March 2016 fund performance

Varying weights to energy, materials and Valeant Pharmaceuticals made the difference for medalist funds in the Canadian Equity category in March 2016.

Christian Charest 28 April, 2016 | 5:00PM Achilleas Taxildaris
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Achilleas Taxildaris: The Canadian Equity category slightly outperformed the [S&P/TSX Composite Index] for the month of March with a 5.5% return, but still trails the benchmark year-to-date with a 3.7% return. Lower exposure in the metals and mining sector and energy sector explains most of this underperformance year-to-date. This underperformance helped active managers in 2014 and 2015 to mitigate losses and trail the benchmark right now as the resource sectors rally.

Of course, another factor is the weight of Valeant Pharmaceuticals within active funds. A lot of managers who either avoided or underweighted that particular stock got a positive impact on their returns versus the benchmark.

Let's start with NEI Ethical Canadian Equity, which finished the month of March with a 6.2% return and, year-to-date, 6.4%. It had a strong first quarter mainly because of smaller underweights in the resource space than some of its peers. This helped in reducing the impact of negative sector allocation. Also, [they had] strong stock selection in the consumer discretionary sector with the high-conviction name of Canadian Tire Corporation being one of the major contributors. This fund also had no position on Valeant, which further helped returns for the month and year-to-date.

Fidelity True North returned 3.8% for the month of March, resulting in 2.1% year-to-date. This Bronze-rated fund lagged its benchmark as its conservatively positioned portfolio will miss out on gains in lower-quality names in the resource space. Additionally, Valeant has been a longtime holding for this fund and while currently in an underweight versus the benchmark, resulting in a positive impact versus its benchmark, it still has a negative impact on absolute returns as well as in some comparison to its peers. Over the years, lead manager Maxime Lemieux was proactive in gradually taking profits over that name, resulting in a net positive contribution for the fund.

Leith Wheeler Canadian Equity had a 7.2% return for the month of March, resulting in a 6.3% year-to-date. This Bronze-rated fund had good stock selection in the consumer sector, helping overcome some of its underweighting in the resource space. Saputo, one of its largest holdings with a 6% weight, was a big contributor year-to-date. Also, the fund has no weight in Valeant and that further helped returns versus its benchmark.

PH&N Canadian Equity finished the month of March with a 6% return, resulting in a 4% return year-to-date. This Bronze-rated fund continued to trail its benchmark in the first quarter. While, like some of its peers, it has an underweight in the materials sector, unlike many it has an overweight in the energy sector, and that was a positive contributor to returns. Names such as Enbridge and Canadian Natural Resources were positive contributors. In the materials sector, besides the overall underweight, specific stock selection was also a negative contributor in returns, with names such as Agrium and Potash Corporation hurting its performance. This fund also owned Valeant and while at a slight underweight to the benchmark right now contributing positively versus the benchmark, it still hurts absolute returns as well as when comparing it to some of its peers. Furthermore, lead manager Doug Stadelman has owned this stock since 2011 and, unlike some of his peers, didn't do as good of a job harvesting profits from this stock, resulting in a negative contributor for the fund overall.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bausch Health Companies Inc11.02 CAD0.27
Canadian Natural Resources Ltd82.70 CAD-4.65
Canadian Tire Corp Ltd285.00 CAD-2.66
Enbridge Inc43.12 CAD-0.37Rating
Nutrien Ltd79.91 CAD1.93Rating
Saputo Inc28.19 CAD1.26Rating

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Christian Charest

Christian Charest  

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