Year-to-date to March 31, the Ninepoint Focused Global Dividend Class generated a total return of 0.93% compared to the S&P Global 1200 Index, which generated a total return of 1.46%.
Returns in the month of March were acceptable on a relative basis but disappointing on an absolute basis, with the Fund generating a total return of -1.46% while the benchmark generated a total return of -1.66%. After a fantastic start to the year and a correction in February, March was another difficult month for the global equity markets. However, a weakening Canadian dollar provided a tailwind to the Fund in the month.
Our modelling indicates that the Canadian dollar should continue to weaken in 2018. Although the Canadian dollar strengthened throughout January on accelerating global growth expectations, the currency began to decline in February and the trend persisted through the middle of March. With a resolution to the ongoing NAFTA negotiations expected shortly, we have hedged approximately half of our USD exposure in order to reduce currency-related volatility in the Fund.
Following months of investigation and threats, the Trump administration recently announced its intention to place tariffs on approximately $50 billion worth of Chinese goods, heightening the risk of a global trade war. Despite the concerning headlines, we believe that negotiations will prevail before any significant damage can be done to the outlook for global growth and corporate profits. From our perspective, the correction has provided an opportunity to high-grade our portfolios and add exposure to sectors and stocks that benefit most in a mid to late-cycle environment.
Top contributors to the year-to-date performance of the Ninepoint Focused Global Dividend Class included Mastercard (+71 bps), Raytheon (+60 bps) and Microsoft (+39 bps). Top detractors year-to-date included Brookfield Asset Management (-43 bps), Valeo (-20 bps) and Credit Suisse Group (-15 bps). Note that we have sold our position in Valeo, based on disappointing margin progression and weak free cash flow generation as we approach the top of the automotive sales cycle.
Consistent with our positive outlook on the sector, Interxion Holdings (INXN US), the US-listed but European-focused provider of cloud and carrier-neutral data centers, rallied just over 10% in March, driven by a solid financial report and upbeat guidance. Revenue for Q4 and 2017 increased by 18% and 16% to €130 million and €489 million respectively, as European data center deployment continues to catch up to the US. With the Company forecasting both revenue and adjusted EBITDA growth of 15% in 2018 and the stock at a discount to the major US peers, we expect continued gains in 2018.
The Ninepoint Focused Global Dividend Class was concentrated in 25 positions as at March 31, 2018 with the top 10 holdings accounting for approximately 44.2% of the fund. Over the past year, 19 out of our 25 holdings have announced a dividend increase, with an average hike of 20.0%. We will continue to apply a disciplined investment process, balancing various quality and valuation metrics, in an effort to generate solid risk-adjusted returns.
Jeffrey Sayer, CFA
1 All returns and fund details are a) based on Series F shares; b) net of fees; c) annualized if period is greater than one year; d) as at March 30, 2018; e) 2015 annual returns are from 11/25/15 to 12/31/15. The index is S&P GLOBAL 1200 TR (CAD) and is computed by Ninepoint Partners LP based on publicly available index information.
The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: ADR risk; Capital depletion risk; Capital gains risk; Class risk; Credit risk; Currency risk; Cybersecurity risk; Derivatives risk; Exchange traded funds risk; Foreign investment risk; Inflation risk; Interest rate risk; Liquidity risk; Market risk; Securities lending, Repurchase and reverse repurchase transactions risk; Series risk; Short selling risk; Specific issuer risk; Tax risk.
Ninepoint Partners LP is the investment manager to the Ninepoint Funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), and other expenses all may be associated with investing in the Funds. Please read the prospectus carefully before investing. The indicated rate of return for series F shares of the Fund for the period ended March 30, 2018 is based on the historical annual compounded total return including changes in share value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Fund may be lawfully sold in their jurisdiction.
The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP and are subject to change without notice. Ninepoint Partners makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint Partners assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint Partners is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners LP. Any reference to a particular company is for illustrative purposes only and should not to be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by Ninepoint Partners LP is or will be invested. Ninepoint Partners LP and/ or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. Ninepoint Partners LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, Ninepoint Partners LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.
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