Fund Performance
Fund Documents
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Key Takeaways
01/
Volatility Returned, But Risk Discipline Paid Off
A resurgence in volatility in Q1 and going into Q2 - driven by tariff concerns, AI-driven positioning shifts, and portfolio unwinds highlighted the importance of robust risk controls. Long/short experience and daily cross-team risk meetings allowed the team to contain drawdowns while uncovering dislocated opportunities on both the long and short side.
02/
Opportunities in Dislocation and Factor Rotation
Short-term volatility created actionable opportunities to add to long-term secular growth names at more reasonable valuations—particularly in areas like wealth and alternative asset managers. On the short side, the team adjusted exposure to higher-beta and cyclical names while tactically rotating factors using quantitative baskets and option overlays.
03/
Q2 Positioning for a Range of Outcomes
With stagflationary pressures building and Canadian macroeconomic data weakening, the outlook remains uncertain. The equity portfolios are positioned with tighter risk control and a focus on resilient, structural growth companies. The team remains prepared for further dislocations and continues to build diversified return drivers across long and short exposures.
Manager Perspective & Outlook
Q1 2025 has witnessed dramatic shifts in market narratives. Based on established themes including AI, cloud computing, biotechnology and more, equities (led by U.S. mega-caps) powered ahead for the majority of last year, aided by a U.S. Federal Reserve (“Fed”) which had shifted from acute inflation hawkishness to a more “stable” approach after a healthy rate cut in the Fall of 2024. Entering 2025, as markets braced for the Trump 2.0 agenda, the growing equity bubble was at risk of bursting. As the period drew to a close, rising equity volatility associated with tariffs and implications for a global trade war called global growth into question. The dual specter of a reigniting inflation (via tariffs) and slower global growth (and therefore slower earnings) presents a very dramatic shift to a stagflationary backdrop, where equities, as an asset class are likely less-favoured and skilled sector and thematic rotation, coupled with security-selection could set up a healthy environment for manager skill “trumping” market beta.
In the midst of violent market weakness associated with escalating trade and tariff issues, the indiscriminate selling has left few, if any, places to hide. For some time, we had been cautious on expensive sectors and themes in the market and have sought to avoid these more broadly. No doubt, some mechanical form of seller exhaustion or news headline may present a shorter-term tactical opportunity to participate in a relief rally, but the larger question persists as to what level of damage has been done to global growth and thus earnings prospects across the board. The situation is very fluid, but we are biased to let the evidence speak for itself vis-à -vis fundamental positive change. We note that such large market swings, both down AND up, tend to take place in bear markets and would therefore remain unwilling to proverbially “catch the falling knife” on a shorter-term basis.
Looking ahead, the macro environment remains uncertain, with tariff developments contributing to stagflationary pressures. The potential range of outcomes is wide, requiring portfolios to remain agile. We anticipate ongoing short-term market volatility but see secular growth areas—such as wealth and alternative asset managers in financials sector—as attractive, particularly as valuations have reset. Within Canadian financials, signs of softening are emerging, including a sharp drop in housing activity and rising delinquencies, which warrant a more cautious stance.
Portfolio Positioning
We have tightened risk across the equity portfolios while leaning into areas with long-term structural tailwinds. On the long side, we favor businesses with resilient growth profiles, capable of compounding through macroeconomic cycles. On the short side, we are mindful of crowded trades and avoiding high-leverage cyclicals vulnerable to downside shocks. Our use of long/short quantitative factor baskets and option overlays helps us stay dynamic and responsive. Above all, we remain focused on risk-adjusted alpha and portfolio resilience through a volatile but opportunity-rich environment.
Performance Highlights
Our equity strategies were subject to a bit of a momentum style unwind during the period, but they held in relatively well and we maintain our conviction that current levels of dispersion continue to offer long-short stock pickers a very rich environment to generate alpha.
Over the quarter, Consumer Discretionary and Energy were the notable sectors that contributed to absolute performance in our strategies. Our collective holdings in Information Technology negatively impacted performance during the quarter as AI-related holdings that had previously performed well in 2024 were affected by the DeepSeek selloff in January. Health Care was another sector that notably detracted from performance during the period.
| As of March 31, 2025 (%) | 1M (%) | 3M (%) | 6M (%) | 1YR (%) | 3YR* (%) | 5YR* (%) | Since Inception* (%) | Inception Date |
| Picton Mahoney Fortified Equity Fund (Cl. F) | -2.97 | 0.25 | 7.06 | 15.77 | 12.78 | 16.45 | 10.03 | (2015-10-29) |
| Picton Mahoney Fortified Active Extension Alternative Fund (Cl. F) | -3.43 | -1.17 | 4.19 | 16.23 | 9.73 | 21.51 | 13.15 | (2018-09-27) |
| Picton Mahoney Fortified Market Neutral Alternative Fund (Cl. F) | -0.80 | -0.72 | 3.05 | 9.36 | 6.84 | 9.65 | 7.78 | (2018-09-27) |
| Picton Mahoney Fortified Long Short Alternative Fund (Cl. F) | -2.71 | -1.69 | 2.31 | 10.82 | 7.45 | – | 13.87 | (2020-07-08) |
(*) Annualized performance.
Source: Picton Mahoney Asset Management
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