Q3 2025 Fund Commentary

Market commentary

Canada’s economy faced challenges in the third quarter as trade tensions with the U.S. continued. This weighed on trade activity and the manufacturing sector. Household spending demonstrated resiliency despite a slowing labour market and economic uncertainty.

The Bank of Canada (BoC) lowered its key interest rate to 2.50%, citing a weaker labour market and easing inflation. The BoC emphasized a cautious approach to balancing growth and price stability. Canada’s unemployment rate was 7.1%, the highest since 2021, with youth unemployment rising sharply.

The Canadian fixed income market posted gains. Yields on 10-year Government of Canada bonds finished at 3.18%, slightly lower than 3.27% at the beginning of the quarter. Government bond prices increased, while investment-grade corporate bonds outperformed. High-yield bonds rose, driven by improving risk sentiment and appetite for income.

Performance

The Fund’s overweight exposure to TransCanada Trust (4.65%, 2077/05/18) contributed to performance as it benefited from investor demand for high-quality credit. Overweight exposure to Canada Housing Trust No. 1 (1.95%, 2025/12/15) detracted from performance as it lagged its sector peers.

At the sector level, overweight exposure to corporate bonds contributed to the Fund’s performance. Exposure to federal government bonds detracted from performance.

Portfolio activity

A new issue of Sienna Senior Living Inc. (4.112%, 2030/08/21) was added based on its yield and defensive qualities. The company may benefit from demographics, government support and resilient demand. Intact Financial Corp. (4.125%, 2081/05/31) was increased for its yield and issuer fundamentals.

Toyota Credit Canada Inc. (3.73%, 2029/10/02) was sold as the sub-advisor rebalanced the Fund, shifting toward positions with higher yield. Allied Properties REIT (4.312%, 2027/04/07) was reduced to take profits.