Global Equity Fund

September 30, 2024

Market Context

• Global stocks, as measured by the Morningstar Developed Markets Index, were up 5.2% in Canadian dollar terms in the third quarter.
  
• Financials, basic materials, utilities, and industrial companies were areas of strength while the energy and technology sectors lagged. European markets and Japan generally performed better than the U.S.
  

Portfolio Specifics

• The fund owns 48 stocks, of which 21 are domiciled in the U.S., 12 in Europe, 8 in Japan, 3 in Asia-Pacific, 2 in the U.K., and 2 in Canada. Companies range in size from mega-cap Microsoft to small-cap FirstCash Holdings.
  
• The portfolio gained 4.8% in the quarter and is up 13.5% this year. While these numbers are solid, the fund has lagged the broader market. Our manager, Aristotle Capital, is increasingly focused on maintaining a well-diversified portfolio, by industry and geography, in a global market that is becoming overly-influenced by large U.S. tech companies. Specifically, we have greater exposure to European and Japanese industrial and consumer companies, and more measured exposure to AI-related stocks, many of which are richly valued. While this has held back performance, we believe our positioning provides greater balance and downside protection.
  
• Japanese holdings MonotaRO and Otsuka Holdings had a strong quarter, both gaining more than 20%. Tokyo Century Corp., a new addition to the portfolio, has also been a solid performer since our purchase. The company specializes in providing equipment leases on long-term assets, with the bulk of its business coming from aircraft and IT leasing. The stock trades at a compelling valuation.
  
• Many of our European investments turned in strong operating results, including Alcon (eye care), Rational (industrial kitchen equipment), Assa Abloy (locks and entrance automation solutions), and DSM-Firmenich (vitamins, health and beauty), which benefited from a fire at a production facility of one of its key competitors.
  
• On the negative side of the ledger, pest control leader Rentokil has experienced a difficult year, with its stock falling 17%. Management acknowledged that its merger with Terminix was taking longer to bear fruit. Aristotle continues to see long-term potential in the combined entity despite the setbacks.
  
• Our technology holdings were also weak in the quarter, as sentiment towards the sector cooled off. Microsoft, Adobe, Microchip Technology, Qualcomm, and Samsung Electronics all traded lower.
  

Positioning

• Investments are spread across industries, both fast-growing and steady-eddy, in companies that have a strong market position. Aristotle looks for quality businesses with competitive advantages, pricing power, and proven executives.
  

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Important information about the Steadyhand funds is contained in our Simplified Prospectus. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.