Patient Capital Quarterly Commentary – Q4 2022

During the fourth quarter of 2022 global markets bounced back from their third quarter declines. The MSCI (USD) World Index rose 9.89%1 while the S&P 500 (USD) posted a positive return of 7.56%2. The S&P/TSX Composite Index rose 5.96%3. For all of 2022, the MSCI (USD) World Index, S&P 500 (USD) and S&P/TSX Composite Index declined 18.11%, 23.87% and 5.84% respectively. The TSX performed better on a relative basis due to its heavier weighting in the oil and gas sector. The Canadian market’s energy subsector was up 24.42% during 2022 providing some support to the overall index. The portfolio of Lysander-Patient Capital Equity Fund (the “Fund”) added to several of its “interest sensitive” holdings as the rise in interest rates drove their share values to attractive valuations. As well, the Fund added a new position, Meta Platforms (formerly known as Facebook), when the shares were driven to historically low valuations on concerns of slower growth and increased capital spending.

While equity markets were positive in the fourth quarter there was a high degree of volatility. Markets rose sharply on several days but also fell by equal amounts on occasion. This volatility was the result of alternating views on how high and for how long interest rates would rise. Sentiment was impacted by data indicating recent inflation rates and economic growth. Some investors concluded that inflation had peaked and that the pace of interest rate increases would slow down in the coming quarters. They also pointed to reports of improving supply chains and an inverted yield curve as evidence that interest rates would not go much higher. On the other hand, employment and overall economic data continued to be strong. In addition, central bankers continued to indicate that as long as the rate of inflation was above their two per cent target intertest rates would continue to increase.

Investors are worried that central bank’s resolve to curb inflation will cause a recession. The continued inversion of the yield curve suggests a recession is possible in 2023. The sharp spike in borrowing costs has started to filter through the economy. The real estate sector is starting to feel the effects of these interest rate increases. Demand has dropped and residential real estate prices are starting to decline. In addition, some homeowners are starting to feel the impact of higher rates and are starting to cut back on discretionary expenditures to meet increased mortgage payments.

While higher interest rates have had a negative impact on overall markets, they have put significant pressure on higher growth companies. Many of these companies are not profitable and/or generate relatively small cash flows. As a result, higher interest rates reduce the net present value of distant cash flows and are less attractive to investors. In this higher rate and more normalized environment, some investors are shifting back to value based investment philosophies.

Lysander-Patient Capital Equity Fund continues to be well positioned for current market conditions. As of December 31st, 2022, the Fund’s dividend yield on equities was 5.11%. The total portfolio yield was 4.86% at year end.

1. Source: MSCI.
2. Source: S&P.
3. Source: S&P/TSX.

Lysander Funds Limited (“Lysander”) is the investment fund manager of Lysander-Patient Capital Equity Fund (the “Fund”). Patient Capital Management (“Patient Capital”) is the portfolio manager of the Fund.  This document was prepared by Patient Capital as portfolio manager of the Fund.  In this presentation, “we”, “us”, and “our” means Patient Capital.  This document has been prepared solely for information purposes. Information in this document is not intended to constitute legal, tax, securities or investment advice and is made available on an “as is" basis. Neither Lysander nor Patient Capital make any warranties or representations regarding the information herein. Information in this document is subject to change without notice. Neither Lysander nor Patient Capital assume any duty to update any information herein. Certain information in this document has been derived or obtained from sources believed to be trustworthy and/or reliable. Neither Lysander nor Patient Capital assume responsibility for the accuracy, currency, reliability or correctness of any such information.

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This document may contain forward-looking statements. Statements concerning a fund’s or entity’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition are forward looking statements. The words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “aims”, “may”, “will”, “would” and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward- looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from current expectations. Readers are cautioned not to place undue reliance on these forward-looking statements. While Lysander and Patient Capital consider these risks and uncertainties to be reasonable based on information currently available, they may prove to be incorrect.

This document is not an invitation to invest in the Fund and does not constitute a public offering of sale. Purchases in the Fund can only be made through an Investment Professional on the terms in the applicable Fund’s offering document by eligible investors.  Each purchaser of units in a fund may have statutory or contractual right of action.

Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (

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