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It’s not often we write to clients, advisors, and friends twice in the same week. Economic circumstances and our inherent desire to maximize opportunities for our clients has me writing to you again.
By the end of 2013, Yorkville decided to exit most of its Energy Sector positions resulting in our investors being handsomely rewarded in 2014 and 2015. The story was, however, totally different for most of 2016 as energy prices rallied (oil peaked at $54.50) and many struggling Energy Sector stocks delivered high double-digit share price returns despite weak sales and earnings. Also alarming during this period, many energy companies began selling-off income generating assets to enhance cash flow when sector revenues were off 33% and earnings off almost 50% respectively. Energy companies sold assets to meet immediate cash flow needs, but also gave up future earnings potential resulting from a smaller revenue base. We feel this general deterioration will reach an equilibrium level in the later part of 2018.
In 2016, Yorkville’s Analyst Team had an important decision to consider:
- Do we follow market momentum (that was against our portfolio positioning) in order to participate in a rally that was not supported by expected growth in sales or earnings? OR,
- Do we stick to our investment process that clearly indicated that Energy Stocks' performance is not supported by supply, demand, sales or earning fundamentals (clearly a bubble)?
In retrospect, we decided to stay true to our fundamental research model and avoid the Energy Sector in most of Yorkville’s funds. We also reiterated our view of energy prices (equilibrium price of $42-$47 per barrel) at our 2017 Investment Forecast events earlier this year. As an Investment Manager, it is sometimes difficult to be an “outlier” when most of the investing community is revising their crude oil and energy stock estimates higher. However, we believe in sticking to our principles and time-proven process.
Today we have zero exposure to the energy sector in our American QVR fund and are less than half the market weight in our Canadian QVR fund. Our energy position in Canada is dominated by premier companies including a sizable exposure to “toll-taking” pipeline companies.
Our 2017 Forecast also calls for an improving US dollar and a deteriorating Canadian dollar. Interest rate differentials have been widening – the Bank of Canada has refrained from lowering rates resulting in only a modest expansion. Lower current oil prices and a broadening economic gap with our southern neighbor have pushed the Loonie lower to what we believe is a true equilibrium exchange rate. We are looking to modestly hedge our US dollar exposure if it gets extended beyond fair value.
As political and economic winds are quickly shifting, we thought we would send you these reminders to ensure your confidence that our Yorkville Team has been proactive and is ahead of these developments.
Please let me know if you have any questions.
Regards,
Hussein Amad,
President and CEO
IMPORTANT DISCLOSURES
……………………………………………………………………………………………
Yorkville Asset Management Inc. is registered with the Ontario Securities Commission as a registered portfolio manager, investment fund manager and exempt market dealer.
This newsletter does not constitute and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation by Yorkville Asset Management Inc. or its affiliates, or any other third party, of any security, including any mutual funds managed by Yorkville Asset Management Inc. or any other third party.
This information is provided for general informational purposes only. It is not intended as investment, financial, legal, insurance or tax advice and you should not construe it or rely upon it as such. Professional advice should be obtained with respect to any investment. Views expressed regarding a particular company, security, industry or market sector are the views of only that individual as of the time expressed and do not necessarily represent the views of Yorkville Asset Management Inc. or any of its representatives and are not a recommendation to buy or sell. These views may not be relied on as investment advice or other advice. Market information used on this newsletter is obtained from non-proprietary market sources. While we believe this information is accurate, Yorkville Asset Management Inc. and its affiliates cannot attest to the validity of information culled from other sources and cannot guarantee that it is current or complete at all times. The information contained is subject to change without notice and Yorkville Asset Management Inc. and affiliates cannot be held liable for any loss arising from any use of or reliance on the information contained in this newsletter.
To all Yorkville Asset Management Private & Institutional Clients, Advisors, and Friends:
This is a quick note to let you all know that Yorkville does not presently have exposure to Canadian alternative mortgage lenders. Furthermore, we have a short to mid-term negative bias toward Canadian real estate.
Our concerns began three years ago and were driven mainly by ballooning consumer debt-to-disposable-income ratios that have reached an all-time high. This concern is compounded by sluggish employment growth and worsening salary growth across all provinces. The potential for the Bank of Canada to meaningfully raise interest rates in 2018, CMHC tightening their policies, and new banking and government rules could further squeeze the real estate market in many areas.
We have concerns over indirect exposure that Canadian banks and insurers have to the real estate market and alternative mortgage lenders. We believe their exposure may be material enough to cause prolonged stock price declines. Further, we could experience a short term drop in Canadian Financials as this negative news may continue in the summer months.
For this reason, Yorkville has reduced our equity exposure to Canadian banks and insurers in favour of cash. We choose to be cautious at this stage and sit on the sidelines ready to reinvest with the view to increase our exposure to Canadian banks once the dust settles.
I hope you take confidence that we have never had exposure to embattled Canadian alternative mortgage lenders, and our recent conservative actions are consistent with our practice of Managing Risk and Nurturing Wealth.
Regards,
Hussein Amad
IMPORTANT DISCLOSURES
……………………………………………………………………………………………
Yorkville Asset Management Inc. is registered with the Ontario Securities Commission as a registered portfolio manager, investment fund manager and exempt market dealer.
This newsletter does not constitute and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation by Yorkville Asset Management Inc. or its affiliates, or any other third party, of any security, including any mutual funds managed by Yorkville Asset Management Inc. or any other third party.
This information is provided for general informational purposes only. It is not intended as investment, financial, legal, insurance or tax advice and you should not construe it or rely upon it as such. Professional advice should be obtained with respect to any investment. Views expressed regarding a particular company, security, industry or market sector are the views of only that individual as of the time expressed and do not necessarily represent the views of Yorkville Asset Management Inc. or any of its representatives and are not a recommendation to buy or sell. These views may not be relied on as investment advice or other advice. Market information used on this newsletter is obtained from non-proprietary market sources. While we believe this information is accurate, Yorkville Asset Management Inc. and its affiliates cannot attest to the validity of information culled from other sources and cannot guarantee that it is current or complete at all times. The information contained is subject to change without notice and Yorkville Asset Management Inc. and affiliates cannot be held liable for any loss arising from any use of or reliance on the information contained in this newsletter.
Jason is a Portfolio Associate and part of the Client Services team. He works closely with the private investment team on the Yorkville Long Term Health Care Fund, fulfilling responsibilities including administration, compliance, reporting, and sales.
Jason is a graduate of the University of Guelph Bachelor of Commerce program. His prior experience in financial services includes various accounting roles at Equitable Bank and CIBC Mellon, including both general and fund accounting roles. He is preparing to write his Exempt Market Proficiency Course (EMP) in 2017.
The Fed is raising rates. But this isn't a typical rate hike cycle, as lower Long Bond yields after each hike seem to say the Fed has done "enough" to halt the expansion. Please click here to read "Easy does it...".
Yorkville Introduces EAFE QVR Enhanced Protection Equity Class
Yorkville Asset Management is pleased to announce the launch of the EAFE QVR Enhanced Protection Equity Class - a new fund designed to provide investors access to select investment opportunities in Europe, Australia, Asia and the Far East. Yorkville, a pioneer in utilizing Quality, Value and Risk metrics in its investment approach strongly advocates that Canadian investors consider prudently diversifying into these markets. Utilizing a value investment approach, the Fund is well positioned to immediately build upon the opportunities the Manager sees in these markets.
“International (EAFE) equities are great diversifiers for balanced mandates and for those seeking exposure to Europe, and developed Asian economies, like Singapore, Hong Kong and Japan. They represent 30% of the world large cap market and have historically outperformed Canadian equities.” Hussein Amad President and CEO of Yorkville Asset Management.
In addition to Mr. Amad, acting as the Fund’s lead Portfolio Manager, Yorkville has brought onboard additional talent with Polina Markova joining as Associate Portfolio Manager. Ms. Markova holds an Honours Bachelor of Administrative Studies degree from York University and is a CFA charterholder. She previously worked at a boutique investment firm, managing investments and constructing portfolios for high-net-worth individuals.
The Fund is available dealers as both an A and F Series
|
Series |
Fund Code |
Initial Investment |
Additional Investments |
PAC Plans |
|
Front End Load - Series A |
YAM700 |
$1,000 |
$100 |
$100 |
|
Deferred Sales Charge (DSC) – Series A |
YAM705 |
$1,000 |
$100 |
$100 |
|
Low Load (LL) – Series A |
YAM710 |
$1,000 |
$100 |
$100 |
|
F – Series |
YAM715 |
$1,000 |
$100 |
n/a |
For additional information please contact Polina Markova at 416-504-0411 or visit www.yorkvilleasset.com for additional information and regulatory documents.
The Canadian Securities Administrators have implemented amendments to mutual fund prospectus disclosure rules for pre-sale delivery of Fund Facts. Under the amendments, the most recently filed Fund Facts will have to be delivered to a purchaser before a dealer accepts an instruction for purchase. This delivery requirement will apply to all initial purchases, including both full service accounts and order execution-only accounts.
Advisors can click the link here to access all Yorkville Fund Fact Sheets and print the appropriate documents as required.
Yorkville Asset Management joined almost 1,000 other supporters, on Saturday February 27th , as the VIP reception sponsor for the Trillium Health Partners Foundation’s annual Gala in Mississauga.
This is Yorkville’s 4th consecutive year sponsoring the foundation gala, dating back to 2013, when Yorkville became the VIP Reception Sponsor for Trillium’s Laugh Out Loud event. This year’s event was hosted by acclaimed hometown comedian Russell Peters and Jessica Holmes who managed to lead a successful night of laughter and music. The event raised almost $950,000 for the Mental Health Program at Trillium Health Partners. To date, the Laugh Out Loud event has raised over $7.5 million in support of Trillium Health Partners Foundation.
To find out more about Trillium Health Partners Foundation, the work they are doing to improve health care in Mississauga and the surrounding area, please visit trilliumgiving.ca
To see more photos of the evening please visit LOL Flickr gallery.
For more details on Yorkville’s commitment to Trillium and for commentary by Yorkville President CEO Hussein Amad on Yorkville’s dedication to charitable giving, please see the 2013 announcement here.
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