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 (BoC) 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 allocation to maturities across the Canadian yield curve contributed to performance during the quarter. An underweight to shorter-term Canadian rates also contributed. Canada’s economic outlook diverged from the U.S. as fragilities became more evident, prompting markets to reassess the BoC’s policy outlook following weaker growth and a cooling labour market. While Canadian yields moved higher, the Fund’s positioning benefited from relative value opportunities and curve positioning during the period.

Allocation to bonds in the financials sector detracted from performance. Sun Life Financial Inc. (2.8%, 2033/11/21) detracted from performance as bonds within the financials sector came under pressure during the period.

Portfolio activity

The sub-advisor added ARC Resources Ltd. (3.349%, 2029/02/25) during the quarter, participating in a new issue. ARC Resources is one of Canada’s leading natural gas and liquids producers with a strong asset base and disciplined capital allocation. In the sub-advisor’s view, the addition aligns with a constructive outlook on Canadian energy and reflects confidence in the issuer’s credit profile.

Canadian Core Real Estate L.P. (4.482%, 2029/10/16) was increased. In the sub-advisor’s view, the issuer has a conservative leverage profile and defensive cash flows from its diversified portfolio of high-quality commercial and residential properties across Canada. The bond offers attractive yield and enhances the Fund’s real estate credit exposure.

Canadian Imperial Bank of Commerce (6.369%, 2085/04/28), a Limited Recourse Capital Note (LRCN), was sold as part of ongoing adjustments to the Fund’s LRCN exposure and duration management.

Bell Telephone Company of Canada (3.6%, 2027/09/29) was reduced because of portfolio rebalancing and relative value considerations. Bell Canada remains a leading telecommunications provider with a strong market position and stable cash flows.