Ninepoint Focused Global Dividend Class

February 2021 Commentary

Year-to-date to February 28th, the Ninepoint Focused Global Dividend Class generated a total return of 0.15% compared to the S&P Global 1200 Index, which generated a total return of 1.13%. For the month, the Fund generated a total return of 1.71% while the Index generated a total return of 1.65%.

The three main catalysts that we have highlighted in the past (the resolution of the US Presidential Election, the approval of additional fiscal stimulus and the rollout of Covid-19 vaccines) have combined to power a noteworthy sector rotation in early-2021. Across the broad equity markets, growth/momentum plays are clearly lagging value/cyclical plays, suggesting that the mega-cap technology stocks are being used as a source of funds for investments in the energy, financials and industrials sectors. In the infrastructure space, we have seen the bond proxies, such as the regulated utilities, being used as a source of funds for allocations to the energy and industrials sectors. In the real estate space, we have seen the steady performers from 2020, such as the specialized REITs and industrial REITs, being used as a source of funds for investments in the retail REITs, office REITs and hotels & resorts REITs sub-industries.

Although investors like to gravitate towards easy narratives, it is tough to find a clear explanation for the acceleration in the reopening trade during the month of February. Growth and inflation expectations have been picking up for some time now but leadership changes in the market can occur suddenly and violently due to investor positioning. Looking back, it is interesting that the certification of the US Presidential election on January 6/7 by Congress coincided with the 10-year US Treasury bond yield moving back above 1.00% (a key psychological level) for the first time since the beginning of the Covid-19 pandemic. But it was not until February, when the yield on the 10-year spiked more than 50 basis points to reach a high of 1.61%, that the move really caught investor’s attention. Reflation beneficiaries ripped higher while long-duration assets and the more-speculative areas of the market, including high-multiple growth stocks, SPACs and even early-stage clean power technology names were hit hard.

Despite the potential for some outsized moves as market participants cope with the interest rate reset, we continue to expect a broad equity rally as the world reopens through 2021 and pent-up consumer spending is unleashed. In the meantime, we are very comfortable relying on our investment process, which suggests a diversified barbell-strategy to optimize the tradeoff between risk and return over the next twelve months. But we understand that if higher rates translate into at least some degree of P/E compression, it will be crucial to pay the right price for earnings and dividend growth as GDP accelerates from the Covid-19 pandemic induced recession.

Top contributors to the year-to-date performance of the Ninepoint Focused Global Dividend Class by sector included Industrials (+68 bps), Financials (+41 bps) and Energy (+37 bps) while top detractors by sector included Health Care (-58 bps), Consumer Staples (-39 bps) and Communication (-33 bps) on an absolute basis.

On a relative basis, positive return contributions from the Industrials, Utilities and Consumer Staples sectors were offset by negative contributions from the Communication, Financials and Materials sectors.

We are currently slightly overweight the Consumer Discretionary and Energy sectors, while slightly underweight the Utilities and Real Estate sectors. As we have said before, given our expectations for the rally to broaden through 2021 as the world reopens, we have a relatively neutral positioning from a sector perspective. As the vaccine rollout continues to accelerate, we may finally see both growth/momentum stocks and value/cyclical stocks participating in the recovery rally and we are positioned accordingly.

At the stock specific level, top contributors to the year-to-date performance included Magna International (+65 bps), Johnson Controls International (+60 bps) and Ally Financial (+53 bps). Top detractors year-to-date included Apple (-42 bps), T Mobile (-38 bps) and Walmart (-31 bps).

In February, our top performing investments included Magna (+67 bps), Suncor (+53 bps) and Synchrony Financial (+43 bps) while Apple (-41 bps), Thermo Fisher (-39 bps) and Hologic (-34 bps) underperformed.

The Ninepoint Focused Global Dividend Class was concentrated in 30 positions as at February 28th, 2021 with the top 10 holdings accounting for approximately 37.8% of the fund. Over the prior fiscal year, 20 out of our 30 holdings have announced a dividend increase, with an average hike of 2.8% (median hike of 6.1%). We will continue to apply a disciplined investment process, balancing various quality and valuation metrics, in an effort to generate solid risk-adjusted returns.

Jeffrey Sayer, CFA
Ninepoint Partners

1 All returns and fund details are a) based on Series F shares; b) net of fees; c) annualized if period is greater than one year; d) as at February 28, 2021; e) 2015 annual returns are from 11/25/15 to 12/31/15. The index is S&P GLOBAL 1200 TR (CAD) and is computed by Ninepoint Partners LP based on publicly available index information.

The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: ADR risk; Capital depletion risk; Concentration risk; Credit risk; Currency risk; Cybersecurity risk; Derivatives risk; Exchange traded funds risk; Foreign investment risk; Inflation risk; Interest rate risk; Liquidity risk; Market risk; Rule 144A and other exempted securities risk; Securities lending, Repurchase and reverse repurchase transactions risk; Series risk; Short selling risk; Specific issuer risk; Tax risk.

Ninepoint Partners LP is the investment manager to the Ninepoint Funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), and other expenses all may be associated with investing in the Funds. Please read the prospectus carefully before investing. The indicated rate of return for series F shares of the Fund for the period ended February 28, 2021 is based on the historical annual compounded total return including changes in share value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Fund may be lawfully sold in their jurisdiction.

The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP and are subject to change without notice. Ninepoint Partners makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint Partners assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint Partners is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners LP. Any reference to a particular company is for illustrative purposes only and should not to be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by Ninepoint Partners LP is or will be invested. Ninepoint Partners LP and/ or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. Ninepoint Partners LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, Ninepoint Partners LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.

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