Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Emerging markets navigated a challenging first quarter as the outbreak of the conflict in the Middle East in late February and the subsequent closure of the Strait of Hormuz dramatically disrupted global energy markets. Oil-importing economies in Asia, including China, India, Japan and South Korea, faced sharply higher energy costs, which weighed on trade balances and corporate profit expectations as the quarter ended.

Regional performance was mixed. Commodity-exporting markets benefited from higher oil and metals prices. Artificial intelligence-related demand and semiconductor activity continued to support technology-oriented markets in Taiwan and South Korea through much of the quarter, although these gains were partly reversed in March as global risk appetite declined. Latin American markets showed relative strength, supported by resilient domestic demand and, in some cases, improving terms of trade from higher commodity prices.

Emerging market equities ended the first quarter roughly flat, as gains in commodity-linked and technology-driven markets earlier in the quarter were offset by declining investor confidence following the geopolitical escalation in late February and March. The financials sector performed broadly in line with its domestic economic context, while energy-related companies outperformed in markets with significant oil and gas exposure. Consumer-oriented sectors were mixed amid uneven domestic demand signals and uncertainty about the global growth outlook.

Performance

At a country level, security selection in China, South Africa and Taiwan contributed to the Fund's performance during the quarter. From a sector perspective, security selection in the information technology, financials and consumer discretionary sectors contributed to performance. The sub-advisor's stock selection model contributed, while portfolio construction detracted. Among the broader factor exposures, value contributed strongly, followed by growth. The Fund's smaller size bias also contributed to performance.

Taiwan Semiconductor Manufacturing Co. Ltd. contributed to the Fund's performance. The company benefited from continued strength in AI-related semiconductor demand. Samsung Electronics Co. Ltd. also contributed to performance, supported by ongoing momentum in the semiconductor industry. Hanwha Corp., an industrial holding company with businesses spanning aerospace, defence and energy, also contributed to performance during the quarter.

At a country level, security selection in Brazil was the leading detractor during the quarter. At a sector level, selection in the energy and utilities sectors detracted. Among broader factor exposures, quality modestly detracted from performance.

Kanzhun Ltd., a China-based online recruitment platform, detracted from the Fund's performance. Geely Automobile Holdings Ltd. also detracted from performance after March sales were flat year over year. An underweight allocation to Delta Electronics Inc., a Taiwan-based power management and automation company, also detracted from performance during the quarter.

Portfolio activity

The sub-advisor notes that portfolio activity during the quarter was an outcome of a disciplined process driven by stock selection, optimization and vetting that runs on a daily basis.