 22.46
Evaluated at bid price : 22.75
Bid-YTW : 4.95 %

3 Responses to “August 23, 2016”

  1. BarleyandHops says:

    “Each module must also be optimal within the constraints created by inevitable trade-offs while leaving room for flexibility”

    Okay, I admit it. This is completely over my head. It sounds like “sales speak”.

    Keeping it simple, my accounts have either a growth or income targets. Or both in some way.

  2. jiHymas says:

    I agree that it’s not the most transparent explanation in the world!

    I think the procedure that is being described is that the portfolio objectives are first set out. For instance, you might have $1-million, of which you want to keep $250,000 fairly liquid because you might want to buy a vacation property, but $750,000 is earmarked for long-term income.

    Then each of these portions is assigned to a module. The $250,000 might go into a portfolio of short-term bonds, which the firm thinks is the best portfolio of short-term bonds possible, and $750,000 into the best long-term bond portfolio the firm can devise.

    The problem I have with this is that the overall portfolio then has a duration of … call it 13, being a weighted average of 4 and 16, and there may be better ways of constructing a bond portfolio with a duration of 13 than the barbell structure that the firm has come up with.

  3. BarleyandHops says:

    Funny that I did not read this with the “bond universe” in mind. Maybe b/c I have no bonds in any accounts. None. My bad?

    I like the long/short approach; but for now it is in GICs and prefs and some REITS (for current income).

    As of recent, prefs have been a preference. I put a good deal of interest in fixed resets as a long position (slf.pr.j / tri.pr.b ema.pr.a et al) since May 2015 in tax sheltered accounts which have a growth motive and to shelter income and cap gains. This seems to be panning out for the moment.

    I dont have modules or schedules.

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