Q4 2025 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

North American economies showed mixed signals in the fourth quarter. Canada remained pressured by U.S. tariffs, and labour?market softness became more visible as 2025 ended. In the U.S., activity stayed resilient despite the record?long government shutdown. Consumer demand and AI?related spending continued to support growth, although hiring slowed.

Monetary policy turned more supportive in 2025 and continued in the fourth quarter. The Bank of Canada held its policy rate at 2.25% in December following a 25-basis-point rate (“bps”) cut in October. The U.S. Federal Reserve Board delivered two more 25 bps interest rate cuts over the fourth quarter, bringing the federal funds target range to 3.50%–3.75%. Canada’s unemployment rate rose to 6.8% in December, while the U.S. rate was 4.4%.

Multi?sector fixed income delivered gains in the fourth quarter as credit markets strengthened and investors positioned for a more accommodative policy backdrop in 2026. Investment?grade corporate bonds outperformed government bonds, supported by narrowing credit spreads and steady demand. High?yield bonds also gained, benefiting from firmer risk appetite and ongoing demand for income as equities rallied late in the year. Credit spreads remained tight across sectors given low default expectations.

Performance

Relative exposure to Government of South Africa (9%, 2040/01/31) bonds contributed to the Fund’s performance. South Africa saw strong momentum relative to its peers. Exposure to Kleopatra Finco SARL (4.25%, 2026/03/01) bonds detracted from performance. The bond declined as the company experienced soft end-market demand, withdrawal of expected equity sponsor support and a liability management exercise.

At a sector level, exposure to emerging market government bonds contributed to the Fund’s performance. Security selection within industrials sector bonds detracted from performance.

Portfolio activity

A holding in Sunoco LP (4.375%, 2029/03/26) was added to the Fund to replace a holding in Parkland Corp. Sunoco is one of the largest independent fuel distributors in the Americas and a leading operator of energy infrastructure. The investment reflects the sub-advisor’s positive outlook for the credit following Sunoco’s announced acquisition of Parkland in a transaction valued at approximately USD$9.1 billion. The Fund’s holding in Parkland (4.375%, 2029/03/26) was sold given the acquisition.

The Fund’s holding in Maya SAS (7.0%, 2032/04/15) was increased as the company benefits from a diversified service offering and market share growth. The sub-advisor has a positive view of the credit, supported by stable recurring revenues, improving credit metrics and competitive positioning. A holding in Cenovus Energy Inc. (3.5%, 2028/02/07) was trimmed to help Fund rebalancing.