Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy navigated a challenging first quarter as trade uncertainty continued to weigh on business confidence and manufacturing activity. Employment fell in January and February before stabilizing in March, when the economy added 14,000 jobs and the unemployment rate held steady at 6.7%.

The Bank of Canada held its policy rate at 2.25% at both its January and March meetings. Canada’s inflation rate eased to 1.8% in February, the softest reading in several months. The Bank noted that near-term growth was likely to be weaker than anticipated and that the energy price shock following the outbreak of the conflict in the Middle East posed upside risks to inflation in the near term.

The Canadian fixed income market delivered mixed results in the first quarter as geopolitical uncertainty and rising oil prices complicated the investment landscape. The yield on the 10-year Government of Canada bond rose from 3.43% at the start of the quarter to 3.47% by quarter-end, reaching a high of 3.58%, putting downward pressure on government bond prices, particularly late in the quarter. Corporate bonds showed resiliency, but underperformed government bonds with credit spreads widening slightly. High-yield bonds were relatively volatile as the late-quarter decline in risk appetite weighed on lower-rated issuers, though energy-linked names broadly outperformed.

Performance

The Fund’s exposure to the utility sector contributed to performance during the first quarter of 2026.

Frontera Generation Holdings LLC contributed to performance. The company operates a natural gas-fired facility in Texas that sells power into the wholesale market. In the sub-advisor’s view, merchant generation assets benefited from strong wholesale power prices driven by rising electricity demand from data centres and industrial electrification.

Security selection in the communication services sector detracted from performance.

Viacom Inc. (4.375%, 2043/03/15) detracted from performance. Bond prices declined after Paramount Global completed its acquisition of Warner Bros. Discovery Inc. The transaction involved a substantial debt component, resulting in higher pro forma leverage that weighed on investor sentiment.

Portfolio activity

The sub-advisor added Curaleaf Holdings Inc. (11.5%, 2029/02/18). Curaleaf is a leading U.S. multi-state cannabis operator with operations across cultivation, processing and retail. The bond provides attractive yield and enhances the Fund’s diversified credit exposure.

TransAlta Corp. (5.875%, 2034/02/01) was increased. In the sub-advisor’s view, TransAlta has a diversified power generation portfolio and a disciplined approach to leverage management. The company is also positioned to benefit from growing electricity demand, including from data-intensive applications.

Sunoco LP (4.5%, 2029/10/01) was sold as more compelling opportunities emerged elsewhere in the portfolio.

Cleveland-Cliffs Inc. (7.0%, 2032/03/15) was reduced. Cleveland-Cliffs is a vertically integrated mining and steel producer and the largest flat-rolled steel manufacturer in North America. While the sub-advisor views the business favourably, the pace of balance sheet deleveraging has been slower than expected.