We are living in interesting times.
Geopolitical tensions, tariffs, trade wars, inflation, social unrest, challenges to established institutions and the current multi-week government shutdown in the U.S. are all contributing to the uncertainty and unpredictability for which 2025 is likely to be remembered.
However, corporate earnings remain healthy, the AI-technology investment boom marches forward, economic growth has remained steady, and interest rates have moved lower. Since bouncing off the Liberation Day lows in early April, the public markets have brushed aside warning signals and have chosen to focus on the positive indicators.
While we’ve benefited from this tailwind, our Investment Committee remains focused on balancing the pursuit of current opportunities with disciplined risk management and long-term positioning. As we reflect on the third quarter, we wanted to share some insights into how we’ve navigated recent developments and what we’re considering as we look toward year-end.
The first is the potential for a market pullback.
The public equity exposure in our five mandates range across geographies, market capitalization, and investment style. This diversified approach is balanced from a sector standpoint, with financials, information technology and industrials currently carrying the largest weightings.
With equity markets at all-time highs, it is easy to suggest that a correction is around the corner, but pinpointing exactly when this will happen is more challenging. This is where the rationale behind our approach becomes more obvious.
A reduced reliance on public equities allows us to invest in asset classes that have low correlations to the direction of the stock market. Diversifying our equity exposure reduces our dependence on any one country or company and our willingness to hold cash in our funds de-risks the portfolio and provides capital that can be deployed when buying opportunities emerge.
In this environment, adhering to our active management approach is more important than ever.
In fact, new investment decisions in 2025 have already exceeded the total for 2024. This makes sense as periods of increased volatility typically provide opportunities for portfolio re-positioning.
Of the investments allocated across four asset classes year-to-date, about 60% of this was directed towards Canadian, U.S. and International public equity markets. The selloff from February to April provided attractive entry points, complementing allocations that have been made on a consistent basis throughout the year.
As active managers, we are always realigning and responding to shifting market conditions. In the third quarter, we made the decision to allocate capital to a Toronto-based global small-cap equity manager. This will be our first allocation to this firm, and it was preceded by nearly 12 months of due diligence.
We added to our public bond exposure in the third quarter, with an allocation to one of our long-standing managers. This asset class has become more of a focus in the last couple of years as interest rates moved higher and the increased weighting could prove timely as central banks began making cuts. Our bond exposure also serves the dual purpose of providing predictable cash flows and stability should volatility re-emerge.
Third quarter private equity and private real estate investments were also made. In 2025, both asset classes have lagged their recent performance, but we do not expect this trend to continue, and both remain key components of our investment strategy.
Amidst all the noise, planning is paramount.
December 31st is approaching, and it is prudent to dedicate time for any year-end financial and tax planning. Among other key dates, December 15th is the last installment date for taxpayers remitting quarterly, and for those corporations with a calendar year end, December 31st is the last date to make any IPP contributions for 2025. Watch for our Wealth Planning Group’s annual “Personal Financial Checklist” early in the new year—a valuable roadmap for 2026.
We look forward to sharing more ideas and insights with you in the months ahead.
To find out more about Newport’s unique investment approach and discuss how our strategies align with your goals for 2025 and beyond, get in touch.
Kyle Smith, MBA, CFA® is a Managing Director & Portfolio Manager and a member of Newport Private Wealth’s Investment Committee.
