Manager commentary - December 31, 2018

IA Clarington Global Opportunities Fund Series A returned -8.7% during the fourth quarter of 2018. Its benchmark, the MSCI World Index,1 returned -8.5% in Canadian dollars.

The Fund’s positioning in financials and healthcare detracted from performance. In financials, the sector and our holdings underperformed as the equity market sell-off during the quarter led investors to reduce exposure to cyclical stocks. One of the biggest detractors in financials was Anima Holding SpA, an Italian asset manager. Continued political uncertainty in Italy has led to a sell-off in Italian markets and Anima shares, despite no material change in the company’s fundamentals.

The main contributors to performance during the quarter were the Fund’s positioning in the consumer discretionary and technology sectors. One of the best performers in consumer discretionary was G8 Education Ltd. (a leading childcare provider in Australia), which re-rated on improving occupancy at its centres. The company’s update gave investors confidence in a turnaround for the sector from the recent oversupply of centres. In technology, an underweight position helped the Fund avoid one of the worst-performing sectors during the quarter. The Fund was underweight the technology sector due to the sector’s run over the past few years, which made it difficult to find new bargain opportunities.

New positions initiated during the quarter were investments in Lundin Mining Corp., Hudbay Minerals Inc., Qualicorp SA, and Card Factory plc. We exited our position in Xtep International Holdings Ltd. during the quarter due to the stock reaching our estimates of full value.

Looking into 2019, we believe that markets will continue to be concerned with political uncertainty, global monetary policy and global economic growth. With our global long-term value approach, we will continue to look for the best investment opportunities around the world and take advantage of any opportunities caused by volatility in markets. Our focus on companies with strong balance sheets or asset value support should help protect on the downside from company-specific or macro events.

Fund and benchmark performance as at December 31, 20181 year3 year5 year10 year
IA Clarington Global Opportunities Fund - Series A-13.3%-1.72.7%6.2%
MSCI World Index-0.5%5.8%9.9%10.9%

 

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1Source: MSCI Inc. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. The performance data comparison presented is intended to illustrate the Fund’s historical performance as compared with historical performance of widely quoted market indices. There are various important differences that may exist between the Fund and the stated indices that may affect the performance of each. The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of 24 developed market country indices. The Fund’s market capitalization, geographic and sector exposure may differ from that of the benchmark. The Fund’s currency risk exposure may be different than that of the benchmark. The Fund may hold cash while the benchmark does not. It is not possible to invest directly in market indices. The performance comparison is for illustrative purposes only and does not imply future performance. Effective November 30, 2011, Radin Capital Partners Inc. replaced OppenheimerFunds, Inc. as sub-advisor to the Fund.