CAPITAL MARKETS ENVIRONMENT
As reported by portfolio management partner Aon, Global equities continued to perform well during the fourth quarter of 2020, supported by COVID-19 vaccine program optimism and accommodative monetary and fiscal policies. After breaking the pre-pandemic all-time high in Q3, the MSCI All Country World Index continued its strong run despite uncertainties around the US elections and surging COVID-19 cases and deaths. The MSCI World Index rose by 12.4% in local currency terms over Q4, but the gains were limited to 8.7% in Canadian dollar (“CAD”) terms. Meanwhile, Canadian equities, as represented by the S&P/TSX Composite Index, rose by 9.0% for the quarter.
The US Federal Reserve (“Fed”) kept its policy rate unchanged and reiterated that it would continue to buy $120 billion USD of debt per month until “substantial further progress has been made” toward its employment and inflation targets. The Fed also upgraded its projected economic growth rate from -3.7% to -2.4% in 2020, and from 4.0% to 4.2% in 2021.
The Bank of Canada (“BoC”) kept its policy rates unchanged at its effective lower bound of 0.25% and pledged to keep it near zero until 2023. The BoC said it has no plans to change its benchmark interest rate until inflation reaches 2.0%.
The Canadian economy rebounded at a historic pace as businesses resumed after the COVID-19 lockdown. It grew at an annualized rate of 40.5% in the third quarter of 2020 but still fell short of consensus estimate of 47.6% growth.
PERFORMANCE OF BÂTIRENTE FUNDS
Continuing their results trend from Q2 and Q3, the Bâtirente Diversified Funds experienced sustained performance in Q4 of 2020, posting absolute returns of between 3.0% and 9.3%, based on the risk profile.
For the last five years, our Diversified funds have produced annualized returns ranging from 3.9% to 8.7%, well ahead of inflation.
The solid track record of these Diversified funds has been largely due to the performance of our various equity portfolios and our global resource portfolio.
The Bâtirente Global Small Cap Equity Multi Fund delivered a total return of 17.4% in Q4 while the Bâtirente Global Equity Multi Fund earned a return of 7.9%.
The Bâtirente Canadian Equity Multi Fund generated an absolute return of 11.1%. However, this fund trailed behind the market index by 4.2% in 2020. One of the reasons for this underperformance was a pronounced style bias as compared to the benchmark.
Fixed income funds also posted positive returns in the fourth quarter. The tightening of credit spreads contributed to a return of 0.7% for the Bâtirente Treasury Multi Fund and 1.0% for the Bâtirente Bond Multi Fund. The absolute performance of these funds in 2020 was very positive (4.9% and 7.8%). However, the relative performance was negative due, in particular, to the fact that the funds were generally well-positioned to face an increase in interest rates. It is recognized that confronted by the COVID-19 crisis, governments have tended to keep interest rates low.
To learn more about Bâtirente Funds and to view up-to-date performance, please visit our funds section.