Ninepoint International Small Cap Fund (NPP370)
The first thing that you might ask is, “What the heck is Ninepoint and
where did they come from?” Well, Ninepoint Partners is the new name for the
funds managed by Sprott Asset Management, which were bought out by the
management group in 2017. Why “Ninepoint”? According to the company, “The
Ninepoint name is derived from the ‘nine point puzzle,’ where four,
continuous straight lines are used to connect all nine points of a 3x3
grid. The only way to solve the puzzle is to draw “outside the box.”
Sprott had historically been very focused on resource and commodity funds.
But with the arrival of
as co-CEO of Ninepoint, it began shifting to a more alternative focus.
Under the Ninepoint banner, this trend continues, as the group expands its
product shelf into interesting and innovative parts of the investment
universe. As a matter of interest, Ninepoint isn’t in the startup category
either: It has around $3 billion in assets under management.
The International Small Cap Fund is one of their newer offerings, having
debuted last March, and on the surface it may not look that interesting.
But it is unique in that there aren’t that many small-cap funds that don’t
invest in the U.S. market. In fact, there is only a handful of
international small-cap offerings.
This fund is managed by
and his team at Global Alpha, a firm founded in partnership with Connor
Clark & Lunn (CC&L) in 2008, which today manages more than $1.5
billion in international and global small-cap mandates. CC&L offers a
global mandate that includes U.S. small- and mid-cap stocks. The process
used in the CC&L and Ninepoint funds is identical, as the manager aims
to add 3% in excess return over a market cycle.
The managers use a rigorous, research-driven, bottom-up, multi-step
investment process that is fundamentally-driven and looks to identify
high-quality companies that can deliver earnings growth and that are
trading at levels not yet recognized by the market. They also look for
growth themes that can help create a tailwind for the companies.
Consequently, the result is a diversified portfolio of between 50 and 70
Top holdings as of Dec. 31 included communication equipment manufacturer
Internet Initiative Japan Inc. (NASDAQ: IIJI), Japanese REIT
Advance Residence Investment Corp. (TYO: 3269), workspace provider
IWG Plc (LSE: IWG), Hong Kong-based beverage company
Vitasoy International Holdings Ltd. (HKG: 345), and cosmetics firm
L’Occitane International SA (HKG: 973). The top 10 holdings comprise 30% of the portfolio. Main sectors
represented include 27% to industrials, 18% to consumer discretionary, 10%
to real estate, and 9% to consumer staples. Geographically, the fund is
allocated 29% to Japan, 15% to the U.K., and 9% to Hong Kong, with the
balance distributed in other developed nations except the U.S.
While this is a new retail offering, it has been available institutionally
for many years, hand has delivered very strong risk-adjusted returns that
have met or exceeded the return target. This fund is worth a look for those
seeking a small-cap fund that does not invest in the U.S.
Ninepoint Concentrated Canadian Equity Fund (NPP151)
Formerly the Sprott Canadian Equity Fund, which was very much a small-cap,
resource-focused fund, Ninepoint replaced managers James Bowen and Jonathan
of Connor Clark & Lunn-owned Scheer Rowlett & Associates, which has
$2.4 billion in assets under management. The fund debuted in March 2018.
The new fund name pretty much sums up the fund, which holds a concentrated
portfolio of between 15 and 25 of the manager’s best Canadian equity ideas.
Mr. Dionne’s active-management investment approach is very institutional in
nature, and he uses a fundamental, bottom-up, value method in researching
and selecting investments.
As of the end of December the fund was overweight financials at 40% of the
portfolio, with materials representing 25%, and energy at 16%. Top holdings
Royal Bank Of Canada (TSX: RY),
Toronto-Dominion Bank (TSX: TD),
Bank Of Nova Scotia (TSX: BNS),
Canadian Imperial Bank Of Commerce (TSX: CM), and
Canadian Natural Resources Ltd. (TSX: CNQ).
I certainly believe this will be a much better fund with the new management
team at the helm. However, until we get a few more quarters of data, I
can’t really comment on its overall quality, so I am taking a wait-and-see
approach on this one.
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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