December 2011 investment results

Volatility sums up market performance for the fourth quarter of 2011 and in fact for the entire year that was 2011. The European debt crisis and continued concerns about the economic recovery in the U.S. top the list of investor concerns. The seemingly endless rollercoaster with respect to these issues has marred investor confidence. As one writer put it, “markets moved from optimistic to pessimistic in a heartbeat.”

Canada’s economic picture remains strong but our commodity-dependent economy will feel the effect of slowed growth in the U.S. and global economies. The high levels of personal debt are cause for future concern when borrowing rates rise.

SPP’s balanced fund returned -1.0 per cent after administration costs while the short-term fund return, after administration costs, was 0.6 per cent for the year. The top ten holdings, portfolio composition and returns are summarized in the accompanying tables.

SPP portfolio
at December 31, 2011
Balanced fund return* Benchmark Short-term fund return*
Short term 1.1% 1.0% 1.1%
Bonds & mortgages 9.8% 9.8% 1.1%
Cdn. equities -9.4% -8.7% n/a
U.S. equities 1.2% 4.6% n/a
Non-North American equities -11.4% -10.0% n/a
Cdn. Real estate 13.7% 10.6% n/a
*Gross return before administration expenses
Top 10 balanced fund holdings
Canadian Equities % of Portfo-lio U.S. Equities % of Portfo-lio Non-North American Equities % of Portfo-lio
1 Toronto Dominion Bank 7.0 Pfizer 3.6 Cash 2.6
2 Canadian Natural Resources 5.4 Markel 3.0 HSBC 2.4
3 Bank of Nova Scotia 5.3 Johnson & Johnson 2.8 Novartis Ag 2.4
4 Canadian National Railway 3.9 Intel 2.7 Adidas 2.2
5 Saputo 3.8 Apple 2.6 Canon 2.2
6 Transcanada 3.3 Proctor & Gamble 2.6 Samsung Electr. 2.1
7 National Bank of Canada 3.1 3M 2.4 Tesco 2.0
8 Teck Resources 2.7 Wells Fargo 2.3 Nestle 1.9
9 CAE 2.6 Chevron 2.2 BMW 1.7
10 Toromont Industries 2.6 Merck 2.1 Royal Dutch Shell 1.6

The S&P/TSX Composite Index lost 8.7 per cent during the year.

  • Health Care and Telecommunications were the top performing sectors while Information Technology was the weakest.

U.S. equities returned 4.6 per cent in Canadian dollar (C$) with seven of the ten sectors in positive territory.

  • Utilities and Consumer Staples experienced the strongest performance
  • Financials and Materials were the weakest sectors.

The MSCI EAFE Index returned -10.0 per cent in C$ terms as the dollar appreciated against eight of the twelve currencies in the Index.

  • Only two of the twenty-two countries in the EAFE Index had positive returns in C$ with Ireland leading the way.
  • Not surprisingly, Greece had the lowest return at -61.9 per cent. Developed markets outperformed emerging markets.
The Canadian bond market returned 9.7 per cent during 2011. The Bank of Canada maintained its overnight rate at one percent during the quarter and the U.S. Federal Reserve maintained it key interest rate at a target range of 0 to 0.25 per cent.

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