Vantage Year End Commentary

In our 2021 Investment Outlook we wrote about rotational themes we are seeing emerge. The Vantage Performance Protected Fund should benefit from the "small to mid-cap over large cap" & "value over growth" rotations.

Vantage is a Canadian equity focused asset management firm that specializes in the small to mid-cap market range of companies valued at $500M to $3B. In this often overlooked and misunderstood segment of the market, the managers seek out mispricing opportunities, looking for operational or strategic catalysts that will drive share prices higher. - That’s not to say that they are mandated to invest solely in Canada. Currently 20% of the funds are invested in US Companies. When making an investment, the managers focus on business structure over locality. - They are bottom-up fundamental value investors who invest in companies that will produce market returns without taking market risk. We think they pair well with our Large Cap North American dividend strategies.

The Vantage portfolio is currently invested in 24 companies. Before making an investment, the managers take their time and "do the work". They carefully cultivate relationships within the company’s management and they analyze the business structure and the competition. The companies they invest in tend to be off the beaten track. Many are traded in Canada but are doing business primarily in the US and sometimes are traded in Canada but are US owned. The turnover rate in the fund was higher in 2020 as they were nimble in response to the volatility in the market. Here is but one interesting investment story:
 
Brunswick Corporation (BC) – With a $5B market cap, this is one of the largest companies in the portfolio. It’s known on the street for being a "boat business" but that’s too narrow a descriptor. This company does build boats. It also owns Mercury (boat engines) and has almost a monopoly in boating parts & accessories manufacturing. This makes them more of a "marine business". The fund first bought into the company 2 years ago and enjoyed plenty of upside. In March 2020, at the advent of COVID lockdowns, thinking no one would be boating anytime soon, they decided to sell it. The managers consider this move the worst misstep they made during that time. As the year progressed and everyone went to the cottage and therefore boat crazy, the price of Brunswick recovered and went on the rise. The managers bought back in mid-summer, losing some of the upside, but anticipate that in 2021 the price climb will continue.
 
The managers believe the current market upswing is justified and there are reasons for longevity. Or rather, “there are good reasons for good performance”. The biggest being the vaccine(s), and now that the US election is decided, there is more political stability and central banks around the world are continuing to provide stimulus and support to their economies.
 
Interestingly, the fund has an Environmental, Social, Governance (ESG) policy. They will not buy companies that produce fire arms or tobacco and they don’t own resources. While the policy is in place, it is not a true driver of decisions, so management do not consider themselves a pure ESG company but rather they are ESG friendly. This is a trend we are seeing more and more across all asset classes.
 
The Vantage Protected Performance Fund has a long/short strategy built in to provide a hedge against market risk and smooth out volatility. Having this hedge in place is especially important when investing in an area of the market that has higher than average volatility.

The Vantage Q4 2020 Quarterly Commentary report can be found here: 
 

 

A note from Wynn

The Vantage Protected Performance Fund has attributes that place it in both our Capital Growth & Volatility Management asset class buckets.

While looking to achieve higher rates of return in capital gains, the long/short hedging strategy that the fund managers employ works to smooth out pricing volatility, making it more palatable for investors in a space that typically has higher volatility in pricing.

This is a hard working management team who are dedicated researchers and hunters of value and opportunity. Their enthusiasm and energy make them a pleasure to work with and we are pleased to have them as investment partners.

Should you wish to learn more, we encourage you to read the Q4 Commentary. If you have any questions, we welcome the opportunity to discuss this and/or any of the investments in your portfolio.

Warm regards,


 
Wynn A. Harvey BBA, CIM, CPCA, CDFA
Director, Wealth Management
Portfolio Manager, Investment Advisor
Tel.: 416.572.5530 • TF: 1.866.775.7704 • F: 416.864.9888

Wynn.Harvey@RichardsonWealth.com
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The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. Insurance services are offered through Richardson Wealth Insurance Services Limited in BC, AB, SK, MB, NWT, ON, QC, NB, NS, NL and PEI. Additional administrative support and policy management are provided by PPI Partners. Insurance products are not covered by the Canadian Investor Protection Fund. Richardson Wealth Limited, Member Canadian Investor Protection Fund. Richardson Wealth is a trademark of James Richardson & Sons, Limited used under license.