Q1 2026 Fund Commentary

Commentary and opinions are provided by Keyridge Asset Management Limited.

Market commentary

The global economy navigated a turbulent first quarter. Markets began 2026 on a positive note, with investor sentiment buoyed by continued disinflation, stable corporate earnings and expectations for further monetary easing. The outlook shifted dramatically in late February after the conflict in the Middle East escalated, and the Strait of Hormuz was effectively closed in early March, disrupting a significant share of global oil supply and raising fears of an energy-driven inflation shock.

Major central banks responded with caution. The U.S. Federal Reserve Board and the Bank of Canada both held rates unchanged at their January and March meetings. The European Central Bank postponed planned interest rate reductions and raised its inflation forecast after energy prices surged. These developments signaled that monetary easing cycles could be delayed or disrupted by the geopolitical shock.

Global equity markets declined in the first quarter, with the MSCI World Index falling about 3.5%. The U.S. market weighed most heavily on results as large-cap technology stocks retreated amid rising inflation concerns. Japanese equities benefited from ongoing corporate governance reforms. Emerging markets ended the quarter roughly flat, as higher import costs in oil-importing economies in Asia partly offset gains in commodity-exporting markets.

Performance

Stock selection in the health care sector was the largest contributor to the Fund’s performance. Overweight allocations to the energy and consumer staples sectors also contributed to performance.

Johnson & Johnson contributed to performance as investors rotated toward defensive, large-capitalization health care names with visible earnings and lower macroeconomic sensitivity. Confidence improved around the company’s ability to manage its patent transition, supported by continued strength in oncology and steady growth in medical technology. Exxon Mobil Corp. also contributed to performance as shifting commodity market expectations and ongoing geopolitical tensions supported energy prices. The company also benefited from record upstream production driven by its Permian Basin and Guyana operations.

Stock selection in the energy and materials sectors detracted from performance.

SAP SE detracted from performance because of broad investor concerns about artificial intelligence (AI) disruption in the software sector, despite solid underlying results. In the sub-advisor’s view, the weakness was driven more by sentiment than by fundamentals, with cloud revenue continuing to grow and better-than-expected guidance issued for the year ahead. Microsoft Corp. also detracted from performance as cloud revenue growth fell short of investor expectations, partly because of internal demand for computing capacity as the company balanced external deployment with developing its own artificial intelligence offerings.

Portfolio activity

The sub-advisor added The Phillips 66 Co. to the Fund. The company is a leading North American downstream energy business, and improving refining margins driven by volatility in global energy markets supported the investment case. The sub-advisor also added Reckitt Benckiser Group PLC. The company has simplified its business by focusing on core brands in household care, germ protection and self-care, which in the sub-advisor’s view should support long-term growth.

Diageo PLC was sold. While the sub-advisor continues to view the company as high quality, a recent leadership change signaled a strategic shift away from premiumization, which changed the investment case. The sub-advisor also sold Uber Technologies Inc., taking advantage of early-quarter volatility to redeploy capital into what the sub-advisor believes are more attractive opportunities.