Global Small-Cap Equity Fund

June 30, 2019

Market Context

  • The global small-cap market (S&P Global SmallCap Index) rose 2.0% in the second quarter in Canadian dollar terms.
  • Technology and financial stocks were solid performers while energy stocks lagged.

Portfolio Specifics

  • Securities regulations prohibit us from discussing performance until the fund reaches the 1-year mark. Our discussion will focus instead on the characteristics and investment merit of select holdings.
  • The fund consists of 47 companies around the globe. Twenty are headquartered in the U.S., 17 in Europe (including the U.K.), 8 in Japan, and 2 in Australia.
  • Technology stocks are one of the largest areas of investment, making up roughly one-fifth of the fund. These companies fall outside the realm of high-profile household names such as Apple, Google and Facebook. Rather, the manager, TimesSquare Capital Management, focuses on smaller businesses that are leaders in engineering components or providing research services, software solutions, and other value-added services for a variety of industries, including those that are inventing the products and services of tomorrow. Altran Technologies, a Paris-based leader in engineering and R&D services, is one such company that was a positive story in the quarter, as it received a takeover offer at a nice premium.
  • While there aren’t many recognizable names in the portfolio (part of the nature of small-cap investing), one business you may have heard of is Planet Fitness, the fund’s 5th largest holding. The company operates fitness centers across the U.S. and Canada. It has been growing nicely, has strong operating results, and has attracted a broad base of clients thanks to its accessibility and ‘Judgement Free’ mantra.
  • Two new stocks were purchased: CIE Automotive and Cushman & Wakefield. CIE is a Basque supplier of automotive parts. It supplies subcomponents and small parts to larger “Tier 1” suppliers. It’s not a sexy business, but the company has fantastic margins and one of the most highly automated factories TimesSquare has seen (“you have to see it for yourself”, in the manager’s words). Its ability to invest in technology sets it apart from its competitors. Cushman & Wakefield is a Chicago-based commercial real estate services company. TimesSquare believes it’s the best managed company in the sector with an attractive valuation.
  • The fund currently has a cash position of 2%.

Positioning

  • The fund invests in businesses with a clear competitive edge, a record of consistent earnings growth, and management that has clear goals and a record of success.
  • This approach results in low weights in commodity-related businesses and utilities.

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.