both Magellan Midstream, and Enterprise Product Partners posted positive returns over the period.
During the quarter, we kept exposure to the energy infrastructure component stable while taking profits in renewables and increasing allocation to Iron Mountain, the document storage and data centre REIT. Overall exposure to infrastructure declined to 17.2%, while the energy infrastructure subsector fell to 11.3% of assets.
Gold bullion prices continued to rally until early September for an overall 4.5% positive return. ETF investors flows surged and added a total of 216 tonnes for the period. Market positioning, according to CFTC data, has become more challenging as short positions declined significantly. Gold stocks, as measured by the FTSE Gold mines index, increased 4.7% in a low-volatility regime and continued to outperform almost every other asset over the last four quarters. In September, Osisko Gold, the Canadian gold royalty company, announced the acquisition of the remaining shares of Barkerville gold mines for C$ 350 million. Market reaction was extremely negative (-10.6% in USD for the quarter) as the company was not expected to expand beyond its natural markets. Other mining stocks crashed 9.2%. Franco-Nevada and Royal Gold outperformed as stock prices increased by 7.7%, and 20.5%, respectively.
At the end of August, we reduced exposure to gold bullion by 1%, while cutting exposure to gold stocks by almost 2%. At the end of September, gold bullion exposure stood at 8% while allocation to royalties represented 3.3% of fund’s assets.
Timber equities had another volatile quarter as challenging activity in U.S. housing and oversupply in paper products led to increased pressure on both timber REITS and paper producers. In Canada, companies continue to announce production curtailments, while weather and pine-beetle related accidents in Europe are causing another shift in the market. For the quarter, the S&P Global Timber and Forestry Index declined 2.5%, as both Timber REITs and wood producers rebounded in September while lumber futures lost 3%. The Housing Affordability index continues to improve due to falling mortgage rates, while paper demand remains strong. Additional capacity and a potential slowdown in global growth are seen hurting pulp prices. Timber REITS, Weyerhaeuser, and PotlachDeltic in particular, added 6.5% on average despite their cyclical component while pure timberland owners (Rayonier) underperformed again. Wood producers declined again with the notable exception of Canfor (+44.2%) which, in August, benefited from the Great Pacific’s offer to take the company private at C$16 per share. That price represented a premium of more than 80% to the previous closing price. Paper names International Paper fell 2.2%, Mondi crashed 14.3%, while hygiene related Svensksa Cellulosa remained stable.