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 situation as of September 30, 2022. How is inflation behaving? Inflation has remained at a high level due mainly to the war in Ukraine and the persisting pandemic, factors that have contributed to global supply chain failures, among other things. Canada’s inflation rate even reached a 40-year high! Various central banks increased their key interest rate this year in an aim to decrease the demand for goods and services and slow down this inflation. In Canada, we’re seeing that these rate increases work even if inflation is still high. But it did drop from 8.1%, at the end of June, to 6.9% at the end of September. These rate increases have also resulted in negative impacts on financial markets. What are the repercussions for Bâtirente Funds? As was the case in the first two quarters of 2022, Bâtirente Diversified Funds experienced a negative third-quarter performance, posting results ranging between -1.4% and -0.8% according to their risk profile, i.e., from high-risk to low-risk. However, since the beginning of the year, the right positioning of mandates entrusted to experienced managers helped generate returns that exceeded benchmarks (see definition below), varying from 0.5% (Income Fund) to 1.0% (Provident and Energetic Funds). The reason for this is that Bâtirente has been moving away from speculative securities, favouring instead so-called “quality” securities that offer good internal growth and low volatility in terms of sales and earnings. What advice would you give to Bâtirente members in the current context? It’s often said that in periods of volatility, one should stay the course and look to the long term. And that holds even more true when we think about retirement or other future plans! That’s because, for the past 10 years, Diversified Funds have generated annualized yields varying between 3.4% and 7.9%—well above the inflation rate recorded for that same period. What is the overall performance as of September 30? With regard to shares, the Bâtirente Global Equity Multi Fund had a total return of -18.9%. Meanwhile, our Global Small Cap Equity Multi Fund performance was -19.2%. Here, too, the quality of the securities chosen helped limit any negative impacts. For example, our Global Small Cap Equity Multi Fund yielded a return that was 2.0% above its benchmark. Bâtirente’s Canadian Equity Multi Fund declined by 7.0%. Thanks to the selection of securities at an affordable price (price/book value, price/earnings, etc.), the fund was able to yield a return of 4.2% above its benchmark index. What about fixed income securities as of today? These funds also had negative returns. The dramatic increase in interest rates contributed to the Bâtirente Treasury Multi Fund’s -3.9% performance and the -9.1% return for Bâtirente’s Bond Multi Fund. Yet, compared to the benchmark for these funds, their performance was still excellent mainly due to the shorter term involved for the bonds, which is profitable in an inflationary context. Will this situation eventually stabilize? Yes! Historically, we’ve often seen markets rebound after very negative quarters. In 2022, several central banks responded robustly by raising their interest rate to reduce inflation, which seems to be working, and this could restore investor confidence. For more on Bâtirente’s Funds and the latest yields, see the Bâtirente Funds section. *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 18 years’ experience in financial markets.   [box]Benchmark index: What’s that? When we share the performance of the various Bâtirente Funds with you each quarter or on an annual basis, we’re measuring their performance in relation to benchmark indices. Bâtirente entrusts mandates to managers, who choose different portfolios from benchmark indices, with the goal of yielding greater returns. 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 -7.0%, when the benchmark S&P/TSX Composite Index performance was -11.2%.[/box]

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 situation as of September 30, 2022.

How is inflation behaving?
Inflation has remained at a high level due mainly to the war in Ukraine and the persisting pandemic, factors that have contributed to global supply chain failures, among other things. Canada’s inflation rate even reached a 40-year high! Various central banks increased their key interest rate this year in an aim to decrease the demand for goods and services and slow down this inflation. In Canada, we’re seeing that these rate increases work even if inflation is still high. But it did drop from 8.1%, at the end of June, to 6.9% at the end of September. These rate increases have also resulted in negative impacts on financial markets.

What are the repercussions for Bâtirente Funds?
As was the case in the first two quarters of 2022, Bâtirente Diversified Funds experienced a negative third-quarter performance, posting results ranging between -1.4% and -0.8% according to their risk profile, i.e., from high-risk to low-risk. However, since the beginning of the year, the right positioning of mandates entrusted to experienced managers helped generate returns that exceeded benchmarks (see definition below), varying from 0.5% (Income Fund) to 1.0% (Provident and Energetic Funds). The reason for this is that Bâtirente has been moving away from speculative securities, favouring instead so-called “quality” securities that offer good internal growth and low volatility in terms of sales and earnings.

What advice would you give to Bâtirente members in the current context?
It’s often said that in periods of volatility, one should stay the course and look to the long term. And that holds even more true when we think about retirement or other future plans! That’s because, for the past 10 years, Diversified Funds have generated annualized yields varying between 3.4% and 7.9%—well above the inflation rate recorded for that same period.
What is the overall performance as of September 30?

With regard to shares, the Bâtirente Global Equity Multi Fund had a total return of -18.9%. Meanwhile, our Global Small Cap Equity Multi Fund performance was -19.2%. Here, too, the quality of the securities chosen helped limit any negative impacts. For example, our Global Small Cap Equity Multi Fund yielded a return that was 2.0% above its benchmark.

Bâtirente’s Canadian Equity Multi Fund declined by 7.0%. Thanks to the selection of securities at an affordable price (price/book value, price/earnings, etc.), the fund was able to yield a return of 4.2% above its benchmark index.

What about fixed income securities as of today?
These funds also had negative returns. The dramatic increase in interest rates contributed to the Bâtirente Treasury Multi Fund’s -3.9% performance and the -9.1% return for Bâtirente’s Bond Multi Fund. Yet, compared to the benchmark for these funds, their performance was still excellent mainly due to the shorter term involved for the bonds, which is profitable in an inflationary context.

Will this situation eventually stabilize?
Yes! Historically, we’ve often seen markets rebound after very negative quarters. In 2022, several central banks responded robustly by raising their interest rate to reduce inflation, which seems to be working, and this could restore investor confidence.

For more on Bâtirente’s Funds and the latest yields, see the Bâtirente Funds section.

*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 18 years’ experience in financial markets.

 

Benchmark index: What’s that? When we share the performance of the various Bâtirente Funds with you each quarter or on an annual basis, we’re measuring their performance in relation to benchmark indices. Bâtirente entrusts mandates to managers, who choose different portfolios from benchmark indices, with the goal of yielding greater returns.

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 -7.0%, when the benchmark S&P/TSX Composite Index performance was -11.2%.

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