Q3 2017 Commentary – Mackenzie Global Small Cap Growth Fund | Mackenzie Investments

Fund Commentary

Q3 2017 Commentary

Mackenzie Global Small Cap Growth Fund


Performance Summary

  • During Q3 2017, the Fund returned 5.8% against the MSCI All Country World Small Cap Index TR (net) CAD, which returned 2.2%.

Contributors to Performance

  • At the sector level, the Fund’s stock selection in Information Technology and Consumer Discretionary contributed to performance.
  • From a regional perspective, an overweight allocation and stock selection in China contributed to performance, as did the selection in Taiwan.
  • At the security level, strong results were seen from YY Inc., Plus500 Ltd., and Nanya Technology Corporation.

Detractors from Performance

  • At the sector level, stock selection in Consumer Staples and underweight exposure to Industrials detracted from performance.
  • From a regional perspective, an overweight allocation in Korea detracted from performance.
  • At the security level, key detractors included Sprouts Farmers Markets, Dave & Buster's Entertainment, and Harmonic Inc.

Portfolio Activity

  • Portfolio activity and market effect over the quarter resulted in increased exposure to Financials and Consumer Discretionary. The Fund reduced exposure to Real Estates and Health Care. Regionally, the portfolio increased exposure to the Hong Kong, Canada and France, while decreasing exposure to the United States and the United Kingdom. Cash allocation has slightly increased over the quarter.

Outlook

  • The Systematic Strategies team selects stocks based on fundamental factors such as: earnings, sales and cash flow growth; valuation metrics such as: price to earnings, price to cash flow, and quality metrics such as: leverage and earnings visibility. We will vary the weightings of these factors depending on our forecasts of the rewards to these factors. Another key component of our investment process is our stock selection model. In general, the more successful the stock selection model is, the better the portfolio is expected to perform. The final step is portfolio construction. A proprietary portfolio construction methodology is applied, with the objective of maximizing expected returns subject to constraints using some of the industry’s best practices.
  • At the end of Q3, our portfolios were generally positioned with positive exposures to Growth, Liquidity and Medium Term Momentum. The funds also have a high Alpha exposure, across all industries and sectors to the Stock Selection model. Thus, aside from our stock-specific risks, we would expect our portfolios to perform above their market benchmarks in an environment which values stocks with positive growth characteristics, with positive medium term momentum, and that are more liquid than the average small cap stock.

Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns as of September 30, 2017 including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution, 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.

Index performance does not include the impact of fees, commissions, and expenses that would be payable by investors in the investment products that seek to track an index.

On September 25, 2006, the Fund changed its mandate from investing mainly in Canadian small-cap and mid-cap equity securities to investing mainly in North American small-cap and mid-cap equity securities. The past performance before this date was achieved under the previous objectives.

On July 26, 2013 the Fund changed its mandate from investing mainly in North American small-cap and mid-cap equity securities to investing primarily in Global small-cap and mid-cap securities. The past performance before this date was achieved under the previous objectives.

On September 30, 2015, Rick Weed became the lead Portfolio Manager on the Fund.

This document includes forward-looking information that is based on forecasts of future events as of September 30, 2017. Mackenzie Financial Corporation will not necessarily update the information to reflect changes after that date. Forward-looking statements are not guarantees of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Some of these risks are changes to or volatility in the economy, politics, securities markets, interest rates, currency exchange rates, business competition, capital markets, technology, laws, or when catastrophic events occur. Do not place undue reliance on forward-looking information. In addition, any statement about companies is not an endorsement or recommendation to buy or sell any security.

The content of this commentary (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the mutual fund or returns on investment in the mutual fund.