Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy navigated a challenging first quarter as trade uncertainty continued to weigh on business confidence and manufacturing activity. Employment fell in January and February before stabilizing in March, when the economy added 14,000 jobs and the unemployment rate held steady at 6.7%.

The Bank of Canada held its policy rate at 2.25% at both its January and March meetings. Canada’s inflation rate eased to 1.8% in February. The Bank noted that near-term growth was likely to be weaker than anticipated and flagged that higher energy costs posed upside risks to inflation following the escalation of the conflict in the Middle East in late February.

Canadian corporate bonds delivered mixed performance in the first quarter. Energy-sector issuers gained as sharply higher crude oil prices improved operating conditions. Investment-grade corporate bonds outside the energy sector were broadly stable over much of the quarter, though investor caution increased in March as inflation concerns and geopolitical uncertainty weighed on risk appetite. High-yield bonds were relatively volatile as the late-quarter decline in risk appetite weighed on lower-rated issuers, though energy-linked names broadly outperformed.

Performance

The Fund’s exposure to the energy sector contributed to performance during the quarter. Enbridge Inc. (3.57%, 2031/02/26) contributed to performance. Enbridge remains a core holding given its predictable cash flows, with roughly 98% of earnings contracted or regulated with investment-grade counterparties, supported by the company’s pipeline and midstream infrastructure.

The Fund’s long-end financial bond exposure detracted from performance. Intact Financial Corp. (2.954%, 2050/12/16) detracted from performance. Despite Intact Financial’s strong fundamentals and leading position in the Canadian insurance market, the long-dated bond lagged as the broader sector underperformed.

Portfolio activity

The sub-advisor added Curaleaf Holdings Inc. (11.50%, 2029/02/18) during the quarter. Curaleaf is a leading U.S. multi-state cannabis operator with a broad footprint across cultivation, processing and retail operations. The addition reflects the sub-advisor’s positive view on the cannabis sector and its evolving regulatory and demand backdrop.

Hydro One Inc. (5.49%, 2040/07/16) was increased because of the company’s resilient fundamentals and favourable yield profile given its predictable, long-term contracted cash flows.

Bank of Montreal (7.325%, 2082/11/26) Limited Recourse Capital Note was sold because of its long-dated structure and extension risk.

Brookfield Infrastructure Finance ULC (4.193%, 2028/09/11) was reduced. While Brookfield Infrastructure remains a high-quality issuer with diversified global infrastructure assets, the reduction was driven by portfolio positioning rather than a change in the sub-advisor’s fundamental view on the credit, with proceeds used to fund new-issue opportunities.