Your clients, Ernie, and Gina Smith, met with you a week ago because they were seeking

some
advice regarding how to invest a sum of money that is maturing from a GIC in two weeks. At
that time, you established that they did not want to invest in individual stocks, bonds, and money
market instruments, but wanted the entire amount invested in mutual funds. Although you
explained to them that they should select mutual funds from various companies, they told you
that they only wanted to use Mackenzie mutual funds because Gina has an administrative
position at that company. They have informed you that they are seeking similar investment
advice from at least one other financial advisor at another financial institution, and they are
willing to invest with you if you produce the best proposal.
You have had a chance to do some research and now you are about to present your
recommendations.
Your clients currently have the following financial assets and major personal use assets:

 a house worth $800,000, with a $400,000 mortgage

 a joint $330,000 GIC maturing in two weeks at a competitor’s financial institution this money
was originally inherited.
 a joint $40,000 non-redeemable GIC maturing in 3 years at your financial institution.
 Each of them has a savings account with a balance of $25,000.
 Ernie’ RRSP has $60,000 in a 3-year non-redeemable GIC at a competitor’s financial
institution.
 Gina’s RRSP has $70,000 in a 5-year non-redeemable GIC at your financial institution.
 neither spouse has a pension plan where they work, and each earns approximately
$80,000/year
 they are both in their late 50s, and their adult children are fully independent.
 both spouses have invested in various types of guaranteed and equity investments in the
past
Questions:
1. Given the information above, create a portfolio of mutual funds for their non-registered
account using the entire amount that is maturing from the GIC in two weeks. Ensure that the
portfolio meets their suitability requirements.
Create the mutual fund portfolio using only 5 different Mackenzie mutual funds.
Your proposed portfolio should include the fund name, fund code, amount invested, and
percentage of portfolio occupied by each of the mutual funds. [10 marks]
Answer:
Introduction of Mackenzie mutual funds:
Mackenzie Investments, a prominent Canadian investment management firm has established
itself as a symbol of collaborative excellence since its inception in 1967. Over a million clients
are served by the company's extensive suite of financial products, which includes mutual funds
and retirement solutions, through 175 investment advisors, with $192.2 billion (as of December
31, 2022) in assets under administration. As one of the Greater Toronto Area's Top 100
Employers in 2022, Mackenzie Investments is notable for its strong corporate culture of diversity
and inclusion. Situated for long-term expansion and dedicated to enduring partnerships, the
company continues to be a mainstay in Canada's financial scene, personifying steadiness, and
commitment. (Wealthprofessionals, n.d.)
Know Your Client:
Name of the Clients: Ernie and Gina Smith
Age: Late 50s
Children: Adult and Independent
Current Financial and Personal Status:
Ernie and Gina Smith both does not have pension plan.
Outstanding Mortgage is $400,000.
Current Net worth $950,000
Ernie and Gina Smith both are retiring. (table)
Clients Investment Knowledge:
Both of the couples have previously made investments in a variety of guaranteed and equity
products. Gina currently works as an administrative assistant at Mackenzie Investments.
Investment’s Goal and Preferences:
The main objective of Smiths' Couple is to diversify maturing GIC money into a portfolio of
Mackenzie mutual funds.
Client’s Risk Profile
Since the clients have previously made investments in a variety of guaranteed and equity
products, they can comprehend the risk and return of the portfolio.
Similarly, Ernie and Gina both are in their late 50s and their adult children are fully independent.
This indicates that they have no responsibility towards their children and they are at the age
nearing retirement. Similarly, neither of the two individuals has any pension plan.
So, looking at the present circumstance and their past investment, they can tolerate some
amount of risk because of their past investment in equity and the fact that they are fully
independent. However, since they are at the age nearing retirement, with no pension plan, they
should not be willing to take too much of risk.
Mutual Fund Portfolio:
Based on the investment objectives and current circumstances following are the details of a
proposed portfolio of Mackenzie Mutual funds.

Mutual Fund Name Fund Serie Amount % of

Code s Invested Portfoli
o
Mackenzie Unconstrained Fixed Income Fund MFC4765 F 66,000.00 20.00%
Mackenzie Strategic Income Fund MFC3233 F 66,000.00 20.00%
Mackenzie Canadian Bond Fund MFC027 F 99,000.00 30.00%
Mackenzie Inflation-Focused Fund MFC9495 F 49,500.00 15.00%
 Mackenzie Bluewater Canadian Growth MFC090 F 49,500.00 15.00%
Balanced Fund
Total 330,000.0
0

2. Asset allocation is known to be an important component of portfolio management.

Approximately what percentage of your proposed portfolio is invested in:
a. equities
b. fixed income
c. money market / cash
Show how you calculated those values. You may need to access various information
sources
beyond the Fund Facts documents to help you. [5 marks]
Answer:
Asset Allocation of portfolio refers to how the total amount of the portfolio is divided among
different assets (equities, fixed-income assets and money market/cash) within the portfolio of
funds.
(% of equity, fixed Income and money market/cash in Individual Mutual Fund.)

Mutual Fund Name Fund % of % of Fixed % of Money Total

Code Equity Income Market/ Cash %
Mackenzie Unconstrained Fixed MFC476 4.10 89.10 6.80 100.00
Income Fund 5
Mackenzie MFC323 53.10 44.70 2.20 100.00
Strategic Income Fund 3
Mackenzie Canadian Bond Fund MFC027 - 92.00 8.00 100.00
Mackenzie Inflation-Focused MFC949 30.20 52.10 17.70 100.00
Fund 5
Mackenzie Bluewater Canadian MFC090 61.00 32.80 6.20 100.00
Growth Balanced Fund

Asset Allocation of Portfolio

Fund Name Equity Fixed Money Market/

(%) Income (%) Cash (%)
Mackenzie Unconstrained Fixed Income Fund 0.82 17.82 1.36
Mackenzie Strategic Income Fund 10.62 8.94 0.44
Mackenzie Canadian Bond Fund - 27.60 2.40
Mackenzie Inflation-Focused Fund 4.53 7.82 2.66
Mackenzie Bluewater Canadian Growth 9.15 4.92 0.93
Balanced Fund
Total % of Assets 25.12 67.10 7.79

Total Asset Allocation in Portfolio (% of total Portfolio)

Equity: 25.12%
Fixed Income: 67.10%
Money Market/ Cash: 7.79%

3. Explain why the 5 funds chosen are the ideal combination for this family at this time in their
lives. Emphasize those features that make your selected funds stand out. Issues such as
various measures of rates of return, level of volatility, management expense, portfolio
manager’s investment philosophy, as well as other relevant issues, should all be addressed
in your discussion. [5 marks]

Answer:
Based on an understanding of the client’s risk profile, client’s age, and financial circumstance,
we believe the combination of 5 mutual funds meets their investment objectives.
As discussed earlier, based on their age and their current status, they should be focusing on
financial planning for retirement to maintain their standard of living and look for a fund that can
provide them with a stable income. Even though a fixed-income fund meets its investment
objectives, fixed-income funds are prone to interest rate risk. So, based on the past investment
of the client, balanced funds are included in the portfolio mix to reduce the risk of interest rate
risk.
Various Details of Mutual Funds are as follows:

Fund Name Dividend Level of Beta Risk Compou Manageme

Frequen Volatilit Tolerance nd nt
cy y Level Annualiz Expenses
(Annual ed (MER%)
ized Return (1
S.D) year)
Mackenzie Unconstrained Monthly 4.04 0.66 Low 3.50% 0.78%
Fixed Income Fund
Mackenzie Monthly 7.67 0.83 Low-Medium 4.50% 0.93%
Strategic Income Fund
Mackenzie Canadian Monthly 6.1 0.88 Low 1.50% 0.67%
Bond Fund
Mackenzie Inflation- Annual N/A N/A Low-Medium 2.20% 0.99%
Focused Fund
Mackenzie Bluewater Quarterly 10.25 0.88 Low-Medium 3.70% 0.95%
Canadian Growth
Balanced Fund
Out of five selected funds, three funds provide dividend in monthly basis. These will help the
client to get a fixed income in regular interval of time which will help them to maintain their living
standard after retirement.

All the mutual funds have beta of less than which indicate that the funds are less risky funds
which can also be observed from low level of standard deviation of the fund. All the mutual
funds have a risk tolerance level of low or low-medium.
Compound Annualized 1 Year return of Mutual Fund is also good and the MER% of mutual fund
is well below 1% which is considered as good MER%.
So, based on all above points and especially the investment objectives of the client, we think
that the above mentioned portfolio of mutual funds are the ideal combination for this family at
this time.
4. Produce the Fund Facts sheets for each of the five funds in your proposed portfolio, as well
as any other supporting documentation.