Q4 2025 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy showed signs of strain in the fourth quarter as U.S. tariffs and weakening trade flows continued to pressure manufacturing and export?oriented sectors. Business confidence softened, and labour?market momentum faded, although household spending remained stable heading into year?end.

The Bank of Canada held its policy rate at 2.25% in December following its 25-basis-point rate cut in October, citing moderating inflation and persistent economic uncertainty. Canada’s unemployment rate rose to 6.8% in December, as labour?force growth outpaced hiring and trade?sensitive industries showed renewed weakness.

The Canadian fixed income market delivered modest gains in the fourth quarter given easing inflation and a stable policy stance towards the end of the quarter. The yield on the 10-year Government of Canada bond ended December at 3.43%, up from 3.18% at the beginning of the quarter. Government bond prices moved lower and underperformed corporate bonds, which gained. High?yield bonds also rose, supported by the late?year rally in equities and investor demand for carry in a lower?rate environment.

Performance

Overweight exposure to TransCanada Trust (4.65%, 2077/05/18) bonds contributed to the Fund’s performance as corporate bond spreads narrowed. The bond benefited from income and price appreciation, supported by favourable technical factors and investor demand for high-quality credit. A holding in Province of Quebec (2.3%, 2029/09/01) bonds detracted from performance.

At a sector level, overweight exposure to corporate bonds contributed to the Fund’s performance. Exposure to provincial bonds detracted from the Fund’s performance.

Portfolio activity

A holding in Canadian Pacific Railway Co. (2.54%, 20028/02/28) bonds was added to the Fund because the company benefits from stable demand, high barriers to entry and diversified end?market exposure. In the sub-advisor’s view, the bond provides high?quality credit exposure with defensive characteristics. A holding in The Toronto-Dominion Bank (3.842%, 2031/05/29) bonds was increased based on the sub-advisor’s preference for high?quality, investment?grade financial credit and a conviction in the bank’s fundamentals. The bond is aligned with the Fund’s duration (interest rate sensitivity).

The Fund’s holding in Canadian Imperial Bank of Commerce (4.375%, 2080/10/28) was sold to adjust the Fund’s exposure to limited recourse capital notes. A holding in Cenovus Energy Inc. (3.5%, 2028/02/07) was trimmed to help Fund rebalancing.