Q3 2025 Fund Commentary

Market commentary

Global equities rose in the third quarter of 2025, supported by enthusiasm for artificial intelligence (AI), interest-rate cuts and positive corporate earnings. Emerging market equities outperformed developed market equities, largely because of Chinese equities, which benefited from easing of U.S. trade tensions and a weaker U.S. dollar. Japanese equities rose, aided by a new U.S. trade agreement that reduced tariffs, ongoing corporate governance reforms and a resilient domestic economy. German equities fell because of its stagnating economy, weak manufacturing and exports, rising U.S. trade tensions and political uncertainty.

U.S. equities rose, aided by second quarter earnings. The U.S. Federal Reserve Board’s first interest-rate cut of the year also supported U.S. stocks. Canadian equities rose driven by strength in the materials sector, which benefited from rising commodity prices. The Bank of Canada also lowered interest rates, which aided equity performance.

Performance

The Fund’s relative exposure to Bombardier Inc., Royal Bank of Canada and Bank of Montreal contributed to performance. Bombardier secured a significant business jet fleet contract, saw outperformance in its aftermarket segment and expansion in its defense business. Royal Bank reported positive performance across net interest margins, fees, loans, credit and capital, with its capital markets segment exceeding expectations. Bank of Montreal saw a recovery in its U.S. business and reported good cost control and improved credit quality.

Relative exposure to Intact Financial Corp., Metro Inc. and Definity Financial Corp. detracted from performance. Intact Financial was affected by weakness in commercial property and casualty insurance. Metro reported lower-than-expected same-store food sales and showed a slowdown on a two-year basis. Definity Financial’s stock fell because of concerns about reduced pricing discipline within the industry.

At the sector level, stock selection within industrials contributed to performance, as did exposure to consumer discretionary and real estate. Security selection within materials, consumer staples and energy detracted from performance, as did overweight exposure to consumer staples. The Fund’s cash allocation detracted from performance in a rising equity market.

At the regional level, selection within the U.S. and Canada contributed to performance, as did a lack of exposure to India and Germany. Stock selection in Switzerland and Belgium detracted from performance.

Portfolio activity

The sub-advisor added Airbus SE for its large order backlog, strong earnings visibility, improving profit margins and defense spending growth potential. Enbridge Inc. was purchased based on its growth-oriented capital projects and long-term contracts as global energy demand is expected to increase. Jabil Inc. was added because its business mix shifted toward more value-added design work, which should allow for expanded margins, earnings and free cash flow. E Ink Holdings Inc. was added as retail adoption has grown, and a shift to full-color and larger formats could improve profit margins.

The sub-advisor added to Exchange Income Corp. after it released positive quarterly performance.

RPM International Inc. was sold because of weakness in its commercial and residential end markets, which limited growth. Waters Corp. was sold after it acquired Becton, Dickinson and Co. The company paid a premium for the asset, which introduced potential integration risks. CGI Inc. was reduced because of weakening demand, AI-related disruption risks and pricing pressure.

Outlook

The sub-advisor is focused on applying a long-term investment process that seeks to invest in attractively valued, high-quality growth companies. The sub-advisor believes geopolitical and macroeconomic concerns may remain elevated but has an optimistic outlook.