Ninepoint Focused Global Dividend Class

April 2018 Commentary

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Year-to-date at April 30, the Ninepoint Focused Global Dividend Class generated a total return of 2.59% compared to the S&P Global 1200 Index, which generated a total return of 2.31%.

Returns in the month of April were good on both an absolute and relative basis, with the Fund generating a total return of 1.65% while the benchmark generated a total return of 0.83%. Thankfully, after a tough couple of months, April was generally better for the broad equity markets. The February to March correction reset valuations to levels roughly in line with historic averages and a solid earnings season provided some relief for investors.

Our modelling indicates that the Canadian dollar should continue to weaken in 2018. However, with some form of 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.

Top contributors to the year-to-date performance of the Ninepoint Focused Global Dividend Class included Mastercard (+79 bps), Visa (+54 bps) and Total (+53 bps). Top detractors year-to-date included Brookfield Asset Management (-44 bps), MGM Resorts (-37 bps) and Affiliated Managers Group (-28 bps). MGM declined after reporting an in-line quarter but guiding second quarter revenue per available room (RevPAR) growth to a range of 1% to 3%, which was below consensus expectations of 4%. With the guidance reset due to softness at the Monte Carlo and Mandalay Bay casinos (along with a notable fight cancellation in the second quarter), we believe free cash flow growth will allow the shares to grind higher in the near to mid-term.

Globally, luxury spending rebounded in 2017 and our favourite way to participate in the estimated 4% to 5% annual total market growth over the next three years is Kering (KER FP), the Paris-based conglomerate. The Group’s brands include Gucci, Saint Laurent, Bottega Veneta. Kering also owns the luxury watch brands Girard-Perregaux and Ulysse Nardin and the German sport & lifestyle brand Puma.

The Company’s most recent quarter demonstrated exceptional revenue growth indicative of the resurgence of its brands. Consolidated revenue grew an eye-popping 27.1% as reported and 36.5% on a comparable basis to €3,107.8 million. The results were driven by spectacular growth at Gucci (up 48.7% on a comparable basis), which accounts for about 50% of the Group’s sales, as millennials picked up on the return of ‘90s styles and fashion. In fact, Kering has been particularly good at integrating its internet strategies with traditional retail and online sales which more than doubled during the quarter. The next catalyst for the story should be the distribution of approximately 70% of the shares outstanding of Puma, as Kering returns to a luxury pure-play while Puma executes on its transformation plan.

The Ninepoint Focused Global Dividend Class was held 27 positions as at April 30, 2018 with the top 10 holdings accounting for approximately 45% of the fund. Over the past year, 22 out of our 27 holdings have announced a dividend increase, with an average hike of 16.6%. 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 April 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 April 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.

The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering or tax, legal, accounting or professional advice. Readers should consult with their own accountants and/or lawyers for advice on the specific circumstances before taking any action.

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