Global Small-Cap Equity Fund

March 31, 2021

Market Context

  • The global small-cap market (S&P Global SmallCap Index) rose 6.9% in the first quarter in Canadian dollar terms
  • Economically-sensitive companies turned in strong gains. The energy and financial sectors saw double-digit returns while technology and consumer staples lagged.

Portfolio Specifics

  • The fund is managed by New York-based TimesSquare Capital Management, which specializes in small-cap investing. The portfolio is currently invested in 38 companies. Fourteen are based in the U.S., 12 in Europe, 4 in Japan, 4 in the U.K., 3 in Australia, and 1 in Asia.
  • The fund struggled to keep up with the recent rally which has been driven by economically-sensitive companies. Holdings in healthcare, insurance and technology, which helped protect investors through the worst of the 2020 correction, have not fully benefited from the market’s recent strength.
  • Our manager, TimesSquare Capital Management, sold three stocks in the first quarter: Japanese staffing provider En-Japan, chemical manufacturer RPM International, and software provider Tyler Technologies. They are all well run businesses that have recovered since the market bottom last year. TimesSquare has concluded, however, that there are more attractive opportunities elsewhere.
  • The proceeds from the sales were used to buy three new companies. HomeServe is a U.K.-based home repair and improvement services provider that operates in North America and Europe. Nordnet is a leading digital platform for savings and investment services in the Nordic region. And TGP Pace Beneficial Finance builds electric vehicle charging infrastructure.
  • As the new holdings suggest, the fund owns a diverse array of businesses. TimesSquare finds growing, smaller companies with well established franchises, regardless of where they’re located. For example, within the financial services sector, we own RenaissanceRe (Bermuda-based casualty reinsurer), St. James’s Place (U.K. investment services), and Steadfast (Australian insurance broker).
  • Japan is a country on our manager’s radar. It is lagging the U.S. in a big way when it comes to the digitization of its economy. This is presenting attractive opportunities in sectors such as healthcare and financial services, as corporate Japan starts to invest in new technologies and processes. We currently own four stocks in the country, which make up 10% of the fund, and TimesSquare is looking closely at other companies.
  • The fund currently has a cash position of 6%.

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.

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.