PenderFund

Manager’s Quarterly Commentary – Felix Narhi – Q1 2017 – Part 2

Written on . Posted in Commentaries, Pender Strategic Growth and Income Fund, Pender US All Cap Equity Fund

All we want in life is no competition or an unfair advantage

At Pender we sometimes joke that all we want in life is either no competition or an unfair advantage. This is only partly in jest. In truth, virtually all great businesses have unfair advantages – Warren Buffett calls such advantages economic “moats”. Moats are very valuable if they provide a business with the ability to generate sustainably high returns on capital, which creates wealth for its owners. The ideal business is one that uses very little capital, has a defensible business model and can continue to grow at a decent clip. The growth of such a capital-light business generates lots of extra free cash flow every year which is not required in the core business. As an investor, you get a double-barreled compounding effect from this earnings growth – first from the value of the growing business and second from the value of the excess cash which can be used to fund other promising opportunities, repurchase shares or pay out dividends. There are relatively few businesses like that, but this approach describes the business models of many of today’s tech giants including Apple, Google, Facebook, Amazon and Microsoft. As these enterprises illustrate, management teams that have the ability to look around the bend and make smart early bets on tomorrow’s promising trends and achieve critical mass have the potential to create large fortunes. Collectively, these companies have grown so rapidly that extra cash continues to pile up faster than many of these companies can deploy it. A high class problem!

Continue Reading

Manager’s Quarterly Commentary – Felix Narhi – Q1 2017 – Part 1

Written on . Posted in Commentaries, Pender Strategic Growth and Income Fund, Pender US All Cap Equity Fund

“The concept of a general equilibrium has no relevance to the real world (in other words, classical economics is an exercise in futility.)” – George Soros

The Loonie – To Hedge or Not to Hedge

We have been fielding more questions about currency and potential hedging strategies recently. We are not currency experts or forecasters, but we are keen observers of the lessons from history, respect long-term cycles and are eager to study how the world really works so we can position ourselves sensibly. When contemplating the recent trajectory of the loonie, we are reminded of George Soros’ theories that financial markets do not tend towards equilibrium as conventional theory would argue. Rather, that markets feed on their own misconceptions about events to drive exaggerated movements, which then feeds further momentum. Soros describes this two-way feedback loop between perception and reality as his theory of reflexivity. He claims that speculative runs on a currency can persist for a long time and relative movements in one currency against another are frequently of a long term, secular nature, often measured over many years, rather than days or weeks. That has certainly been the case for the loonie.

Continue Reading

Pender Corporate Bond Fund – Manager’s Commentary – May 2017

Written on . Posted in Commentaries, Pender Corporate Bond Fund

The Pender Corporate Bond Fund returned 0.5% in May. Leading this performance was our position in the distressed credit of Global Brokerage Inc, which surprised creditors positively with a $56M non-core asset disposition. We saw further strength in PRA Group 2020 convertible bonds as that company improved its liquidity through a new debt issue at good terms which created a positive “read-across” effect for the existing issue.

During the month, risk-free credit yields continued their recent decline with Canada’s 5-year note month-end yield falling below 1.0% for the first time since October 2016. A market which was not too long ago primed for “reflation,” appeared to settle back into a pattern of lower yields. The 5 year inflation breakeven expectation implied by US inflation-protected security pricing fell from 2.0% to 1.7%.

Continue Reading

Pender Corporate Bond Fund – Manager’s Commentary – April 2017

Written on . Posted in Commentaries, Pender Corporate Bond Fund

The Pender Corporate Bond Fund returned 0.3% in April. Although certain credits gained, others were weaker in the month and the net effect of winners and losers was this very modest total. Winners included demand-side management energy leader Enernoc Inc, where our convertible bonds rose in value by five points and foreign exchange broker Global Brokerage, where we saw an uptick in valuation. On the weaker side, Sherritt bonds were a few points lower on uncertainty surrounding the company’s bid to restructure its financial commitments in the Ambatovy nickel plant. Preferred shares also were slightly weaker in the month. In the end, our total return for April was approximately the level of underlying coupons.

Continue Reading

Manager’s Quarterly Commentary – David Barr – Q1 2017

Written on . Posted in Commentaries, Pender Canadian Opps Fund, Pender Select Ideas Fund, Pender Small Cap Opps Fund, Pender Value Fund

When talking to investors today, the questions we hear quite frequently revolve around one central theme – are markets expensive? We spend the majority of our time trying to figure out if an individual company is trading at a good price and, while our team has grown over the years, we still don’t have the resources to have an opinion on every stock and hence the “market” as a whole.

Continue Reading

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in net asset value and assume reinvestment of all distributions and are net of all management and administrative fees, but do not take into account sales, redemption or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. This content is intended for information purposes only and does not constitute an offer to buy or sell our products or services nor is it intended as investment and/or financial advice on any subject matter and is provided for your information only. Every effort has been made to ensure the accuracy of its contents.