Acadian Core International Equity Fund

Transcription

1 Semi Annual Management Report of Fund Performance As at June 30, 2018 This semi-annual report of fund performance contains financial highlights but does not contain the complete semi-annual financial statements for the Investment Fund. You may request a copy of the semi-annual financial statements at no cost, by calling , by writing to us at Integra Capital Limited ( Integra ), 2020 Winston Park Drive, Suite 200, Oakville ON L6H 6X7 or by visiting our website at or the SEDAR website at Security holders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record, or portfolio disclosure relating to the Fund.

2 Management discussion of fund performance Results of operations For the six months ended June 30th, the Fund returned 4.8% compared to the 2.1% return generated by the MSCI EAFE (Net) Index. All of the returns are presented in Canadian dollar terms and gross of fees. International equity markets closed the first half of 2018 overall with a modest gain after enjoying a robust Following a volatile first portion of the year, stocks gained some traction despite rising trade tensions, higher energy prices, geopolitical concerns and a stronger U.S. dollar. The diverging framework of monetary, fiscal and trade policy coupled with the rising price of oil have varied across currencies, commodities and capital markets. Results at the industry group level also reflected changes in macro conditions, with Energy performing well more recently, joining Information Technology and Consumer Discretionary stocks as the better performers. Financials and autos lagged the general market. European equity markets have been challenged as early optimism following strong corporate earnings was displaced by worries about the impact of President Trump s trade policies on the continent. Political developments in Germany, Italy and Spain also sparked apprehension at times. Meanwhile, Brexit negotiations continue amid much conjecture and minimal indication a resolution is forthcoming. Since the Brexit referendum in the summer of 2016 the UK economy has performed better than most forecasters expected. British unemployment is close to a four-decade low. Nominal wage growth seems to be inching up as firms are forced to compete more for workers. In June, the European Central Bank announced it intends to end its quantitative easing program by year-end and expects to keep interest rates on hold at least through the summer of Economic data out of the region suggest the economy continues to improve. Asian equities performed somewhat better than the European countries did during the period ending June 30. Although the US-North Korea meeting held in June provided a temporary boost for some markets, ongoing trade tensions between China and the United States concerned many investors throughout the period. After experiencing a banner 2017, emerging markets have been challenged to date in The recent trend has largely been a function of the extent to which financial conditions in emerging markets are determined by the US Federal Reserve s interest rate policies. When the Fed runs loose monetary policy, financial capital goes in search of higher returns. With rising interest rates this year, investor money is flowing out of emerging markets. The Fund significantly outperformed its benchmark during the first half of the year. Acadian s multi-factor model produced positive results largely due to stock selection. Payoffs were strong in smallcap stocks. The dynamic weighting model tilted away from value in risky segments. Meanwhile, earnings-related measures and momentum factors were rewarded, reflecting investor preferences for growth regardless of price. Quality was positive as strong payoffs to cashflow-related factors reflected investor demand for reliable sources of earnings. The portfolio s added value was generated to a large extent in the Financial Services, Health Care and Consumer Discretionary groups. From a regional perspective, factor returns were directionally consistent but varied in magnitude. Value factors lagged in most markets, but especially within emerging markets. The opportunistic allocation to emerging markets was detrimental to relative performance. From a sector perspective, the overweight to Energy and Information Technology was helpful, as was the overweight to European pharmaceuticals. Growth and momentum payoffs were strong across most regions. The Fund experienced net redemptions of $2.3 million during the first six months of Expenses incurred by the Fund may be either direct or indirect charges. Direct expenses include items such as Custodial Fees. Indirect charges are allocated based on several factors including assets under management, number of unitholders and the Fund s mandate. Integra, as Fund manager, may at its discretion subsidize some of the Fund s expenses. Year over year, the expenses incurred by the Fund increased entirely due to a sharp rise in withholding taxes. Recent developments Global growth is likely to continue at its current pace in the near term, but the medium and longer-term prospects are more uncertain given the consequences of trade tariffs. Rising U.S. interest rates and a stronger American dollar also present longerterm risks. Europe is already feeling the impact of Trump s trade policy. German manufacturing and confidence indicators have slumped due to the threat of tariffs on auto imports. Populist politics are generating uncertainty, including the struggles to form a coalition government in Italy following the recent election. If there is any indication of persistent softening of growth in the EU, there could be a delay to the end of QE in the region. Page 2 of 7

3 Japan s economy after a long period of positive growth has seen its export orders fall off and the services sector faltering. Australia is enjoying decent growth supported by public infrastructure investment and a revived export sector. Emerging markets continue to generate favourable growth rates due to global trade, higher commodity prices and supportive financial conditions. Growth in China s economy is somewhere between 6-7% but expected to slow. Mounting debt in the country and the expanding trade dispute with the U.S. could lead to declining business investment. Currently Acadian favours investments in software, retailing and oil & gas. Whereas, autos, utilities and capital goods are less favourable. Japan offers attractive valuations and offers relatively low risk. Portugal, Austria and Norway also are favourable countries for investment. At the other end of the spectrum is Hong Kong due to lack of growth, interest rates and trade concerns. Within Acadian s dynamic weighting model, forecasts for Momentum factors have deteriorated but remain positive. Assetbased value forecasts are weak in most developed-market regions. Thus, Acadian expects value to continue to have lower-thannormal returns overall. Lastly, the team expects quality measures to underperform long-run averages in the near term, as well. It should be noted the Integra Statement of Investment Policies and Procedures ( SIPP ) of the Integra Family of Funds is available on Integra s web site at The SIPP lists the asset mix ranges and permitted investments for all of the Integra funds along with additional disclosure relating to the funds and to Integra. Related party transactions Caution Regarding Forward looking Statements This report may contain forward-looking statements about the Fund, including its strategies and expected performance. Forwardlooking statements include statements that are predictive in nature, that depend upon or refer to potential future events or market and economic conditions. In addition, any statement that may be made concerning future performance, strategies or prospects and possible future Fund action, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to risks, uncertainties and assumptions about the Fund and capital market and economic factors. Forward-looking statements are not guarantees of future performance, and actual events and results may differ materially from those expressed or implied in any forward-looking statements made by the Fund. A wide range of factors may contribute to these variances, including general economic, geopolitical and market influences in Canada or globally, interest rates and currencies, capital markets, technology innovations, regulations and catastrophic events. Investors are encouraged to consider these and other factors including their own investment objectives carefully before making any investment decisions and are urged to avoid placing undue reliance on forward-looking statements. Additionally, investors should be aware that the Fund has no specific intention to update any forward-looking statements whether as a result of new information or future events, prior to the release of the next Management Report on Fund Performance. Manager, Portfolio Manager and Transfer Agent The Fund is managed by Integra. Integra provides or arranges for the provision of all general management and administrative services rendered by the Fund in its day-to-day operations, including providing or arranging the provision of investment advice and record-keeping services for the Fund. As a result of proving or arranging for the provision of investment advisory and management services, Integra is entitled to receive an investment management fee from investors in the Fund. These management fees are paid either by a redemption of units or the unitholder, if an institution, may be invoiced and payment will be delivered to the Manager. Page 3 of 7

4 Financial highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the six-month period ended June 30, 2018 and for the financial years ended December 31, as indicated. This information is on a per unit basis and is derived from the Fund s unaudited interim financial statements and audited annual financial statements. Six months ended June 30 th Years ended December 31 st , beginning of period (1) $7.25 $5.78 $5.82 $4.88 $4.75 $3.68 Adjustment for accounting standards Net Assets, beginning of period (1) $7.25 $5.78 $5.82 $ Increase (decrease) from operations: Total revenue Total expenses (0.03) (0.04) (0.04) (0.04) (0.04) (0.03) Realized gains (losses) Unrealized gains (losses) (0.19) 0.58 (0.52) 0.40 (0.89) 0.63 Total increase (decrease) from operations (2) $0.35 $1.63 $0.02 $1.04 $0.34 $1.18 Distributions: From income (excluding dividends) (0.14) (0.12) From dividends (0.15) (0.11) (0.17) From capital gains Return of capital Total Annual Distributions (3) $0.00 ($0.14) ($0.15) ($0.11) ($0.17) ($0.12) Net Assets, end of period (1)(4) $7.60 $7.25 $5.78 $5.82 $4.88 $4.75 Ratios and Supplemental Data (Based on Pricing NAV) Net assets (000 s) $73,460 $72,306 $70,896 $85,880 $78,602 $126,115 Number of units outstanding 9,666,443 9,971,656 12,124,415 14,759,485 16,121,023 26,578,131 Expense ratio (%) 0.23% 0.26% 0.33% 0.32% 0.24% 0.20% Expense ratio before waivers or absorptions (%) 0.23% 0.26% 0.33% 0.32% 0.24% 0.20% Portfolio turnover rate (%) (5) 37.94% 67.80% 76.10% 72.11% 75.27% 44.42% Trading expense ratio (%) (6) 0.12% 0.09% 0.14% 0.08% 0.10% 0.10% Ratios and Supplemental Data Supplementary information to the Financial Highlights calculations are based on the following: (1) The information for 2018, 2017, 2016, 2015, 2014, and 2013 are derived from the Fund s financial statements prepared in accordance with International Financial Reporting Standards ( IFRS ). (2) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the period. (3) Distributions were paid in cash/reinvested in additional units of the Fund, or both. (4) Prior to December 31, 2014, for the purpose of processing unitholder transactions, net assets were calculated based on the closing market price, while for financial statement purposes net assets were calculated based on bid/ask price. For the period ended 2018, 2017, 2016, 2015, 2014 and 2013, the information provided for processing unitholder transactions is consistent with the information provided for reporting purposes. (5) The Fund s portfolio turnover rate is a measure of trading activity in a Fund s portfolio. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher a Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high portfolio turnover rate and the performance of a Fund. (6) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of the Fund s average net asset value during the period. Management Fees The Fund pays no management fees to Integra. For management services provided to them by Integra, clients of Integra will pay an investment management fee directly to Integra, as set out in their agreement with Integra. The amount of the investment management fee is negotiable between the client and Integra. Page 4 of 7

5 Past performance The performance reported below assumes that all distributions made by the Fund in the period shown were reinvested in additional units of the Fund. If an investor holds the Fund outside of a registered plan, he/she will be taxed on these distributions. How the Fund has performed in the past does not necessarily indicate how it will perform in the future. All rates of return are calculated based on Pricing NAV and are in Canadian dollars unless stated otherwise. Fund Inception: September 27, 2000 Year-by-year returns (%) The following bar chart shows the investment fund s annual performance for each of the years shown, and illustrates how the investment fund s performance was changed from year to year. In percentage terms, the bar chart shows how much an investment made on the first day of each financial year would have grown or decreased by the last day of each financial year. Annual Returns (%) ending June Summary of Investment Portfolio as at June 30, 2018 Asset Mix International Equities Other Assets, Net of Liabilities Country Mix Australia Austria Belgium Brazil China Colombia Denmark Finland France Germany Guernsey Hong Kong Indonesia Ireland Israel Italy Japan Jersey C.I Luxembourg Malaysia Mexico Netherlands New Zealand Norway Poland Portugal Qatar Russia Singapore South Africa South Korea Spain Sweden Switzerland Taiwan Thailand United Kingdom Page 5 of 7

6 Summary of Investment Portfolio (continued) as at June 30, 2018 Sector Mix Financials Industrials Information Technology Energy Health Care Consumer Discretionary Materials Consumer Staples Telecommunication Services Real Estate Utilities Top 25 Holdings (excluding cash equivalents) 1. Royal Dutch Shell PLC, Class A Roche Holding AG Genusscheine L Oréal SA DBS Group Holdings Ltd Aristocrat Leisure Ltd Nippon Telegraph & Telephone Corp Taisei Corp Macquarie Group Ltd BP PLC Koninklijke Philips NV Qantas Airways Ltd UbiSoft Entertainment SA Sony Corp United Overseas Bank Ltd Samsung Electronics Co. Ltd Japan Post Holdings Co. Ltd Sandvik AB SK Hynix Inc Daiwa House Industry Co. Ltd H. Lundbeck AS PSA Peugeot Citroën SA Stora Enso OYJ, Series R Deutsche Lufthansa AG, Registered International Consolidated Airlines Group SA Ipsen SA Total Fund : $73,460,376 The summary of investment portfolio may change due to ongoing portfolio transactions of the investment fund. The most recent annual report, semi-annual report or quarterly report is available at no cost, by calling , by writing to us at Integra Capital Limited, 2020 Winston Park Drive, Suite 200, Oakville, ON, L6H 6X7 or by visiting our website at Page 6 of 7

7 Integra Capital Limited 2020 Winston Park Drive, Suite 200 Oakville, Ontario L6H 6X7 Manager, Portfolio Manager, Transfer Agent and Registrar Integra Capital Limited, Oakville, Ontario Auditors KPMG LLP, Toronto, Ontario Legal Counsel Torys LLP, Toronto, Ontario Is a registered Canadian trademark of Integra Capital Management Corporation