Triasima Canadian Small Capitalization Equity Fund Commentary – Q1 2026

The economy

Economic growth was average in advanced and emerging countries as the year 2026 began; a fair state of affairs. In the United States, the economy was supported by spending by higher-income households and infrastructure construction, buoyed by artificial intelligence-related investments. The overall narrative was managed global inflation and easing monetary cycles. 

The war in Iran, the defining event of the first quarter, upended this scenario in late February, adding a geopolitical dose of uncertainty to the outlook. Concerns about tariffs rapidly receded in the background.

So far, the main impacts of the war have been increases in the price of oil and other commodities, a rise in interest rates, and a strong American dollar due to its worldwide reserve currency status. This last effect is particularly damaging to emerging countries’ economies. Oil usage per dollar of GDP is at a record low but economic activity is nonetheless bound to soften and inflation to increase with a lag. 

Canada, a net energy exporter, will see a boost to national income but household spending will be hurt, and so will it be in the United States. Europe and Asia are net energy importers and face the prospects of higher economic input costs and weaker domestic spending as well.   

The Canadian small capitalization equity market

The S&P/TSX SmallCap Index had a 11.4% return this quarter. 

Unsurprisingly, with the price of oil climbing by over 50%, the Energy (35%) sector led. The Utilities (24%) sector also recorded a strong performance as energy producers benefitted from an elevated pricing environment. 

Hurt by rising interest rates, the Information Technology (-15%) sector faltered badly. The Consumer Discretionary (-9%) sector pulled back for similar reasons, as the combination of oil prices surging past $100 per barrel and rising credit costs dampened consumer appetite. 

The Fund

The Triasima Canadian Small Capitalization Equity Fund had a 10.4% return this quarter.

Relative underperformance was driven by sector allocation, due to the underweight in the Energy sector and overweight in the Information Technology sector. Security selection within Materials and Information Technology added value and provided a partial offset to the allocation headwinds. 

The table presents the top and bottom contributors to the relative performance:

*Securities not held in the fund.

The underweight position in the Energy sector was substantially reduced for tactical reasons, and a large overweight was established in Industrials with two new holdings. Additionally, the Materials sector exposure was moderated to a neutral weight to align with the sector’s updated benchmark weighting.

The Three-Pillar Approach ™

From a Quantitative perspective, relative to the benchmark, the Fund exhibits lower volatility metrics, superior profitability parameters, and higher revenue and earnings growth. Valuation metrics indicate the Fund’s holdings are more expensive. 

After reaching new highs in January and February, the uptrend of the Canadian small capitalization equity market weakened considerably following the onset of the Iran conflict, suggesting a transition into a sideways consolidation phase. 

Notwithstanding its large 26% Energy sector weight, the Fundamental background to Canadian small capitalization equities deteriorated in the quarter due to the Iran war. Fortunately, corporate profits keep on growing. 

Legal notices

The posted rate of return is a historical total rate of return compounded annually, except for periods of less than one year, which are not annualized. The rate of return shown takes into account fluctuations in unitholder value and the reinvestment of distributions. The posted rate of return does not take into account investment management fees and income taxes payable by the unitholder, which would have the effect of reducing the return. The Funds are not guaranteed, their value fluctuates, and past performance is not indicative of future results.

Data on the FTSE Canada 91 Day T-Bill, FTSE Canada Short Term Bond and FTSE Canada Universal Bond reference indices are provided by FTSE Global Debt Capital Markets Inc.  (“FTSE”). Data on the S&P/TSX Income Trust, S&P/TSX Preferred Share, S&P/TSX SmallCap, and S&P/TSX Composite reference indices are provided by TSX Inc. (“TSX”). Data on the S&P 500® Index are provided by Standard & Poor’s Financial Services LLC (“S&P”). Data on the MSCI EAFE, All Country World, and World reference indices are provided by Morgan Stanley Capital International Inc. (“MSCI”). Lastly, the classification of securities according to the Global Industry Classification Standards (“GICS”) is provided jointly by MSCI and S&P. (FTSE, TSX, S&P, and MSCI are hereafter collectively referred to as “indices and data providers”.) 

The indices and data providers have awarded limited licences to Triasima allowing it to use the above-mentioned indices and data in its portfolio statements. The information provided by the indices and data providers may not be redistributed, sold or used without the prior written consent of the indices providers concerned. The indices providers assume no liability with respect to the accuracy or completeness of these data or for any delay, interruption, or omission with regard thereto, and makes no warranty or declaration, either explicit or implicit, with regard to the results that might be obtained by using these data or as to the marketability or appropriateness of the data for a specific use.