Spring 2019: Fund and portfolio update

May 1, 2019

As stock markets bounced back in Q1 2019, so too did MD funds and portfolios. Additionally, bonds posted some of their strongest returns in recent years, reasserting their role in a balanced portfolio. Our allocation to foreign equity investments and an overweight tactical allocation to outperforming equities contributed to positive excess return.

Transcript*

For the first quarter of 2019, we've seen a major recovery in equity markets. In fact, we've now seen most markets recover back to their pre Q4 2018 levels. What this translates into is very robust portfolio returns for the quarter.

In fact, all MD portfolios experienced very strong positive returns. Our exposure to global equities, has made an outsized contribution to growth whereas fixed income provided a stable albeit more muted contribution to our total returns. Within fixed income, our portfolios

remain conservatively positioned for capital preservation. However, each fund’s overweight position to Canadian and foreign credit, as well as our prudent exposure to interest rate risk made a positive contribution to absolute and benchmark relative returns.

Our portfolio's allocation to foreign equity investments, as well as our overweight tactical position to equities, has contributed very positively to excess returns.

If we look at our individual fund performance, starting with our MDPIM US Equity Pool, the pool delivered very strong results, of over 11%, in the quarter. Also outperforming the S&P 500.

Our strong contributors to performance in the quarter were the information technology sector, consumer discretionary as well as industrials. Some of our top contributors to our performance included AbbVie, where we have no exposure. Our overweight position to MasterCard and our overweight position to Synchrony Financial.

Looking internationally our MDPIM International Equity Pool deliver a return of over 8% for the quarter and as well, outperform its benchmark. The strongest contributors to portfolio performance were from industrials, financials, IT and healthcare. Our currency management effects were fairly flat for the quarter, but we saw strong out performance by our underweight or no exposure to Sony, an underweight exposure to HSBC and our overweight position to WG Group

In the Canadian equity space, although we delivered very strong returns of over 12%, we slightly underperformed the S&P TSX composite index. Our strong contribution did come from the financials, materials and consumer discretionary sectors - however we saw

some negative results coming from the healthcare sector, where we have a very

low position. And our low position in healthcare is predominantly as a result our lack of cannabis exposure, which is a result of our mandate from the Canadian

Medical Association to exclude both tobacco and cannabis from our portfolios.

So, in summary the first quarter of 2019 has been very strong for both MD funds

as well as our portfolios. All MD portfolios experience very strong

positive returns. This is in stark contrast to the results that clients would have seen at the end of 2018.

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