Inhance Global Equity SRI Class Commentary
Portfolio Advisor: Vancity Investment Management
Ltd.
Fund Commentary - March 31, 2012
The Portfolio Sub-Advisor increased exposure to US equities
given the relative attractiveness of the region. During the
quarter, positions were initiated in VF Corp, Home Depot and EOG
Resources. International apparel firm VF Corp's strong brand
portfolio, including The North Face and Timberland, is well
positioned for domestic and international growth. Home improvement
retailer, Home Depot has laid the foundation to gain upside
exposure to a recovery in the US housing cycle and capture deferred
home renovation and maintenance spending. We expect EOG Resources
to be a key participant in the burgeoning trend towards North
American energy independence, with an early mover advantage in
unconventional energy plays. These additions were funded from the
sales of Amazon.com, Man Group, Talisman Energy and United
Continental.
In terms of ESG strategy, the Portfolio Sub-Advisor met with
Teck Resources to discuss actions and policies to promote gender
diversification in the workplace. Teck provided an overview of
initiatives at company operations, demonstrating in-depth knowledge
on the benefits of diversity and committed to provide increased
reporting in the annual sustainability report.
The absence of major negative surprises out of Europe, along
with the relative success of the ECB liquidity initiatives were
welcomed by equity markets during the first quarter. With central
banks unwavering on maintaining ample liquidity, a low interest
rate environment, generally solid corporate earnings reports, and
attractive comparative yields to bonds, it was unsurprising that
equities regained favour among underinvested institutions. However,
the Portfolio Sub-Advisor's remains concerned that liquidity
measures merely mask the deeper, on-going solvency, deleveraging
and austerity issues still facing much of Europe. While modest
growth in the US is encouraging, global growth is far from booming.
Peaking corporate profit margins could suggest the potential for
disappointing upcoming quarterly earnings in a slow growth
environment. Finally, developments surrounding Iran, oil prices and
expectation shifts on previously noted liquidity, interest rates
and corporate profitability could instigate further market
volatility typical of the long work-out phase post a major
financial crisis. Accordingly, while recognizing financial risks
are slowly diminishing, no "All Clear" has been sounded yet.
In this context, the Portfolio Sub-Advisor believes stock
selection offers ample opportunity and will be the primary source
of risk minimization and value-add the Portfolio strategy of
the Fund. As concluded in the Portfolio Sub-Advisor's commentary,
they believe the attractiveness of non-resource stocks will rise
relative to resource stocks and that the breadth of investment
available in other more diverse markets, particularly the US,
offers superior medium-term investment opportunity. Hence they
believe a Canadian investor may benefit from increased exposure to
the Global Fund within their overall equity portfolio.