Small-Cap Equity Fund

September 30, 2019

Market Context

  • The Canadian small-cap market (S&P/TSX SmallCap Index) declined 1.2% in the quarter. U.S. small-caps (Russell 2000 Index) also fell 1.2% in Canadian dollar terms.
  • Real estate and gold stocks were strong while energy stocks were weak.

Portfolio Specifics

  • The fund consists of 24 companies, ranging from very small (Waterloo Brewing) to medium-sized businesses (Finning). While the majority of holdings are Canadian, there are 4 U.S. stocks which make up 19% of the portfolio.
  • The fund pulled back in the quarter after a strong first half to 2019. There were some big price moves in the summer as trade wars and a slowing global economy took centre stage. Alcanna, NFI Group and Ag Growth were the biggest detractors to performance. Alcanna (a liquor and cannabis retailer) has been a victim of poor sentiment towards cannabis stocks, even though the company derives the vast majority of its revenues from liquor retailing. NFI (North America’s leading bus and coach manufacturer) revised down its 2019 delivery forecasts because of production delays. And Ag Growth (a fertilizer and seed retailer) sold off as flooding-related crop damage in the Midwest cast a cloud over the sector. The manager, Galibier Capital Management, isn’t fazed by these declines as they’ve all been driven by factors that are short-term in nature.
  • On the positive side, Cargojet continues to soar. The Mississauga-based cargo airline recently signed a long-term agreement with Amazon. The deal allows Amazon to acquire up to 15% of Cargojet over time. By locking up such an important strategic customer, Cargojet will further benefit from incremental business with the world’s largest retailer.
  • Dream Global REIT was also a standout. The company, which owns and operates office and industrial properties in western Europe, agreed to be acquired by Blackstone Group, an American private equity firm. We sold the stock on the news, realizing a gain of 125% over our 3-year holding period.
  • One new stock was added to the portfolio, Pason Systems. Pason is an oilfield specialist whose products and solutions allow its clients to access their critical drilling information anytime, anywhere. Pason is a best-in-class company with a durable competitive advantage, strong balance sheet, and attractive dividend yield (4.7%). Clients may be familiar with the stock, as we also own it in our Equity Fund.
  • The fund currently has a cash position of 2%.


  • The portfolio has a unique composition, with key areas of investment being capital goods, transportation, and commercial & professional services. Food & beverage and consumer companies are also important components of the fund. This is in contrast to the small-cap market’s heavy focus on resource companies.

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.