CAPITAL MARKETS ENVIRONMENT
As reported by portfolio management partner Aon, the rebound in economic activity continued during the second quarter as lockdown restrictions eased around the globe. However, the uneven re-opening has raised questions about how long supply bottlenecks may persist and whether inflationary pressures will be transitory or structural. Risk assets were strong in the second quarter, with the MSCI World Index up 7.6% in local currency terms, but gains were limited to 6.2% in Canadian dollar (CAD) terms. Canadian equities rose by 8.5%.
The Bank of Canada (BoC) left the benchmark rate and bond buying program unchanged but is expected to trim asset purchases in the third quarter. The BoC expects the Canadian economy to rebound strongly once the restrictions are eased and vaccinations picks up. It also expects inflation to remain around 3% throughout the summer, but ultimately thinks inflationary impulses will be transitory. The Canadian economy recorded GDP growth at an annualized rate of 5.6% in Q1 2021.
The US Federal Reserve (Fed) left interest rates unchanged and held its current pace of asset purchases. However, hawkish sentiment has emerged with various members voicing a preference to tighten policy sooner rather than later. The dot plot from the June Federal Open Market Committee (FOMC) meeting showed rate hikes could start in 2023.
The European Commission upgraded the Eurozone’s growth forecast to 4.3% this year and 4.4% in 2022 from the previous estimates of 3.8% in both years, citing increasing vaccinations and easing lockdown restrictions.
PERFORMANCE OF BÂTIRENTE FUNDS
As in the first quarter, the Bâtirente Diversified Funds performed well in the second quarter, posting returns of between 2.8% and 5.6%, based on the risk profile.
For the last five years, our Diversified funds have produced annualized returns ranging from 4.0% to 10.0%, well ahead of inflation.
The solid track record of these Diversified funds has been largely due to the performance of our various equity portfolios, our global commodity portfolio and our ESG-listed real assets portfolio.
The Bâtirente Canadian Equity Multi Fund generated an absolute return of 10.8%. It added 2.3% against the market index. The outperformance can be explained by the good stock selection of our two managers (FGP and Triasima). In addition, the Bâtirente Global Equity Multi Fund obtained a total return of 6.3%. For its part, the Bâtirente Global Small Cap Equity Multi Fund posted a performance of 2.8%.
In addition, the global resources portfolio returned 12.6%. We note the strong appreciation of WTI crude oil which increased by nearly 25%.
Finally, the ESG-listed real assets portfolio returned 5.7%. This portfolio includes securities linked to the real estate and infrastructure sectors.
Fixed income funds also posted positive returns. The tightening of credit spreads contributed to a return of 0.3% for the Bâtirente Treasury Multi Fund and 1.3% for the Bâtirente Bond Multi Fund. However, the relative performance of the latter was negative mainly due to the shorter duration.
To find out more about Bâtirente Funds and to view up-to-date performance, please visit our funds section.