Q3 2025 Fund Commentary

Market commentary

U.S. equities, as measured by the S&P 500 Index, returned 8.12% growth for the third quarter of 2025. Stocks were boosted by the U.S. Federal Reserve Board’s (Fed) interest-rate cuts. Information technology sector stocks were strong, driven by capital spending related to artificial intelligence.

Performance

The Fund’s exposure to Seagate Technology Holdings PLC and overweight exposures to Citigroup Inc. and PulteGroup Inc. contributed to performance. Relative overweight exposure to Philip Morris International Inc., Charter Communications Inc. and The Coca-Cola Co. detracted from performance.

At the sector level, stock selection in health care, financials, information technology and consumer discretionary contributed to performance. Stock selection within consumer staples and materials detracted from performance. Overweight exposure to consumer staples and underweight exposure to communication services also detracted from performance.

Portfolio activity

The sub-advisor added Novo Nordisk AS and increased Becton, Dickinson and Co. The Cigna Group was eliminated and NRG Energy Inc. was trimmed.

Outlook

U.S. economic growth and equity markets remain resilient despite a softening labour market. The economy has not felt the full effects of tariffs and questions remain around several tariff proposals. Based on economic data, markets are optimistic about further interest-rate cuts from the Fed. However, the sub-advisor believes there isn’t a clear path forward, with some division among members of the Federal Open Market Committee.

There is uncertainty around the U.S. administration’s policies, which could have consequences for economic growth and investor confidence. Equity valuations are high, leaving stocks vulnerable to negative developments that are possible at this stage of the economic cycle.

Corporate earnings were strong and are expected to continue to grow, but at a slower pace than was anticipated. The implementation of tariffs could impact earnings growth. The sub-advisor is watching for proposals that could ease the regulatory burden on banks and boost long-term return potential for the sector. Although uncertainty remains, as value investors, the sub-advisor recognizes that market disruption can also present attractive investment opportunities.

The Fund’s largest sector overweight allocations are consumer staples and materials. The financials sector is one of the Fund’s largest weights but still underweight relative to the benchmark. Communication services, real estate and industrials sector exposures are below benchmark weight.