Global Small-Cap Equity Fund

March 31, 2024

Market Context

• The global small-cap market (Morningstar Developed Markets Small Cap Index) rose 7.3% in Canadian dollar terms in the first quarter.
  
• Energy, consumer staples and industrial stocks were areas of strength while the utilities and real estate sectors had a weak start to the year.
  

Portfolio Specifics

• The portfolio is currently invested in 50 companies. 23 are based in the U.S., 11 in Europe, 6 in Japan, 4 in the U.K., 2 in South America, 2 in Australia, and 2 in Canada.
• The fund had a strong quarter, reflecting the solid fundamentals of our holdings. Our investments in the industrial goods & services sector drove performance, on the back on excellent earnings. Standouts included mechanical and electrical construction services firm EMCOR Group (up 63%), defence and civil security specialist Saab (+57%), and warehouse equipment leader Kion Group (+26%). Financial services holdings RenaissanceRe and Rakuten Bank were also among the top contributors to performance.
  
• Integral Ad Science is a digital advertising verification leader. The company reported a good quarter but lowered its revenue guidance and announced a price discounting program that turned off investors (the stock was down 35%). Our manager, TimesSquare Capital, feels the selloff was an over-reaction and believes the company has a promising outlook over the medium term. Synaptics, which develops human interface hardware and software (e.g. touchpad modules and fingerprint sensors), also reported good financial results but indicated that some of its products are seeing slowing demand. TimesSquare continues to like its longer-term prospects.
  
• We increased our investments in the technology sector, adding three new stocks: Onto Innovation, MACOM Technology Solutions, and JFrog. Onto Innovation provides metrology (measurement) and defect inspection solutions for semiconductor manufacturers. MACOM makes semiconductor devices and components, and JFrog provides software tools for programmers focused on improving efficiency. Tech stocks comprise 14% of the fund. Our focus is on profitable companies that offer high value added products & services to other businesses.
  
• We also purchased direct-to-consumer eyewear maker Warby Parker and Japanese real estate company KDX Realty Investment Corp. We moved on from six stocks to pursue the aforementioned opportunities: Visteon, Interpump Group, Nakanishi, Exponent, MatsukiyoCocakara, and Lawson (which received a takeover bid).
  

Positioning

• The fund invests in businesses with a clear competitive edge that offer products and services the world needs. A record of consistent sales and profit growth is important, as is a management team that has experience and integrity.
  

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.