Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Global equities experienced a volatile first quarter of 2026 as renewed tariff measures, concerns about technology spending and geopolitical escalation in the Middle East shifted investor focus from economic growth to inflation risks. Energy supply disruptions drove robust commodities performance, while equities broadly declined amid heightened risk aversion.

Regional equity performance diverged. Japanese equities performed well, supported by a weaker yen and expectations of additional fiscal stimulus, while European equities declined amid rising energy costs. U.K. equities delivered a positive return, benefiting from commodities exposure and currency weakness. U.S. equities lagged amid increased scrutiny of technology valuations and capital expenditures, with both the information technology sector and the broader market weakening toward quarter-end. Within sectors, energy, materials and utilities outperformed, while information technology, consumer discretionary and communication services lagged.

Performance

EOG Resources Inc. contributed to the Fund’s performance, benefiting from the increase in crude oil prices driven by the conflict in the Middle East. Canadian Pacific Kansas City Ltd. contributed to performance after delivering resilient results and announcing a share buyback program for 2026, allowing the company to take advantage of attractive valuations.

Stock selection in the information technology sector contributed to performance. An overweight allocation to the industrials sector, which was a relatively strong-performing sector during the quarter, also contributed to performance.

A Fund holding in 3i Group PLC detracted from performance. The company pointed to slower-than-expected performance in France, its largest market, because of challenging consumer demand and increased competition. Microsoft Corp. detracted from performance after delivering growth that fell short of expectations, with guidance indicating elevated capital expenditure growth, which raised investor concerns about future returns on invested capital.

An underweight allocation to the energy sector detracted from performance as energy was a strong-performing sector during the quarter. Stock selection in the consumer staples and health care sectors also detracted from performance.

Portfolio activity

The sub-advisor added to the Fund holdings in Service Corp. International, Netflix Inc., Sea Ltd. and Keyence Corp. In the sub-advisor’s view, Service Corp. International has a strong market position and may benefit from favourable long-term demographic trends. Netflix was added at a point when investor anxiety around a potential content acquisition created an attractive valuation. Sea was added after a significant decline in the company’s share price. Keyence was added after a period in which the sub-advisor believed the company’s shares had become more attractively valued.

The sub-advisor sold the Fund’s holding in SAP SE because of concerns about competitive disruption. Ferguson Enterprises Inc., Moody’s Corp., The Coca-Cola Co. and Hoya Corp. were sold because the sub-advisor believed their valuations were no longer attractive enough relative to other opportunities. HDFC Bank Ltd. and Abbott Laboratories were sold because the original investment thesis for these companies wasn’t playing out as the sub-advisor had expected.

Outlook

In the sub-advisor’s view, a key near-term question is whether there will be a quick resolution to the conflict in the Middle East. An extended restriction of oil and gas supply could pose challenges for the global economy, while a resolution of the conflict could bring a rapid correction in oil prices and a recovery in cyclical stocks.

The sub-advisor is also focused on the sustainability of the current artificial intelligence (AI) investment cycle. Large technology companies are spending heavily on AI-related capital expenditure, and the narrowness of economic growth drivers may present risks if returns on that spending fall short of expectations. The sub-advisor has reduced aggregate exposure to large technology companies and semiconductor manufacturers in response to what the sub-advisor sees as an increasing risk of capital misallocation.

The sub-advisor continues to favour a diversified portfolio, reflecting a wider-than-normal distribution of potential outcomes. The sub-advisor believes thoughtful risk management remains important in the current environment.