Global Equity Fund

December 31, 2018

Market Context

  • Global stocks, as measured by the Morningstar Developed Markets Index, were down 1.2% in Canadian dollar terms in 2018.
  • Japanese, European and emerging markets experienced negative returns in the year, many greater than 10%, while the broad U.S. market (S&P 500 Index) posted a modest loss. The loonie was weaker against most major currencies, however, which propped up the returns of global markets in Canadian dollar terms.

Portfolio Specifics

  • In August, we named Velanne Asset Management advisor of the fund, replacing Edinburgh Partners. Velanne is led by Anne Gudefin, who has built an excellent track record managing global equity portfolios since 2003.
  • The fund holds 52 stocks, of which 21 are based in Europe (including the U.K.), 20 in the U.S., nine in Asia, and two in Canada.
  • The fund declined 11.8% in 2018. Overall, it was a difficult year for the portfolio. In particular, its holdings in the energy sector were hit hard and its British investments struggled.
  • While some of the reasons for the decline in energy prices appear warranted, the negative sentiment towards many companies in the sector doesn’t reconcile with their profitability and competitive positions. The manager sees increased value in this area as prices continue to slide. Velanne purchased Cenovus, CGG, and National Oilwell Varco, and added to existing positions in Encana and Shell. Energy holdings now account for 15% of the portfolio.
  • Tribune Media was also added to the fund, although soon after the company announced a sale to Nexstar for a nice premium. Entertainment companies are an important part of the portfolio. Other holdings include 21st Century Fox, Discovery and Disney.
  • Two drug companies were sold, Pfizer and Merck, as they reached the manager’s estimate of fair value. Healthcare stocks remain a large part of the fund (19%). Holdings include pharmaceuticals (e.g. Allergan, Shire), device manufacturers (e.g. Medtronic, Zimmer Biomet), and hospital operators (e.g. Mediclinic)
  • The fund currently has a cash position of 10%.


  • 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.