Natixis Canada Blog

Month: July 2016

Resources Drive Canadian Markets Higher in Q2

Keith Graham Rondeau Capital
Keith Graham, 
Rondeau Capital, Lead Manager: NexGen Turtle Canadian Balanced Fund

The 2nd quarter of 2016 was a strong one in most global equity markets and particularly in Canada. The S&P/TSX Composite Index was up over 5% in the quarter, driven by a strong rebound performance in the resource space after a very weak 2015. The NexGen Turtle Canadian Balanced Fund continued in its focus on “Capital Growth at a Conservative Pace” and delivered another quarter of steady NAV growth for shareholders.

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Kyle D’Silva, MBA, CFA, Manager of NexGen Canadian Dividend Funds & NexGen Canadian Diversified Income Funds

In the second quarter of 2016, North American markets performed well with the S&P/TSX Composite almost doubling the return of the S&P 500 in Canadian dollar terms (Exhibit 1). Sectors that drove equity market performance in Canada were Materials, Energy, and Utilities, while Consumer Discretionary, Consumer Staples, and Information Technology stocks retreated on average. Fixed income markets performed well as government bonds, corporate bonds, and preferred shares rallied owing to investors searching for yield and safety. In summary, investors that exhibited patience during the first quarter’s volatility were handsomely rewarded in the second quarter with solid returns across asset classes, geographies, and sectors.

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Q2 2016: Quarterly Investment Review

Joseph Sirdevan & Scott Connell – Galibier Capital Management Ltd.







At Galibier, we are focused on the long term and are willing to have short-term fluctuations as long as there is the potential for good long-term absolute returns. With a concentrated portfolio, we expect volatility versus our benchmarks and we are willing to sustain this short-term pain against our long-term objectives.

Adhering to our philosophy of owning companies with enduring competitive advantages and solid long-term growth rates means we generally do not have a lot of exposure to the volatile cyclical industries such as Energy and Materials which happened to be strong in the quarter.

The top performing sector in Canada was Materials, which includes base metals and gold (+27%), followed by Energy (+10%) and Utilities (+7%). The worst performing sector, Health Care, was down (-15%). As prices increased during the quarter, we significantly reduced our exposure to energy and eliminated our one gold position.

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Q2: Market Volatility Continues

Darren Ducharme & Harold Scheer, Baker Gilmore & Associates, Portfolio Managers of NexGen Corporate Bond Funds

The second quarter saw the continuation of the high levels of market volatility that were experienced in the first three months of the year. Developed market government bond yields rose early in the period, as improving investor risk appetite led to a rise in equity prices and tightening of credit spreads; however, yields tumbled sharply and prices of riskier assets underperformed in June after the US Federal Reserve left policy rates unchanged – and lowered its outlook for the path of future rate increases – and the UK electorate surprised markets by voting to leave the European Union. With global uncertainty rising, the US dollar rallied against most currencies and oil prices continued their rebound from the lows seen in February.

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Brexit Triggers Flight to Safety In June


Jeff Herold
Jeff Herold, J. Zechner Associates, PM of NexGen Canadian Bond Funds

Global bond markets, including that of Canada, were dominated in June by the run-up to and the aftermath from the British referendum to leave the European Union. The uncertainty regarding the impact of the negative referendum vote caused investors to buy sovereign government bonds as a safe haven. The yield of 10-year German Bunds, for example, fell below zero, ending the month at -0.13%, while 30-year U.S. Treasury yields closed at an all-time record low of 2.28%. Canada Bonds also benefitted from the flight to safety bid, as Canada’s AAA rating proved attractive to investors. The FTSE TMX Canada Bond Universe returned 1.77% in June, the best monthly result since January 2015.

The effect of Great Britain leaving the European Union, if it happens, will be felt most acutely in Britain. In addition to needing to renegotiate trade treaties with the E.U., the British economy will be hurt by businesses choosing to shift operations out of the U.K. to remain within the world’s largest trading bloc. The risks to the British economy were reflected in a sharp drop in the pound to the lowest level in over 30 years.

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