Each quarter, Bâtirente’s Investment Strategy Manager, Jean-François Dumais, shares our funds’ performance results with you and offers his comments regarding financial markets. This issue looks at the first quarter of 2023.
How did the economy perform?
Central bank interest rate hikes had an impact on worldwide inflation, which has been decreasing rapidly. For example, in Canada, this rate has been on the decline, dropping from its peak of 8.1% in June 2022 to 5.2% by March 31st. It seems that this monetary tightening is coming to an end. The Bank of Canada put the rate hike on hold as of January.
The recent bankruptcy of Silicon Valley Bank, difficulties experienced by several regional American banks and rescue of Credit Suisse by UBS (two major Swiss banks) resulted in market volatility in March and are a good argument for ending monetary tightening policies.
The more difficult monetary conditions will likely unleash a recession in the second half of 2023, but this should be limited on either side of the border primarily due to the labour shortage.
Expectations of the impending end to this money tightening and a moderate recession have brought a positive outlook regarding bond and equity markets.
How have the markets performed overall?
Bond and equity markets ended the first quarter of the year on a positive note.
The FTSE Canada Universe Bond Index had a 3.1% return. As for equity markets, the Canadian Equity Index posted a performance of 4.6%, while all-country equities yielded a return of 7.2%. Meanwhile, the Global Small Cap Equity market ended the quarter with a 4.2% result (all data in Canadian dollars).
Sectors performed quite differently compared to last year at this time. In fact, the technology sector is now one of the leaders of the pack despite lagging far behind in 2022. Conversely, the energy sector delivered the weakest results even though it was at the top of the heap last year.
What were the repercussions for Bâtirente Diversified Funds?
Good! Bâtirente Diversified Funds had a positive performance, posting results ranging between 3.1% and 5.7% according to their risk profile, i.e., from lower risk to higher risk. The right positioning of mandates entrusted to experienced managers helped generate returns that exceeded benchmarks (see definition below) varying from 0.3% (Income Fund) to 0.5% (Energetic Fund). This was mainly due to the fact that Bâtirente had very little exposure to the bank collapse mentioned earlier (see section on the economy). Also worth noting is the healthy performance of the Presima Listed Real Asset ESG Fund mandate (real estate and infrastructure) compared with its benchmark.
How did Equity Multi Funds perform in Q1 2023?
With its exceptional performance of 10.0%, the Bâtirente Global Small Cap Equity Multi Fund took centre stage! The latter posted a return of 5.8% above its benchmark owing to minimal exposure to the banks’ underperformance. Bâtirente’s Global Equity Multi Fund had a total return of 6.5%, while its Canadian Equity Multi Fund advanced by 3.5%.
What about fixed income Multi funds?
These funds also yielded positive returns. The dramatic drop in interest rates contributed to the Bâtirente Treasury Multi Fund’s 1.9% performance and the 3.2% return for Bâtirente’s Bond Multi Fund. Performance was in line with benchmarks.
Any advice for Bâtirente members?
In periods of volatility, always stay the course and look to the long term! For Bâtirente, now more than ever, diversification is important for generating strong long-term returns in constantly evolving markets. Despite the challenging period in 2022, we met our goal of protecting the value of our members’ portfolios. The right positioning of mandates entrusted to experienced managers helped limit the negative impacts on our members’ capital. In fact, we are proud to share that all Bâtirente Diversified Funds beat their benchmark portfolio. As the market quickly regains its strength in 2023, our Diversified Funds continue to outperform benchmarks.
To learn more about Bâtirente Funds and get updated performance information, see the Bâtirente Funds of our website.
*Jean-François Dumais has worked as an Investment Strategy Manager at Bâtirente since 2019. He holds a Master of Business Administration (MBA) in finance. He has nearly 20 years’ experience in financial markets.
Why is this important? Having a benchmark index for the performance achieved by our Funds makes it possible to determine, at least in part, whether the latter are performing well. Clearly, the aim is to achieve a performance that exceeds the benchmark index, even when this involves negative returns, as we’ve seen recently. A Canadian large-cap equity portfolio will quite frequently be compared to the benchmark, which is called the “S&P/TSX Composite.” For example, in 2022, the Bâtirente Canadian Equity Multi Fund achieved a return of -1.3%, when the benchmark S&P/TSX Composite Index performance was -5.8%.