Equity Pool Quarterly Review
For the period ending
June 30, 2010
Equity markets fell in the quarter as fears of a double dip recession intensified. On the other hand bonds, in particular Government of Canada bonds, benefited from this concern as yields declined.
The portfolio was adversely affected by the performance of the equity portfolios, offset slightly by an underweight in foreign equities and an overweight in Canadian stocks.
ASSET MIX STRATEGY
In the second quarter, the Fund purchased three new holdings - Methanex Corp, Saputo Inc. and Vermillion Energy Trust. Rising demand for methanol, primarily due to the Chinese beginning to blend it with their gasoline, is helping to improve the longer-term outlook for Methanex. A disciplined management approach to acquisitions has enabled Saputo Inc. to successfully develop its dairy and cheese businesses in Canada, the US, Germany and Argentina. Vermillion Energy Trust is a very successful Canadian based international energy producer with operations in Canada, Western Europe and Australia. The company has been very disciplined and successful in the allocation of its capital and has provided investors with a high yield and overall rate of return.
Four stocks were eliminated from the portfolio – Petrobank Energy, Inmet Mining, Canadian Tire and Power Corp. Petrobank and Canadian Tire were experiencing deteriorating fundamentals while Inmet was sold and Teck Resources was trimmed to reduce overall exposure to base metals and coal and to enable increased exposure to precious metals with additional purchases of Agnico Eagle and Silver Wheaton. EnCana and Canadian Oil Sands were trimmed to finance the purchase of more Suncor, which has a more attractive outlook. The Fund also trimmed several banks to finance the purchase of more TD Bank.
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