Ninepoint Global Infrastructure Fund

August 2018 Commentary

Year-to-date to August 31, the Ninepoint Global Infrastructure Fund generated a total return of 3.77% compared to the S&P Global Infrastructure Index (CAD), which generated a total return of -0.08%.

Returns in the month of August were flat on an absolute basis but good on a relative basis, with the Fund generating a total return of -0.10% while the benchmark generated a total return of -2.10%. Although the US 10-year bond yield was essentially unchanged through the month of August, ending at 2.94%, our utilities holdings detracted from performance and we remain significantly underweight. The Industrials sector was also a notable detractor from performance in August with weakness in the E&C sector. Our outperformance in the month could be attributed to our positioning in the Information Technology, Health Care and Financials sectors, which validates our total infrastructure approach.

Admittedly, we are later in the economic and investment cycle, but we believe that it is too early to position for an outright downturn. The economic data remains robust and, broadly speaking, earnings growth will be exceptional throughout the balance of 2018. Further, current expectations for 2019 are calling for another year of double digit earnings growth.

Our modelling indicates that the Canadian dollar should continue to weaken in 2018. However, with Mexico agreeing to some form of bilateral trade agreement with the United States, currency volatility has picked up. Although Canada reportedly missed a month end deadline, we are hopeful that a more equitable, negotiated trilateral agreement can be reached shortly. We have therefore added some USD/CAD currency hedges to reduce volatility in the Fund.

Top contributors to the year-to-date performance of the Ninepoint Global Infrastructure Fund included Parkland Fuel (+153 bps), MasterCard (+145 bps) and CSX Corporation (+129 bps). Top detractors year-to-date included Westshore Terminals (-65 bps), Comcast (-63 bps) and Mastec (-52 bps).

On the morning of August 14, we were horrified to see footage of the Genoa highway bridge collapsing, with an eventual loss of 43 people. Beyond the tragic loss of life, it was apparent that the full ramifications from an operational and financial perspective (potentially including the termination of the concession agreement and significant financial penalties) could be dire. Atlantia Group was likely to come under pressure, since the Morandi Bridge, on the A10 toll road, was operated by Autostrade per l’Italia, which is 88% owned by Atlantia Group. Modern infrastructure simply should not fail to such an extent if inspected and maintained properly. We immediately sold our entire position in Atlantia while the stock was down mid-single digits, avoiding more than a 30% sell-off over the following days.

The Ninepoint Global Infrastructure Fund was concentrated in 33 positions as at August 31, 2018 with the top 10 holdings accounting for approximately 37.4% of the fund. Over the prior fiscal year, 28 out of our 33 holdings have announced a dividend increase, with an average hike of 10.2%. Using a total infrastructure approach, we will continue to apply a disciplined investment process, balancing valuation, growth and yield in an effort to generate solid risk-adjusted returns.

Jeffrey Sayer, CFA

Ninepoint Global Infrastructure Fund - Compounded Returns¹

1M YTD 3M 6M 1YR 3YR 5YR Inception
Fund 0.0% 24.3% 0.5% 6.7% 24.3% 9.8% 5.9% 7.7%

1 All returns and fund details are a) based on Series F units; b) net of fees; c) annualized if period is greater than one year; d) as at August 31, 2018; e) 2011 annual returns are from 09/01/11 to 12/31/11. 

The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: capital depletion risk; concentration risk; credit risk; currency risk; cybersecurity risk; derivatives risk; exchange traded funds risk; foreign investment risk; income trust risk; inflation risk; interest rate risk; liquidity risk; market risk; regulatory risk; series risk; short selling risk; small company 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), other charges and expenses all may be associated with mutual fund investments. Please read the prospectus carefully before investing. The indicated rate of return for series F units of the Fund for the period ended August 31, 2018 is based on the historical annual compounded total return including changes in unit 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. 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 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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