Global Equity Fund

September 30, 2018

Market Context

  • Global stocks, as measured by the Morningstar Developed Markets Index, were up 2.8% in Canadian dollar terms in the quarter.
  • The U.S. market (S&P 500 Index) was a standout, gaining 7.7%. Markets in Europe were mostly flat, and emerging markets declined modestly (although China fell 8%).

Portfolio Specifics

  • We made the difficult decision to change the manager of the fund in mid August. Velanne Asset Management has taken over portfolio adviser responsibilities, replacing Edinburgh Partners. Velanne is led by Anne Gudefin, who has built an excellent track record managing global equity portfolios since 2003.
  • Following the manager change, most of the holdings were replaced with new investments. The transition is now complete. The fund holds 54 stocks, of which 24 are based in the U.S., 21 in Europe, eight in Asia, and one in Canada.
  • Notably, the fund now has more exposure to American companies. In the U.S., technology companies have garnered much attention. Velanne, however, is finding opportunities in areas that remain under the radar — in particular, media companies (21st Century Fox, Discovery, Disney), asset managers (Brightsphere, Legg Mason, Artisan Partners) and healthcare stocks (Zimmer, Merck, Pfizer).
  • Velanne is also seeing compelling value in select mid- and small-sized companies, including Japanese paint manufacturer Chugoku Marine Paints, U.S. communication infrastructure provider Commscope, and France-based cleaning services provider Elis.
  • The salmon industry presents a unique area of opportunity in the manager’s view, and the fund holds four salmon producers — Marine Harvest, Grieg Seafood, Norway Royal Salmon and Bakkafrost. Salmon production requires a very specific geography and water temperature, meaning only a few places in the world are suitable for farming. While supply is limited, demand continues to increase, making the fundamentals for the industry attractive.
  • Velanne’s focus on corporate governance limits investments in emerging markets where shareholder rights aren’t as strong (current holdings include three companies in South Korea). The manager prefers to get exposure to these faster-growing economies through companies based in the developed world that generate a good portion of their revenues in countries such as China, Russia and India.
  • The fund currently has a cash position of 3%.


  • The manager focuses on quality companies that produce large amounts of cash flow but are facing temporary headwinds and are trading below their true value.
  • Velanne assigns a high value to good corporate governance and transparency, which keeps them away from large banks, auto manufacturers and many emerging markets.