Noteworthy Developments

Global equities, as represented by the MSCI ACWI Index, increased 4.3% with sharp dispersion in regional performance. The CAD weakened by 0.5% versus the USD.

Global Equities

Global equities increased by 4.3%, with US large-cap equities (S&P 500) performing strongly at 6.4%while international developed (0.0%) and emerging market equities (-3.1%) delivered flat to negative returns. US equities were bolstered by Donald Trump’s win in the presidential election coupled with the Republican party sweeping Congress. Investors favored US stocks with sentiment driven by the potential implementation of pro-growth policies for the US economy (less regulation, lower taxes). Conversely, investors feared that international markets may suffer if Trump’s tariffs plans are enacted. Additionally, currency movements hurt USD returns for international markets as the USD strengthened further versus most currencies.

Globally, growth (4.9%) and value (3.7%) stocks both performed well. Cyclical stocks outperformed defensive stocks, with the consumer discretionary and financials (7.9% and 7.1%) sectors performing best while the healthcare sector performed worst at -0.5%. US Small Cap stocks rallied significantly and were up 11.6% with strong performance driven by optimism surrounding the incoming administration’s perceived pro-growth economic policies (US small caps earnings are more domestically focused relative to large caps and are thus more influenced by changes in US macro-economic conditions).

Fixed Income

The ICE BOFA Canada Broad Market Index appreciated 1.5% with declines in interest rates augmenting coupon yields. Interest rates declined by 5 to 15 bps across the curve. Canadian government bonds appreciated by 1.0%, municipal and provisional bonds appreciated by 1.8%, and corporate bonds appreciated by 1.6% with performance helped by spread tightening in addition to interest rate declines.

Alternatives

The HFRX Global Hedge Fund Index increased by 1.3%, with most strategies delivering positive returns. Convertible arbitrage and Global macro / trend following strategies performed best (2.7% and 2.0%) while event-driven strategies performed worst at 0.4%.

Manager Comments

Alphadyne: 3.4%

Outperformed the HFRX Global Index (1.3%) due to successful relative value bets within the longer-dated portion of the US Treasury curve coupled with successful directional bets with regards to Japanese interest rates. 

Linden: 2.5%

Outperformed the HFRX Global Index (1.3%) due to a combination of new convertible bond issuances on favorable terms, participating in several refinancing again on favorable terms, and benefiting from compression in credit spreads.