Performance Overview
In March, the Capstone Canadian Equity Income Strategy (CCEIS) returned -2.7%*, outperforming the S&P/TSX Composite Total Return Index (TSX Index), which declined -4.3%, but trailing the S&P/TSX Composite High Dividend Total Return Index, which advanced 2.2%. The High Dividend Index’s relative strength during the month was driven largely by its significant exposure to the Energy sector, which represented approximately 31.5% of the index at month‑end.
The Series I units of the Capstone Biblically Informed Canadian Equity Fund (CBICEF) recorded a unit price change of -2.9% in March. The Series I unit price moved from $23.01 at February month‑end to $22.34 at March month‑end. Year to date, the Series I unit price change is 6.8%, and since inception the cumulative price change is 11.7%.
Market Context and Strategy Drivers
Global equity markets declined during the month as geopolitical tensions in the Middle East escalated meaningfully. The effective closure of the Strait of Hormuz - a critical global energy corridor - resulted in a sharp increase in oil prices, with crude rising more than 50% during March. The surge in energy prices contributed to renewed inflation concerns and rising bond yields, as markets began to reassess the potential path of monetary policy.
Major central banks, including the Bank of Canada and the U.S. Federal Reserve, held policy rates steady during the month but signaled increased caution around inflation, noting that further tightening could be required should price pressures reaccelerate.
In Canada, equity market weakness was driven primarily by the Materials sector, which declined 16.4% during the month. The pullback was largely due to declining gold and precious metals prices, reversing some of the strength seen earlier in the year
CCEIS’ relative positioning and stock selection influenced results across several sectors.
Materials
An underweight position contributed positively as the Materials sector experienced a sharp decline. Stock selection within the sector also added value, helping support relative performance compared to the TSX Index.
A notable contributor was Transcontinental Inc., which performed well despite broader sector weakness. The company completed the sale of its packaging business to ProAmpac Holdings and returned a significant portion of the proceeds to shareholders through a $20.00 special distribution. Following the distribution, the remaining business appreciated as anticipated, supported by tax‑related dislocations that had previously pressured the share price.
Energy
An underweight allocation detracted from relative performance versus the TSX Index. Across Canada and globally, Energy stocks benefited from sharply higher oil prices driven primarily by geopolitical developments rather than changes in long‑term fundamentals. The Fund and the Strategy remain disciplined in their approach to valuation and capital allocation, and we remain cautious about extrapolating short‑term commodity price movements into long‑term investment decisions.
Key Considerations for a Diversified Portfolio
Balanced participation and risk management
Historically, CCEIS has demonstrated strong upside capture of 98% combined with reduced downside capture of 66% relative to the S&P/TSX Composite Total Return Index. While short‑term sector moves can influence relative results, the strategy remains focused on long‑term capital preservation and compounding.
Valuation discipline
Recent volatility underscores the importance of maintaining a disciplined valuation framework. The Fund and the Strategy continue to trade at meaningfully lower valuation multiples than broad Canadian benchmarks.
- Fund and Strategy P/E (NTM) Ratio: ~12.2x
- S&P/TSX Composite Index P/E (NTM): ~18.4x
In addition, the portfolio offers a 3.4% dividend yield, compared to 2.2% for the TSX Index. This valuation and income advantage provides a margin of safety and supports the strategy’s ability to generate attractive long‑term returns.
Multiple sources of alpha
Performance during the period was driven by a combination of sector positioning and stock selection rather than reliance on any single theme. This diversified approach helps improve consistency across market environments.
Research‑driven stock selection
Holdings such as Transcontinental reflect the strategy’s emphasis on fundamental analysis, disciplined capital allocation, and identifying valuation dislocations that can enhance long‑term returns.
What Advisors and Investors Should Know
Series I of the Capstone Biblically Informed Canadian Equity Fund does not include an embedded Management Fee and is only available through a negotiated Management fee Agreement. Investors should review the Fund Facts and prospectus before investing. As always, past performance does not guarantee future results.
IMPORTANT DISCLOSURES
Commissions, trailing commissions, management fees, and expenses may be associated with investments in mutual funds and exchange-traded funds. Please read the prospectus before investing. Mutual funds and ETFs are not guaranteed; their values change frequently, and past performance may not be repeated. The simplified prospectus, fund facts, and ETF facts are available on SEDAR+ at www. sedarplus.ca or consult with a registered investment dealer or advisor.
*The performance data provided for the Capstone Canadian Equity Income Strategy (CCEIS) is a Composite of all CCEIS managed accounts that meet the firm’s composite construction policy. It is intended to provide only a general overview of the performance of this strategy. While individual account performances are reported to investors on a money-weighted basis, Composite performance is provided on a time-weighted basis, includes the reinvestment of dividends and income, and is net of all transaction costs but gross of management fees. Because of these factors, variations in account size, timing of investments, and other factors such as customized investment restrictions and tax strategies, the performance of the Composite will not accurately reflect the experience of any individual investor. Past performance is not indicative of future results and investors should not rely solely on performance data when making investment decisions.
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