Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

The global economy navigated a turbulent first quarter. Markets began 2026 on a positive note, with continued disinflation and expectations for further monetary easing supporting investor confidence. The outlook shifted dramatically in late February after the conflict in the Middle East escalated and the Strait of Hormuz was effectively closed in early March, disrupting a significant share of global oil supply and triggering widespread concern about an energy-driven inflation shock.

Major central banks responded cautiously. The U.S. Federal Reserve Board and the Bank of Canada both held rates unchanged at their January and March meetings. The European Central Bank postponed planned rate reductions after energy prices surged, raising its inflation forecasts and reducing its growth projections. These developments suggested that the global monetary easing cycle could be extended or reversed in some markets if energy price pressures persisted.

Global fixed income markets delivered mixed results in the first quarter as rising energy prices disrupted the easing narrative that had supported bonds through 2025. Government bond yields rose in many developed markets, putting downward pressure on prices. Investment-grade corporate bonds showed greater resilience, with energy-sector issuers outperforming as higher oil prices improved credit quality. High-yield bonds were mixed as investor risk appetite declined toward quarter-end. Emerging market bonds faced particular pressure in oil-importing economies, while those with commodity exposure fared comparatively better.

Performance

The Fund's European government bond positioning contributed to performance during the quarter. An underweight allocation to European government bonds contributed as European yields moved higher, weighing on bond prices. The positioning reflected the sub-advisor's view that increased fiscal spending, particularly on defence, could place upward pressure on yields across the region.

The Fund's Australian government bond exposure detracted from performance during the quarter. An overweight allocation to Australian rates detracted as yields moved higher. Ten-year government bond yields remained near multi-year highs amid reassessment of global geopolitical risks. The Reserve Bank of Australia (RBA) signalled that interest rates may need to rise further to return inflation to the 2% – 3% target band, which reinforced upward pressure on yields.

Portfolio activity

The sub-advisor added Curaleaf Holdings Inc. (11.50%, 2029/02/18) during the quarter, participating in the new issue. Curaleaf is a leading U.S. multi-state cannabis operator with a broad footprint across cultivation, processing and retail operations. In the sub-advisor's view, the bond provides attractive yield and enhances the Fund's diversified credit exposure.

U.S. Treasury (1.25%, 2050/05/15) was sold as part of active duration management. The decision reflected an adjustment to evolving rate dynamics and ongoing efforts to manage interest rate risk.

Government of Australia (1.00%, 2030/12/21) was reduced. The adjustment reflects active positioning in response to evolving rate dynamics and a disciplined approach to managing interest rate risk across global sovereign markets.