Global Small-Cap Equity Fund

December 31, 2024

Market Context

• The global small-cap market (Morningstar Developed Markets Small Cap Index) rose 18.2% in Canadian dollar terms in 2024.
  
• All sectors produced positive returns, with financial services and utilities turning in the strongest gains.
  

Portfolio Specifics

• The portfolio is currently invested in 49 companies. 26 are based in the U.S., 8 in Europe, 7 in Japan, 4 in the U.K., 3 in Australia, and 1 in South America.
• The fund rose 16.3% in 2024. Our industrial holdings, which comprise the largest component of the portfolio (38%), were an area of strength. American companies EMCOR Group (mechanical and electrical construction services), Clean Harbors (environmental and industrial services) and ESAB Corporation (welding and cutting equipment) were among our best performers, with EMCOR doubling in value.
  
• Our financial services and consumer investments also performed well, with Rakuten Bank, Japan’s largest online bank, a standout. The stock doubled in the year on strong profit growth. Japanese companies in general continue to be an area of interest. Shareholder activism reached a record this year and corporate earnings hit an all-time high. The country accounts for 14% of the portfolio. Other notable holdings include Azbil (building automation sensors and products), Integral (private equity), and new addition Tokyo Metro (subway operator).
  
• Our technology investments had a mixed year. Astera Labs (connectivity solutions for data centers), another new addition this year, was a leader (the stock nearly tripled in the fourth quarter alone). MACOM Technology Solutions (semiconductor designer) also had a strong run late in the year. Synaptics (technology for touch, display, and biometrics) and JFrog (software for managing and releasing updates) were disappointments, however.
  
• Arcos Dorados and Tecan Group also detracted from performance. Arcos Dorados (McDonald’s franchisee in Latin America) reported lower margins which disappointed investors, and Tecan Group’s financial performance fell short of expectations. Our manager, TimesSquare Capital, sold Tecan to pursue better opportunities.
  
• The portfolio has gone through more changes than usual over the last 18 months as volatility has been high and new co-manager Mark Grzymski makes his mark. 21 stocks were sold in the year and 19 purchased. Inspire Medical Systems (sleep apnea treatment), Lattice Semiconductor (designs devices for low-power computing), and ServiceTitan (CRM software) are some of the latest additions.
  

Positioning

• The fund invests in businesses with a clear competitive edge that offer products and services the world needs. A record of consistent sales and profit growth is important, as is a management team that has experience and integrity.
  

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.