Fund Manager
Eric Dzuba
Asset markets moved ahead in the third quarter as investors continued to seek out risk, and administered rates remained low while government spending filled gaps in the global economy.
Big returns in the Canadian equity universe came from the materials and energy sectors during the month of September. On the materials side, shares of precious metal companies, of all market caps, led the charge with a select number of base metals stocks contributing to the sector’s performance. Historically, we have found little value in this space; however, there were profitable pair trades in gold equities this quarter.
On the energy side, smaller, gas-weighted names led the way for that sector this month. The Fund’s net exposure was about half the index weight in energy names in its equity allocation. The Fund benefited from positive contributions by Pengrowth Energy Trust and the Arc Energy Trust. The thesis on the Pengrowth is playing out well: new management looks poised to lower costs, apply new technologies to its original oil-in-place pools, and attract an institutional investor share base. The distribution cut announced just after quarter end should be viewed as a positive move.
Other securities making a significant contribution to the fund this quarter included Onex Corporation and Annaly Capital Management Inc., a US based mortgage REIT.
Credit spreads continued to come in during September, touching below 100 briefly at mid month on the IG index. The Fund’s fixed income securities generally gained in price (yields came in), contributing to the positive fund performance. Canadian investors saw a flurry of convertible debt deals over the month as investor appetite for yield/low risk brought many companies and trusts to market.
The Fund continues to hold a significant amount of cash as it is still difficult to reconcile the real economy with the strength in asset prices. Although in the short term governments are able to inject liquidity to keep an economy going, over the medium-to-longer term they don’t create wealth. Current equity valuations require both corporate top and bottom lines to show improvements: earnings have beaten expectations based on cost cutting, not actual sales growth. It remains to be seen how long the global economy can go without the aid of the U.S. consumer: this is the risk that the “too far too fast” asset market will face during the next few quarters.
Eric Dzuba
Eric Dzuba - Q3 2009 Commentary
Date Published
Related Fund(s)
Fund Manager
Asset markets moved ahead in the third quarter as investors continued to seek out risk, and administered rates remained low while government spending filled gaps in the global economy.
Big returns in the Canadian equity universe came from the materials and energy sectors during the month of September. On the materials side, shares of precious metal companies, of all market caps, led the charge with a select number of base metals stocks contributing to the sector’s performance. Historically, we have found little value in this space; however, there were profitable pair trades in gold equities this quarter.
On the energy side, smaller, gas-weighted names led the way for that sector this month. The Fund’s net exposure was about half the index weight in energy names in its equity allocation. The Fund benefited from positive contributions by Pengrowth Energy Trust and the Arc Energy Trust. The thesis on the Pengrowth is playing out well: new management looks poised to lower costs, apply new technologies to its original oil-in-place pools, and attract an institutional investor share base. The distribution cut announced just after quarter end should be viewed as a positive move.
Other securities making a significant contribution to the fund this quarter included Onex Corporation and Annaly Capital Management Inc., a US based mortgage REIT.
Credit spreads continued to come in during September, touching below 100 briefly at mid month on the IG index. The Fund’s fixed income securities generally gained in price (yields came in), contributing to the positive fund performance. Canadian investors saw a flurry of convertible debt deals over the month as investor appetite for yield/low risk brought many companies and trusts to market.
The Fund continues to hold a significant amount of cash as it is still difficult to reconcile the real economy with the strength in asset prices. Although in the short term governments are able to inject liquidity to keep an economy going, over the medium-to-longer term they don’t create wealth. Current equity valuations require both corporate top and bottom lines to show improvements: earnings have beaten expectations based on cost cutting, not actual sales growth. It remains to be seen how long the global economy can go without the aid of the U.S. consumer: this is the risk that the “too far too fast” asset market will face during the next few quarters.
Eric Dzuba