MARQUEST WEEKLY COMMENTARY – OCTOBER 26,2015

Liis Palmer, Cassels Investment Management Inc.

Global Balanced Fund

Last week the MSCI World Index was up 1.4 percent. The C$ was down 1.9 percent against the US$. The Marquest Global Balanced Fund A units closed at $17.75 compared with $17.60 the previous week.

Significant contributors to performance were Disney (up 6.1 percent), Wells Fargo (up 5.1 percent) and Magna International (up 8.1 percent).  Disney’s stock price reacted well to the news of thousands of presold Star Wars movie tickets. The relaunch of Star Wars in December is expected to drive Consumer Products and Studio growth. With expectations this high, it seems like the stock is priced for perfection. However, US domestic theme parks have been crowded and wait-times in Orlando have been unusually high lately. The launch of the first theme park in mainland China in Shanghai is expected to be another major catalyst for earnings growth.

Laggards were Crescent Point Energy (down 6.7 percent), Whirlpool (down 5.5 percent) and Aetna (down 4.8 percent). Crescent Point’s share price was hurt by the downdraft in energy stock prices. Energy is and has been a small part of the portfolio. Whirlpool announced weak results out of Latin America and China. They lowered the outlook for the year but this had been expected. The stock came off anyway. Aetna’s share price was hurt by Clinton’s comments last week that she was skeptical that the mergers in the health management sector would benefit consumers (Aetna is in the process of buying Humana). Aetna is reasonably priced and in the end, somebody will have to manage Obamacare. Aetna and United Health will have the scale necessary for cost effectiveness.

With regard to the fixed income portfolio which is about 25 percent of the Fund, 69 percent of the bonds are B or BB rated. The Yield to Worst (“YTW”) is about 7%, less than the Merrill Lynch US High Yield Index YTW of 7.5% because the securities chosen are in the more conservative spectrum and because it has less exposure to oil exploration and production (E&P) issuers. In the High Yield market, spreads have widened about 103 basis points this year (from 513 to 616 bps), mainly because of oil related issuers. The fixed income portfolio has about a 3 percent exposure in this