Over the first quarter of 2013, Invesco Canadian Premier Growth Class returned 7.54%, outperforming its specific benchmark, the 60% S&P/TSX Composite Index/40% MSCI World Index, which returned 5.94% (C$) over the same period.
On a geographic basis, the Fund's holdings in Canada outperformed those of the benchmark and were the most significant contributors to the Fund's relative performance over the reporting period.
Most sectors posted positive absolute performance over the period. The Fund's holdings in the financials and materials sectors were the most significant contributors to its relative performance. An underweight allocation to the materials sector, one of the weakest-performing sectors in the benchmark, also helped the Fund's relative performance.
The portfolio management team's overall view of the market environment has not changed meaningfully since the start of 2013. More specifically, they remain somewhat cautious about underlying economic growth and market fundamentals. The strong performance seen in the first quarter of 2013 appears to have been aided by the looser monetary policies that drove equities higher in the latter half of 2012. When coupled with the attractiveness of equities (compared to the low returns available on cash and bonds), the result has been a dramatic equity rally (in the region of 20% since mid-2012). Given less than stellar global equity valuations, the team believes the markets may be susceptible to a period of consolidation or correction unless economic and corporate profitability measures show evidence of improvement.
The team continues to find interesting companies to invest in, but still has a relatively circumspect view of potential market returns and the prospect for further market volatility. As always, regardless of the macroeconomic environment, the team remains focused on applying its bottom-up investment process to identify attractive companies that fit its EQV process. Consequently, the Fund emphasizes companies that exhibit the following characteristics: solid, organic revenue growth; pricing power; solid balance sheets; and more defensive growth.
The team continues to focus on investing in high-quality companies that are able to consistently grow their earnings in a weak economic environment while having financial flexibility to allocate capital skillfully.
