December 31, 2022

Market Context

• The Canadian stock market (S&P/TSX Composite Index) fell 5.8% in 2022. Commodity stocks were the only bright spot, with most other sectors declining.
  
• Global stocks, as measured by the Morningstar Developed Markets Index, were down 12.4% in Canadian dollar terms. Currency had a major impact in 2022. The loonie declined 7% against the U.S. dollar, which boosted the returns of American stocks in Canadian dollar terms. It gained against the Yen (+7%) and British Pound (+5%), dampening the returns of these stocks, and ended flat against the Euro.
  

Portfolio Specifics

• The fund holds 24 stocks, of which 12 are headquartered in Canada, 7 in the U.S., and 5 overseas.
• The fund declined 11.8% in 2022. Our Canadian holdings gained in aggregate, despite the market declining — an impressive accomplishment considering we held no oil & gas companies, the best performing sector in the country (up over 50%). Most U.S. and European holdings, however, struggled against the backdrop of rising inflation, higher interest rates, and the war in Ukraine.
  
• Sika and Keyence were hit particularly hard, both falling over 30%. After a long period of gains, Swiss cement manufacturer Sika reversed course in 2022 as investors are expecting the demand for construction services and cement to fall in a likely recession. Keyence experienced a similar story. The company has been a fruitful long-term holding, but the market reacted harshly to a potential slowdown in manufacturing and the demand for its robotics products.
  
• Our commodity-related and consumer holdings did well. Franco-Nevada (gold), Nutrien (fertilizer), and Metro (grocery stores) were among the best performers.
  
• Our manager, Fiera Capital, made four new purchases in 2022. U.K.-based agricultural equipment manufacturer CNH Industrial and Indian bank HDFC have both produced positive returns since their addition in the first half of the year. Zoetis didn’t fare as well. The stock languished despite the company’s dominant position in animal healthcare. It was replaced by Australian bio-pharmaceutical company CSL Limited late in the year to take advantage of tax loss selling.
  
• While not owning any oil & gas producers hurt performance this year, Fiera continues to believe there are better long-term opportunities elsewhere. They would, however, revisit certain stocks at the right price.
  

Positioning

• The fund is comprised of a concentrated group of businesses operating in a diverse array of industries, from information services to renewable energy to packaging. Our manager’s focus is on best-in-class companies that generate strong cash flows, have good growth prospects, and are well financed.
  

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Important information about the Steadyhand funds is contained in our Simplified Prospectus. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.