Ninepoint Focused Global Dividend Class

September 2018 Commentary

Year-to-date to September 30, the Ninepoint Focused Global Dividend Class generated a total return of 9.76% compared to the S&P Global 1200 Index, which generated a total return of 8.39 (CAD)%.

Returns in the month of September were good on both an absolute and relative basis, with the Fund generating a total return of 0.55% while the benchmark generated a total return of -0.26%. In September, the US 10-year bond yield rallied from 2.85% to 3.06%, crossing the key psychological level of 3.0%, which acted as a headwind for the equity markets. Our investments in the Industrials, Healthcare and IT sectors performed well and offset weakness in the Financials and Energy sectors.

As we write this commentary, the broad equity markets are in selloff mode, down more than 5% from the September peak. In just one week, the S&P 500 earnings multiple on 2019 estimates de-rated a full point, from approximately 17.3x to 16.3x. It is always difficult to pinpoint the exact trigger for a correction but the rapid rise in US 10-year bond yields, more hawkish than anticipated FED language, escalating trade friction between the US and China and concerns regarding the pending earnings season are all weighing on investor sentiment.

However, we believe that it is too early to position for an outright downturn. Economic data remains robust (global GDP is expected to grow 3.7% in both 2018 and 2019 according to the IMF) and 2019 should be another year of double digit earnings growth (consensus estimates imply 10.2% growth). Positive seasonality for the markets should kick in by the end of October (gains in November and December occur 75% of the time based on data from the past twenty years), the midterm elections should prove to be benign (on average markets rally 7% from August 31 to year-end around midterms based on history) and the pending third quarter earnings season will likely be better than feared.

Our modelling indicates that the Canadian dollar should continue to weaken in 2018. However, with Canada now joining Mexico in agreeing to a new trilateral trade agreement with the United States, we anticipate some near term Canadian dollar strength. Further, the equity market selloff has introduced a new level of complexity to our FX analysis as prior correlations become less statistically significant. We have therefore hedged half of our USD/CAD exposure to reduce volatility in the Fund.

Top contributors to the year-to-date performance of the Ninepoint Focused Global Dividend Class included Mastercard (+197 bps), Microsoft (+166 bps) and Visa (+139 bps). Top detractors year-to-date included Brookfield Asset Management (-47 bps), MGM Resorts International (-41 bps) and Affiliated Managers Group (-30 bps).

The Ninepoint Focused Global Dividend Class was concentrated in 28 positions as at September 30, 2018 with the top 10 holdings accounting for approximately 43.7% of the fund. Over the prior fiscal year, 21 out of our 28 holdings have announced a dividend increase, with an average hike of 15.4%. 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

Ninepoint Focused Global Dividend Class - Compounded Returns¹

1M YTD 3M 6M 1YR 3YR Inception
Fund -1.0% 18.4% 1.6% 4.2% 18.4% 9.5% 7.2%

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 September 30, 2018; e) 2015 annual returns are from 11/25/15 to 12/31/15. 

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; In ation risk; Interest rate risk; Liquidity risk; Market risk; Securities lending, repurchase and reverse repurchase transactions risk; Series risk; Short selling risk; Speci c 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 September 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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