The AFINA investment products had a very strong November. Following the US election, North American equity markets exploded higher. In addition, as we forecast in our November 14, 2016 update, oil prices have moved higher as Saudi Arabia pushed aggressively for an OPEC deal. We expect that the US$50-US$55 range for oil will see major price resistance as US shale oil production begins to recover from its summer 2016 lows.
Our exposure to higher oil prices is through Canadian stocks such as CIBC, Equitable Group and Home Capital Group, in addition to global infrastructure companies such as Chicago Bridge & Iron and Lyondellbasell Industries. As always, one of our defining screening metrics that any stock in our portfolio must meet is an average return on equity of at least 15% over a full business cycle. Unfortunately, commodity producers have a miserable track record of generating any return on equity that is even remotely close to its cost of capital over the long-term and as a result commodity (including oil) producers rarely make it into our portfolio.
The AFINA investment products continued to outperform in 2016. Even though cash levels across our actively managed products remain relatively high, we were positioned well and saw strong performance led by Devry, Seagate Technology, Waddell & Reed Financial and Bed Bath & Beyond. A summary of the AFINA investment product performance is as follows:
- The AFINA Affinity was up +6.3% in November and up +21.1% in 2016. Notably, this was the first month of performance whereby the structure of the AFINA Affinity changed from a limited partnership structure to a managed account on the NBCN platform, similar to the AFINA Optima10. This new structure provides lower fees, more transparency and enhanced liquidity for our investors.
- The AFINA Optima10 was up +10.5% in November and up +23.9% in 2016.
We want to thank our investors for their continued support and wish everyone a Merry Christmas, Happy Holidays and all the best for a prosperous 2017.
As of November 30, 2016. All figures are net of fees and other expenses. Past performance is not indicative of future results. Refer to https://www.afinacapital.com/legal/ for full details and disclosures.
(1) The benchmark represents a 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.