Q3 2025 Fund Commentary

Market commentary

North American economies showed mixed signals in the third quarter. Canada’s economy remained under pressure from U.S. tariffs. U.S. growth was supported by steady consumer spending. Manufacturing activity weakened in both countries given trade uncertainty.

The Bank of Canada lowered its key interest rate to 2.50%, citing a softer labour market and fading inflation pressures. The U.S. Federal Reserve Board cut its federal funds rate to a target range of 4.00% to 4.25% given slowing job growth and mostly contained inflationary pressures. Canada’s unemployment rate ended the quarter at 7.1%, while the U.S. rate was 4.3% in August 2025.

Small- and mid-capitalization equity markets in both countries rose. In Canada, the industrials and information technology sectors outperformed. Mid-cap resource stocks benefited from rising gold and base metals prices, while energy names faced pressure from weaker oil prices. In the U.S., the industrials and health care sectors led performance, supported by investor interest in biotechnology and manufacturing innovation.

Performance

Relative exposure to Aritzia Inc., Badger Infrastructure Solutions Ltd. and CES Energy Solutions Corp. contributed to the Fund’s performance. Aritzia recovered from tariff concerns to see higher sales and earnings performance. Badger Infrastructure reported positive earnings and outlook aided by artificial intelligence (AI), data centres and power demand. CES performed well in a difficult energy market.

At the sector level, stock selection contributed to performance as several positions recovered after a weak first half of 2025. Exposure to materials contributed to performance, driven by strength in gold equities. However, underweight exposure to the sector detracted from performance. Exposure to industrials detracted from the Fund’s performance, as did selection within information technology, as software companies held were affected by AI-related concerns.

Portfolio activity

The sub-advisor added Lumine Group Inc., Hammond Power Solutions Inc. and Exchange Income Corp. for their growth outlooks. VitalHub Corp. was added through participation in an equity issue to fund the company’s consolidation strategy. A better backdrop for real estate transactions and lower interest rates led the sub-advisor to increase Colliers International Group Inc. A better outlook for the second half of 2025 led to an increase in Element Fleet Management Corp.

Computer Modelling Group Ltd. and North American Construction Group Ltd. were sold in favour of other investments. Stantec Inc., AtkinsRealis Group Inc. and Definity Financial Corp. were reduced after strong performance. ARC Resources Ltd. and Nuvista Energy Ltd. were trimmed given risks related to oil supply and demand.