March was a strong month across the board for North American equities and especially for the AFINA investment products (more details below). Crude oil rebounded and the US dollar’s furious rise since early 2015 finally began to subside. We expect the US dollar to regain strength later this year as the US Federal Reserve continues to raise interest rates while the rest of the world keeps rates on hold.
As we mentioned last month, valuations across the financial services sector in both Canada and the US have been at the most attractive levels since mid-2011. Furthermore, merger and acquisition (M&A) activity globally continues to be strong, which is typical of this stage of a bull market. Two companies across AFINA’s investment products are involved in M&A-related action: Apollo Education and Outerwall. Notably, Chinese companies are becoming one of the biggest acquirers globally. In fact, through the end February 2016 Chinese outbound M&A deals reached US$81.6 billion versus US$11 billion in the same 2015 period.
A summary of the AFINA investment product performance is as follows:
- The AFINA Affinity Fund was up +10.6% in March. At the end of March, financials represented the largest sector weighting at 34.2%, followed by consumer/health care (28.3%), while the dividend yield of the AFINA Affinity Fund was 3.2%.
- The AFINA Optima10 was up +7.7% in March. The Optima10 currently has its largest weighting in financials (40%), consumer (30%) and technology (20%). The dividend yield at month-end in the AFINA Optima10 was 4.2%.
As of March 31, 2016. All figures are net of fees and other expenses. Past performance is not indicative of future results. Refer to afinacapital.com/legal/ for full details and disclosures.
(1) The AFINA Affinity Fund LP fully hedges its US dollar exposure. Accordingly, the AFINA Affinity Fund LP benchmark represents the 50% weighting of the S&P 500 Total Return Index in US dollars and a 50% weighting of the S&P/TSX Composite Total Return Index in Canadian dollars.
(2) The AFINA Optima10 Managed Account does not hedge its US dollar exposure. Accordingly, the AFINA Optima10 benchmark represents the 50% weighting of the S&P 500 Total Return Index in Canadian dollars and a 50% weighting of the S&P/TSX Composite Total Return Index in Canadian dollars.