CI Global Managers Fund – CI Global Managers Fund

Altrinsic global advisors

Our portion of the CI Global Managers Fund portfolio outperformed global indexes during a volatile quarter thanks to our adherence to our fundamental value discipline. Despite heightened uncertainty about the global economy and our concerns about downward earnings revisions in “new economy” sectors, we are finding abundant stock-specific investment opportunities. Attractive valuations, fundamentally attractive business, and earnings with limited economic sensitivity are common themes among many of our positions. Non-bank financials and aerospace/defense are among our largest sector exposures. Within health care, we remain committed to McKesson HBOC, but we have sold our large pharmaceutical positions. Geographically, our stock selections are dominated by the United States (59%), with Europe accounting for 21% and Asia 7%.

BPI global asset management

For the quarter, BPI’s portion of the fund had a strong absolute performance from holdings in technology, consumer staples, and select financial stocks, but a weak performance from holdings in the telecommunications and independent power producer sectors. One outstanding technology holding was Checkpoint Technology, which was purchased early in the quarter and sold after it hit our price target. Citigroup was a strong performer in the financial sector as investors anticipated better net interest margins due to lower interest rates and because of its reputation as a high-quality global leader. Philip Morris in the consumer staples sector also contributed to performance. Our underperformers included telecommunications stocks such as Vodafone in the UK, which has fallen because of reduced prospects for growth in the wireless industry. We sold the independent power producers because of fears of re-regulation in the state of California.

CI global advisors

Global financial markets currently reflect a tug of war between two popular investment maxims: “Don’t fight the Fed” and “Don’t fight the tape” (i.e., negative news flow and market momentum). While things could remain bumpy for a while in response to negative news from corporations, our research shows that U.S. Federal Reserve policy and the yield curve have been dominant influences on the market over the long term, and the Fed’s current easing stance continues to argue for a constructive view on equity markets over the next six to 12 months.

Accordingly, we have tilted our portion of the portfolio in favor of beneficiaries of rate declines such as consumer discretionary products, financial services, and technology, while we have reduced the emphasis on traditional defensive sectors such as consumer staples, health care, and utilities. Geographically, U.S. companies should benefit most directly from the Fed’s aggressive rate-cutting. We are also more optimistic about the emerging markets, which are likely to benefit from global interest rate reductions, and to Japan, because of our increasing optimism about its prospects for political change and economic reform.

Trident investment management

We believe that recent declines within the major markets indicate an ongoing, major transition in global market leadership. Specifically, we anticipate a sectoral shift back to the traditional industrial and infrastructure companies at the expense of the over-invested “new economy” technology and financial shares. At the same time, we expect that Europe and Japan will usurp the U.S. position as the destination of choice for long-term, growth-oriented investors.

Trident’s portion of the CI Global Managers Fund is managed to benefit from opportunities derived from these developments. Our positions are diversified and include exposure to domestically focused (typically non-exporting) European and Japanese companies that should benefit from the economic shifts we anticipate. Our U.S. and Canadian positions are limited to energy companies with a strong likelihood of long-term profitability.

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