Market Commentary

March 2011

Tuesday, March 01, 2011

Market Update
Geopolitical trends evident in January only got stronger in February as social unrest in the Middle East escalated and spread throughout the region. Following on the heels of Tunisia and Egypt, uprisings occurred in Libya, Iran, Bahrain and Oman, just to name a few more countries impacted by the growing fervor for political change. What continues to fuel upheaval is the coordinated use of social media web sites combined with sustained outrage over soaring food prices. The UN’s Food and Agricultural Organization reported world food prices are at an all-time high, working to push an additional 45 million people globally into poverty.

No one is certain how this cascading tide of protests will play out and what will be the end result, but what is clear is these events have affected market prices. After trending down for the first half of the month, the WTI crude oil price shot up to over US$100 per barrel in response to fears that Libyan oil supply could be significantly disrupted. Canadian energy stocks rallied as world markets appear to be placing a premium on the stability of Canadian energy producers. Silver hit new highs and gold came close to doing the same as investors became more risk averse with the increase in Mideast turmoil. Inflation concerns also contributed to the rise in precious metals – this despite the U.S. Federal Reserve exhibiting no such fears with its continued aggressive quantitative easing. In contrast to developing countries, prices remain fairly subdued in Canada and the U.S. However, inflationary signs are emerging in the U.S. as food prices rose 0.5% in January, the biggest jump since September 2008. As discussed in past updates, our “GO CANADA” investment theme is bolstered by a commodity-led inflationary environment.

Fund Update
The Fund’s NAV per unit was up 3.4% for the month on a total return basis as compared to the S&P/TSX Composite Total Return Index (the “Index”) which was up 4.4%. The Fund’s performance was driven by its overall exposure to the energy sector which accounts for 30.6% of its holdings. Relative to the Index, the Fund underperformed as a result of diversification into the financial and fixed-income sectors for risk management purposes and income generation. As was the case in January, we continue to add to the materials sector, lessening our underweight exposure. We also decreased our overweight positions in the utilities and industrials sectors. Going forward we will continue to opportunistically add to our fixed-income exposure and we remain bullish on pro-cyclical commodities such as gold, energy and base metals.

Views contained in this report regarding a particular company, security, industry or market sector are the views of the writers and do not necessarily represent the views of Canoe Financial LP (“Canoe”). Views expressed should not be considered a recommendation to buy or sell and this memorandum does not constitute an offer to sell or a solicitation to buy the securities referred to herein or any of the Canoe investment funds. Information contained in this report is current as of the date of publication and has been obtained from third party sources believed to be reliable. Canoe does not warrant or make any representations in any way regarding the use of the information continued herein and does not accept any responsibility for any loss or damage that results from its use. Canoe investment funds are made by prospectus, which contain important information about the securities being offered. Investors should read the prospectus before making an investment decision. Copies of prospectuses may be obtained from your Investment Advisor.