The Great Divide: Public or Private Equity?

Over the last four years, equity markets have seen a stealth value bull market. However, despite this outperformance, value managers have not yet seen large asset allocations being directed to this turnaround story. One of the possible drivers of the lack of interest, is the fascination with private equity (PE). Warren Buffett at his 2019 AGM commented, “We have seen a number of proposals from PE funds where the returns are really not calculated in a manner that I would regard as honest. If I were running a pension fund, I would be very careful about what was being offered to me.” An audacious quote, even from Warren, and an idea investors might be mindful of as they make asset allocation decisions.

A Few Things we Know for Sure

Kim Shannon outlines a few things we know for sure as the market makes daily new highs.

Fixation with Rates: Unproductive and Unprofitable?

In recent years, investors have been increasingly fixated on interest rates. How high? How long? When is it coming down? Will it come down? Is this the new normal? The curve is inverted, and steepening! What does this mean? What does history say about rate cycles? And so on and so on. This is understandable. Interest rates play an outsized role in asset prices. When rates go up, asset prices go down, and vice versa. This is because an asset is worth all its future cash flows discounted to the present day. A higher interest rate means a higher discount rate, which in turn means a lower present-day value of these cash flows. If you can forecast rates correctly, you have a better grasp of the true worth of an asset.

Katie Ophelders

Katie Ophelders

Katie joined Sionna in 2015. Prior to joining the firm, Katie was an Account Supervisor at a marketing and communications agency, primarily working with clients in the financial services industry, including Sionna. She earned her Honours Bachelor of Commerce degree from the DeGroote School of Business at McMaster University and after graduating, Katie spent several months volunteering at the 2010 Vancouver Olympics and Paralympics. She holds the Chartered Investment Manager (CIM®) designation.

Is your Portfolio Allocated to this Time-Tested Winner? (ACPM – The Observer)

Kim Shannon recently wrote an article for ACPM's The Observer outlining data that suggests investors should consider allocating more to Canadian value…and why now may be the most beneficial time to do so.

Passive Investing and Tragedy of the Commons: What if Market Efficiency is Already Melting Away?

Active managers are discretionary traders, who seek mispriced stocks they believe will add excess returns to their funds. Passive investors are non-discretionary traders, they notionally need not worry about valuation, they believe the market is efficient, and thus perfectly reflects all known information. Their investment strategy is largely irresponsive to the price of the asset. Shiller explained, “Indexing …is free-riding on other people’s work” – in other words, active managers. At what point does there become too many passive players, such that they render the market unmoored from efficiency and thus turn the overall market inefficient?

Hunter Corcoran

Hunter Corcoran

Hunter joined Sionna as a Junior Trader in 2017. He earned his Honours Business Administration from the Ivey School of Business at Western University and completed a degree in Economics from Western University. Prior to joining Sionna, Hunter was an Institutional Equities Sales and Trading Summer Analyst at RBC. He is a CFA® charterholder and a member of CFA Society Toronto. Hunter is set to complete his Master of Liberal Arts in Extension Studies from Harvard University next year.

Canada Has Many World-Class Stocks Trading at Significant Discounts (BNN Bloomberg)

Canada Has Many World-Class Stocks Trading at Significant Discounts (BNN Bloomberg)

Kim Shannon, CFA, MBA
Founder and Co-CIO

Company Spotlight: Linamar

Associate Portfolio Manager, Joanna Wolff, provides an update on Linamar Corporation and outlines our thesis on the name.

Resources Discussion (ETF Conference)

Resources Discussion (ETF Conference)

Aleksy Wojcik, CFA
Portfolio Manager