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 (GoC) 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) contributed to the Fund’s performance as corporate bond spreads narrowed. The company benefited from income and price appreciation, supported by favourable technical factors and investor demand for high-quality credit. A holding in GoC (2.75%, 2055/12/01) bonds detracted from performance as longer-term yields increased.

At a sector level, exposure to corporate bonds contributed to the Fund’s performance. Exposure to government bonds detracted from the Fund’s 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 US$9.1 billion. The Fund’s holding in Parkland (4.375%, 2029/03/26) was sold given the acquisition.

The Fund’s holding in British Columbia Investment Management Corp. (4%, 2035/06/02) was increased for duration (interest rate sensitivity) management amid market volatility. In the sub-advisor’s view, the bond provides defensive, longer?dated exposure with strong credit fundamentals. A holding in Cenovus Energy Inc. (3.5%, 2028/02/07) was reduced to help Fund rebalancing.