O Canada!
Ian Cowie heads north in search of diversification
Wild fluctuations in America’s foreign policy toward friends and foes alike, including punitive tariffs on imports, mean interesting times for investors in the world’s biggest economy and its trading partners. President Donald Trump adds to the drama by describing himself as “the new sheriff in town”.
Now a wise old critter across the border, Mark Carney, the Prime Minister of Canada, sees “a rupture in the world order, the end of a pleasant fiction and the beginning of a harsh reality, where the large, main power, geopolitics, is submitted to no limits, no constraints”.
Fortunately, investment trusts have a long history of reducing risks by diversification and professional stock selection. For example, and perhaps surprisingly, the top performing trust in the AIC North America sector over the last year is not based in the USA but in its geographically larger neighbour to the north – Canada!
“The top performing trust in the AIC North America sector over the last year is not based in the USA but in its geographically larger neighbour to the north – Canada!”
Better still for investors who seek sustainable returns amid almost daily changes in Trump’s tariffs, this investment trust was launched in 1930, during the Great Depression, so it survived that extreme economic stress test and others, including World War II.
While the past is not necessarily a guide to the future, it is some comfort in such uncertain times to see Canadian General Investments (stock market ticker: CGI) deliver total returns of 26% over the last year, with less than five years to go before it is due to celebrate its first century. Better still for bargain hunters, shares in this Canadian $1.9 billion (£1 billion) fund are still priced 43% below their net asset value (NAV).
Its biggest holding is the Toronto-based electronics group, Celestica, whose aerospace and defence hardware is experiencing rising demand from countries which no longer wish to rely too heavily on America for protection. The world’s most valuable company, the microchip maker, Nvidia, is next up; benefiting from its role in the artificial intelligence (AI) boom.
However, the rest of CGI’s top ten include a variety of very different businesses. There is the world’s biggest gold royalties group, Franco-Nevada; the online retailer, Shopify; the copper miner, First Quantum Minerals; the railway, Canadian Pacific Kansas City; and the uranium miner, Cameco.
Over the medium to long term, CGI’s portfolio has delivered total returns of 54% over the last five years and 291% over a decade. It currently yields dividend income of 2.2% that has risen by an annual average of 5.2% over the last five years.
“CGI’s portfolio has delivered total returns of 54% over the last five years and 291% over a decade.”
These numbers illustrate the beneficial effects of progressive fiscal policies that might attract the envy of individuals and institutions in other countries. Carney, a former Governor of the Bank of England, told the World Economic Forum at Davos: “Since my government took office, we have cut taxes on incomes, on capital gains and business investment.
“We have removed all federal barriers to interprovincial trade. We are fast tracking a trillion dollars of investments in energy, AI, critical minerals, new trade corridors and beyond. We're doubling our defence spending by the end of this decade, and we're doing so in ways that build our domestic industries.”
But CGI is not the only investment trust that offers exposure to Canada. Pershing Square Holdings (PSH) has 32% of its money invested there, including top ten holdings in Canadian Pacific Kansas City, mentioned earlier, and the world’s biggest fund manager of alternative assets, Brookfield, which owns a controlling stake in London’s Canary Wharf Group.
Other investment trusts with Canadian assets include North American Income Trust (NAIT), which has 5% of its assets north of the border, and Baillie Gifford US Growth, which holds 3% of its assets in Canada.
While the US remains the world’s largest economy, and shares listed there represent more than 60% of the global total, international investors should consider some exposure to medium-sized countries. While Trump holds centre stage, projecting America’s power from Greenland to Venezuela, Carney sees an important role for others, stating: “the middle powers must act together, because if we're not at the table, we're on the menu.”
Data as at 05/02/26. Ian Cowie is a shareholder in Canadian General Investments.
