Tuesday March 10th, 2015
The Fund holds a risk-balanced portfolio diversified across agriculture, energy, base metals, precious metals, and real estate.
The Fund was positive in February. The Fund’s best sector performers were base metals stocks, energy positions and energy equities. Cyclical commodity names were lifted higher with oil and base metals prices. Crude oil rallied after seeing a sharp decline in U.S. oil drilling activity. Potential disruption to Middle East supply was also supportive for Brent which rallied over 18%. Copper bounced 7% off the lows after seeing an improvement in Chinese manufacturing data. The worst performers were precious metals, precious metals equities and REITS. Gold and silver gave up gains from January as safe haven flows diminished. Precious metals and REITS also experienced weakness driven by a rise in U.S. yields.
The Fund completed a quarterly rebalance, and improved its diversification by increasing the number of real estate holdings by 17. The Fund added Pure Industrial, Brookfield Canada Office Pro, CBL & Associates, Cedar Realty, Mack-Cali Realty, Cyrusone, Coresite Realty, Corrections Corp, Geo Group, Granite Real Estate, Home Properties, Hospitality Properties, Innvest Real Estate, Investors Real Estate, Mid-America Apartment, Morguard Real Estate, Northern Property, One Liberty, Penn Real Estate, Rayonier and Select Income. The deletions were Allied Properties, Can Apartment, Crombie Real Estate and H&R Real Estate. The Fund also increased its commodity holdings adding cocoa, heating oil, live cattle, gasoil, soymeal and wheat. The deletions were crude oil, copper, corn and soybeans.
Markets rebounded higher in February with dip buyers emerging on waning geopolitical concerns and optimism on the global growth outlook. Concerns over Greece’s ability to meet its fiscal pledges receded as bailout provisions were extended by the ECB. Generally positive U.S. earnings, strong jobs data and supportive Fed comments helped the S&P close up 5.7% on the month. European equities outperformed other developed markets as inflows increased on the back of the ECB’s supportive actions from the previous month. U.S. 10 year yields squeezed quickly back above 2% as safe haven demand declined, and the market began to price in a higher probability of a June rate hike.
In commodities, oil managed to recover off the lows with prices buoyed by news of cuts in production and the potential for supply disruption in the Middle East. Gold gave back its January gains retreating lower as safe haven demand declined.
The U.S. dollar continued to exhibit selective signs of strength notably against Japanese yen, Swiss Franc and emerging market currencies. CAD was able to recover higher buoyed by signs of oil recovery and better than expected trade deficit numbers. However, the BOC’s recent dovish comments continued to provide an overhang on the loonie with further rate cuts expected in the coming months.