CAPITAL MARKETS ENVIRONMENT
As reported by portfolio management partner Aon, Global growth edged higher in the third quarter albeit at a slower pace as the Delta variant diminished activity. While vaccination rates continue to rise, concerns around supply chain bottlenecks and inflationary pressures have intensified. Equities were fairly muted for the quarter, with the MSCI World Index up 0.6% in local currency terms and 2.3% in Canadian dollar terms. Canadian equities rose by 0.2%.
The Bank of Canada (BoC) maintained the current benchmark rate but further reduced its bond buying program to $2bn per week in July. However, growth faltered as the Canadian economy contracted at an annualized rate of 1.1% for the second quarter, largely driven by a decline in the housing market and exports.
At the September US Federal Reserve (Fed) meeting, nine out of eighteen Federal Open Market Committee (FOMC) members forecasted an interest rate hike in 2022 compared to seven officials in June. The Fed also signaled its intent to announce a reduction, or tapering, of its pandemic-era monthly bond purchases, currently fixed at $120bn a month, later this year.
The European Central Bank (ECB) decided to slow the pace of its monthly Pandemic Emergency Purchase Programme (PEPP) over the next quarter, citing a strong rebound in eurozone growth and inflation. The ECB has been purchasing €80bn a month under the temporary program, which is set to end in March 2022, per the initial edict. The PEPP was an additional tool the ECB used in conjunction with its regular bond buying program, which is expected to be maintained after the PEPP expires.
PERFORMANCE OF BÂTIRENTE FUNDS
As in the first semester, the Bâtirente Diversified Funds performed positively in the third quarter, posting returns of between 0.8% and 1.3%, based on the risk profile.
For the last five years, our Diversified funds have produced annualized returns ranging from 3.8% to 9.3%, well ahead of inflation.
The positive track record of these Diversified funds has been largely due to the performance of our various equity portfolios and our ESG-listed real assets portfolio.
The Bâtirente Canadian Equity Multi Fund generated an absolute return of 0.8%. It added 0.6% against the market index. The outperformance can be explained by the good stock selection of one of our managers (Triasima). In addition, the Bâtirente Global Equity Multi Fund obtained a total return of 1.8%. For its part, the Bâtirente Global Small Cap Equity Multi Fund posted a performance of 2.2%.
In addition, the TDAM Global Low Volatility Equity portfolio returned 3.4%. It added 1.0% against the market index.
Finally, the ESG-listed real assets portfolio returned 2.6% (1.2% above the market index). This portfolio includes securities linked to the real estate and infrastructure sectors.
Fixed income funds also posted slightly positive returns. The overweighting in credits contributed to a return of 0.3% for the Bâtirente Treasury Multi Fund and 0.1% for the Bâtirente Bond Multi Fund. Also, positioning in credit enabled it to obtain better performance than market indices.
To find out more about Bâtirente Funds and to view up-to-date performance, please visit our funds section.