April 2012
North American equity markets generated predominantly negative performance results in April. More specifically, the S&P/TSX Composite Index declined by 0.80%, the S&P 500 was down 0.75%; the NASDAQ decreased 1.46%; while the DJIA finished flat for the month (up 0.01%).
The Patriot Trust slightly reduced its net market exposure to +73% (beta adjusted net exposure= +87%) during April and generated a loss of 5.54% on the month. The loss in April can be attributed to positions in the energy, basic materials, consumer cyclical, and consumer non-cyclical sectors; while holdings in utilities, and various index unit short positions helped to offset. At the end of April the Fund was net long in Canada (+60%) and net long in the US (+13%). Net exposure stood at +73% due mainly to security-specific investment ideas, while gross exposure stood at approximately 135%. Currently, 53% of the Trust’s equity portfolio consists of Canadian equities and 47% is in U.S. securities. The Trust’s largest weightings were energy at 45%, basic materials at 18%, communications at 14%, and various volatility-dampening equity index short positions totaling 31%.
Patriot Trust endured a difficult month of April as a result of the global investment community’s continued exodus from energy and materials related securities. We strongly believe that the sell-off of these key market sectors is over done, and is particularly hard to justify given the continued price resilience of energy (oil), the steady albeit modest recovery in the United States, and the continued strength of the Chinese economy. As stated in previous monthly commentaries, we continue to have a high degree of confidence in the fiscal quality and prospects for the investments held within the Patriot Trust portfolio and fully expect that our patience will ultimately be well rewarded. We therefore see no reason to alter the style of investing which has served the Fund and its investors so well since its inception over nine years ago.
Since inception (February 2003) the Trust has generated annualized returns of 9.1% as compared to its TSX benchmark comparable of 7.0%; and has experienced modest volatility of 12.8% versus 14.3% for the S&P/TSX Composite Index.
