Noteworthy Developments: Global equities advanced in January, with the MSCI ACWI Index rising 2.5% in Canadian dollar terms (up
3.0% in USD), supported by broad-based gains across regions. The CAD strengthened by 0.5% versus the US dollar.
Global Equities: Global equities (MSCI ACWI Index) rose 2.5% (up 3.0% in USD). US large-cap equities (S&P 500) gained 1.0% (up 1.4% in USD), while international developed equities rose 4.8% (5.2% in USD) and emerging market equities advanced 8.4% (8.9% in USD).
International developed equities benefited from out-performance from cyclical sectors in both Europe and Japan, supported by improving economic sentiment. Emerging markets also delivered strong gains with Korean equities (+24.8%) up strongly given high exposure to memory semiconductor stocks which were up 35%-40% driven by buoyant AI capex demand.
Style leadership shifted meaningfully during the month, with value stocks rising 4.7% and significantly outperforming growth stocks, which gained 0.2%. Sector performance reflected this rotation, with cyclicals sectors such as energy (+11.2%), materials (+9.3%), and industrials (+6.3%) among the strongest performers, whereas technology (-0.2%) performed much worse.
In the US, small-cap stocks (+5.0%) outperformed large-caps (+0.9%) given small caps’ earnings higher sensitivity to macro-economic conditions. Within US large-caps, software stocks (-15.1%) were hit especially hard given fears regarding AI disruption to lucrative entrenched business models.
Fixed Income: The Canada Broad Market Index rose 0.6%, largely driven by coupon income and modest spread tightening. Canadian government bonds returned 0.3% while provincial and municipal bonds rose 0.7% Corporate bonds performed best with a gain of 0.9%. Canadian sovereign yields remained relatively stable during the month.
Alternatives: Hedge funds delivered positive returns in January on a Canadian dollar basis, with the HFRX Global Hedge Fund Index rising 1.5% (up 2.0% in USD). Performance was broadly positive across strategies, led by macro / trend following strategies (+3.5%), convertible arbitrage (+2.0%) and equity hedge strategies (+1.8%).
Manager Comments:
Linden: +3.5%: The fund benefited from a strong environment for convertible arbitrage strategies with high new issuance and refinancings coupled with high volatility especially in the technology sector. In addition, Linden utilized its scale advantage to drive superior terms on new issuances as well as refinancings relative to peers.
Eminence: -2.8%: Underperformed relevant benchmarks (MSCI World Index and S&P Mid Cap Index) due to idiosyncratic declines from various core positions.
CAD January Market Commentary
Noteworthy Developments: Global equities advanced in January, with the MSCI ACWI Index rising 2.5% in Canadian dollar terms (up
3.0% in USD), supported by broad-based gains across regions. The CAD strengthened by 0.5% versus the US dollar.
Global Equities: Global equities (MSCI ACWI Index) rose 2.5% (up 3.0% in USD). US large-cap equities (S&P 500) gained 1.0% (up 1.4% in USD), while international developed equities rose 4.8% (5.2% in USD) and emerging market equities advanced 8.4% (8.9% in USD).
International developed equities benefited from out-performance from cyclical sectors in both Europe and Japan, supported by improving economic sentiment. Emerging markets also delivered strong gains with Korean equities (+24.8%) up strongly given high exposure to memory semiconductor stocks which were up 35%-40% driven by buoyant AI capex demand.
Style leadership shifted meaningfully during the month, with value stocks rising 4.7% and significantly outperforming growth stocks, which gained 0.2%. Sector performance reflected this rotation, with cyclicals sectors such as energy (+11.2%), materials (+9.3%), and industrials (+6.3%) among the strongest performers, whereas technology (-0.2%) performed much worse.
In the US, small-cap stocks (+5.0%) outperformed large-caps (+0.9%) given small caps’ earnings higher sensitivity to macro-economic conditions. Within US large-caps, software stocks (-15.1%) were hit especially hard given fears regarding AI disruption to lucrative entrenched business models.
Fixed Income: The Canada Broad Market Index rose 0.6%, largely driven by coupon income and modest spread tightening. Canadian government bonds returned 0.3% while provincial and municipal bonds rose 0.7% Corporate bonds performed best with a gain of 0.9%. Canadian sovereign yields remained relatively stable during the month.
Alternatives: Hedge funds delivered positive returns in January on a Canadian dollar basis, with the HFRX Global Hedge Fund Index rising 1.5% (up 2.0% in USD). Performance was broadly positive across strategies, led by macro / trend following strategies (+3.5%), convertible arbitrage (+2.0%) and equity hedge strategies (+1.8%).
Manager Comments:
Linden: +3.5%: The fund benefited from a strong environment for convertible arbitrage strategies with high new issuance and refinancings coupled with high volatility especially in the technology sector. In addition, Linden utilized its scale advantage to drive superior terms on new issuances as well as refinancings relative to peers.
Eminence: -2.8%: Underperformed relevant benchmarks (MSCI World Index and S&P Mid Cap Index) due to idiosyncratic declines from various core positions.
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