Q3 2025 Fund Commentary

Market commentary

Global equity markets rose in the third quarter of 2025, with the MSCI ACWI returning 9.7% (in Canadian dollar terms). Global investment-grade bonds, represented by the Bloomberg Global Aggregate Bond Index, rose a more modest 2.6% (in Canadian dollar terms). Gains were supported by easing trade tensions, momentum in artificial intelligence (AI), and expectations for near-term interest-rate cuts.

North American equities led performance, with the Russell 2000 Index gaining 14.6%, followed by the NASDAQ Composite returning 13.6%. Emerging market equities rose, with the MSCI Emerging Markets Index gaining 12.8%. (All returns are in Canadian dollar terms.)

In the U.S., inflation rose to 2.9% year-over-year in August and the U.S. economy grew at an annualized rate of 3.8%. Consumer spending remained strong, and businesses restarted their investment plans, particularly for projects centered on AI infrastructure. However, July labour market data raised concerns as revisions to May and June non-farm payroll figures showed slower employment growth.

The U.S. Federal Reserve Board (Fed) cut its interest rate by 0.25% in September, bringing the federal funds rate to 4.00%–4.25%, while the Fed chairperson warned that cutting interest rates too aggressively could risk keeping inflation above the 2% target.

Against this backdrop, ten of the eleven MSCI ACWI sectors rose, led by information technology, communication services and materials. Consumer staples was the only sector to post a negative return.

Performance

The Fund’s relative exposure to NVIDIA Corp., AppLovin Corp. and Alphabet Inc. contributed to performance. NVIDIA saw demand for its AI chips rise and announced plans to invest up to USD$100 billion in OpenAI to support data centres and AI infrastructure. AppLovin outperformed because of ad-tech performance, growth in its software platform and demand for its AI-powered AXON engine. Alphabet’s shares rose amid demand for AI products, which boosted quarterly sales, justifying an increase in capital spending.

Relative exposure to Metro Inc., Circle Internet Group Inc. and Teleperformance SE detracted from performance. Metro was affected by weaker online sales growth, tariff-related vendor costs and fears over inflationary pressures. Circle Internet Group underperformed because of insiders selling shares, competition from alternative stablecoin providers and valuation concerns. Teleperformance saw operational challenges in specialized services, a drop in its revenue outlook and reduced U.S. language services demand.

At a sector level, exposure to information technology and health care contributed to performance. At a regional level, exposure to the U.S. and emerging markets contributed to performance.

Portfolio activity

There were no notable transactions made during the period.

Outlook

As market volatility persists, the Fund is focused on companies that offer stability, high-quality free cash flow and reinvestment growth opportunities. The Fund has exposure to U.S. regional banks and European asset managers, semiconductor companies with strong pricing power and auto component suppliers. The sub-advisor has invested in Europe, focusing on small- and mid-capitalization stocks.

The Fund is also invested in pharmaceutical companies and the consumer staples sector, such as European beverage and tobacco manufacturers. The sub-advisor diversifies geographically, with investments in the U.K., China and Brazil. The Fund is also invested in companies related to AI and connected television for their growth potential.