2024 proved to be a fruitful year for MCT unitholders, marked by substantial gains that have laid a strong foundation for continued growth in 2025. In British Pounds, the Fund’s shares generated a total return of 20.6% and a NAV total return of 15.1%. This compares to the Benchmark total return of 7.6% and the TSX Composite Index total return of 13.5%.
In early January, Canadian Prime Minister Justin Trudeau announced he will step down after nine years in office. Trudeau’s Liberal Party will hold an internal leadership race in the weeks ahead, with a Federal election expected sometime in the spring. We view the upcoming election as an opportunity for Canada to adopt a more pro-business stance, similar to the U.S. Recent polls show the Conservative Party holds a 20-point lead over all opposition parties and is likely to win a majority government. PM Trudeau’s resignation and corresponding impending election is, in our view, long overdue and we expect a change in government to reinvigorate the Canadian economy, unlock its vast potential and drive economic growth. In addition, Conservative leader Pierre Poilievre provides a refreshing new counterparty for the Trump Administration as tariff negotiations commence. We maintain the view that tariffs on Canadian imports would have a detrimental effect on the U.S. economy and, if enacted, will be more incremental than initially signaled by Trump.
In addition to political tailwinds, the Bank of Canada has adopted a more accommodative policy stance than the U.S. Federal Reserve. With the reduction in Canadian inflation, continued interest rate cuts in 2025 are expected to provide vital economic support and help the country skirt a recession. This accommodative monetary policy should encourage a continued rotation out of cash-like instruments into dividend-paying securities as investors seek higher yields in a low-rate environment. This shift should bolster sectors known for their consistent dividend payouts, including real estate, utilities and financials.
Energy was among the Fund’s biggest contributors to performance in 2024 and remains a high-conviction investment theme for 2025. As at 31 December, energy producers represented 22% of the Fund’s portfolio, with an additional 17% allocated to pipeline companies. Energy policy is core to the Conservative Party’s election platform, with promises to eliminate Canada’s federal carbon tax while maintaining support for emission-reduction technologies such as carbon capture and storage. The expected changes to Canadian energy policy coincide with more global acceptance of natural gas as a key power source in the energy transition. Over the next two years, North America is expected to increase its LNG export capacity by 8 Bcf/day, including 1.5 Bcf/d coming from the inaugural exports of LNG Canada.
Utilities were another major contributor to Fund performance in 2024. Capital Power Corp. (CPX) was a standout performer, generating a total return of 78%. CPX has a premium fleet of natural gas power assets and is well-positioned to capitalize on improving industry trends. CPX has also demonstrated leadership in carbon capture and storage technology with a wealth of opportunities for collaboration and innovation in low-emission energy solutions. AltaGas (ALA) is another gas-focused energy infrastructure company that gathers, processes and distributes natural gas to customers across North America. ALA generated a total return of 25% in 2024 and recently laid out its 2025 guidance which included 6% EBITDA growth as well as expansion projects on existing assets and balance sheet de-leveraging. Gas-focused utilities are positioned to maintain their recent momentum in 2025 and remain core positions for the Fund.