Manager commentary - Q4 2019

North American equities, both large and small cap, posted positive quarterly results to end the year on a strong note. The market results were aided by reduced uncertainty stemming from the U.S.-China trade deal and the U.K. election results, which gives the government a solid mandate to finally complete the Brexit process. Accommodative central bank monetary policies also provided further stimulus to the stock market.

Unstable Middle East oil production, a lack of transportation options for Canadian oil, slowing U.S. economic growth and an inverted yield curve for a period in 2019 continue to stoke fears of an economic recession. However, on the positive side, unemployment, inflation and interest rates remain low and consumer confidence remains strong.

The energy, industrials and information technology sectors contributed to the Fund’s performance. Top individual contributors to the Fund’s performance included holdings in Cineplex Inc. (helped by a takeover offer), Sangoma Technologies Corporation and Birchcliff Energy Ltd.

The consumer staples and real estate sectors detracted from the Fund’s performance. Individual detractors from performance included Sir Royalty Income Fund, OceanaGold Corporation and Maple Leaf Foods Inc.

The fund manager added one new holding to the Fund during the period, privately owned Opera Event, Inc. The company was added to gain exposure to the rapidly growing eSports (competitive gaming) sector. Positions in Canadian Western Bank, Comerica Incorporated, Interfor Corp., Russel Metals Inc. and Sangoma Technologies were eliminated primarily to take profits on share price strength. Similarly, positions in Altus Group Ltd, Gibson Energy Inc., Park Lawn Corp, Parkland Fuel Corp. and Viemed Healthcare Inc. were reduced after a run up in the shares, as well as to improve fund diversification. Positions in Sir Royalty Income Fund and Titanium Corporation Inc. were reduced on deteriorating fundamentals and to manage risk.

The fund manager believes that global growth should continue, which will help to increase demand for Canadian products. Although housing and government policies are a concern, the Canadian economy remains on a solid foundation and should grow in-line with G7 economies. Currently, Canadian equities are historically inexpensive relative to U.S. equities. As a result of these factors, the fund manager has maintained the Fund’s overweight exposure to Canadian equities versus U.S. equities.

Fund and benchmark performance as at December 31, 20191 year3 years 5 yearSince inception (Jun. 2012)
IA Clarington Focused Canadian Equity Class - Series A4.1%-1.9%1.9%4.6%
50% S&P/TSX Composite Index, 50% S&P 500 Index18.1%8.7%9.3%12.9%

 

Learn more about IA Clarington Focused Canadian Equity Class

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 benchmark is a blend of S&P/TSX Composite Index (50%) and S&P 500 Index (50%). The blended benchmark presented is intended to provide a more realistic representation of the general asset classes in which the Fund invests. The S&P/TSX Composite Index is the premier indicator of market activity for Canadian equity markets, with 95% coverage of Canadian-based, TSX-listed companies. The index includes common stock and income trust units and is designed to offer the representation of a broad benchmark index while maintaining the liquidity characteristics of narrower indices. The S&P 500 Index includes 500 leading companies in leading industries of the U.S. economy and is widely regarded as the best single gauge of the U.S. equities market. Although the S&P 500 Index focuses on the large cap segment of the market, its coverage includes approximately 80% of the market. 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 on or about May 30, 2019, the sub-advisor of the Fund was changed from Taylor Asset Management Inc. to IA Clarington Investments Inc.