Canadian Growth Class Commentary
Portfolio Advisor: Industrial Alliance Investment Management
Inc.
Fund Commentary - April, 2012
During the first quarter of 2012, the world economic recovery
continued to have a positive effect on stock markets
worldwide. However, fears of another market downturn are not
unfounded. The European sovereign debt crisis continues to pose a
significant risk to the world economy. While a Greek default was
avoided, we are clearly not "back to normal."
The start of 2012 presents several major differences from 2011.
U.S. economic data is much stronger than a year ago including
better than expected results in employment data, and
Americans renewing their automobile fleet by replacing old cars
with more energy-efficient models.
Major stock market indices had a positive start to the year
while Canada lagged behind foreign indices. The underperformance of
the S&P/TSX Composite Index is primarily due to the fear of an
economic slowdown in China which impacts the performance of the
Materials and Energy sectors, these two sectors for more than a 46%
weighting in the Canadian stock market.
The fund had a positive quarter. Our REIT selection
was also beneficial with names like Artis REIT, Boardwalk REIT and
Cominar REIT. The small-cap portion also helped has small-cap
stocks were a greater contributor than large-cap stocks in the
first quarter of 2012. Stocks like Horizon North Logistics Inc. and
Rocky Mountain Dealerships Inc. did well during the quarter. Our
low exposure in natural gas producers contributed to the Fund as
the commodity declined 34% during the quarter.
During the period, after the rise in the cyclical sectors, we
reduced some positions in the Materials and Energy sectors; Taseko
Mines Ltd., Quadra FNX Mining Ltd., Osisko,Mining Corpoation and
Precision Drilling Corp. were recycled into the Financials sector
more specifically towards Canadian banks. The current situation in
China results in a cautious approach towards the cyclical sector.
Combined with the on-going problems in the Europe, volatility in
the equity markets is expected to remain present for some time.