Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

North American economies diverged in the first quarter. Canada’s economy faced continued pressure from trade uncertainty and a soft labour market, with employment declining in January and February before stabilizing in March. The U.S. started the quarter with stronger momentum but saw sentiment weaken as the outbreak of the conflict in the Middle East drove oil prices sharply higher and raised concerns about inflation and a potential delay in monetary easing.

Monetary policy remained on hold in both countries. The Bank of Canada held its policy rate at 2.25% at both its January and March meetings, while the U.S. Federal Reserve Board maintained the federal funds rate at 3.50%–3.75% at the same meetings. Canada’s unemployment rate was 6.7% in March, and the U.S. rate was 4.3%.

Multi-sector fixed income delivered mixed results in the first quarter as the geopolitical oil shock complicated the fixed income landscape across asset classes. Energy-sector corporate bonds outperformed broadly as improving commodity revenues supported credit quality. Investment-grade corporate bonds were relatively stable, with credit spreads holding firm through much of the quarter before widening modestly in March. Government bonds underperformed as yields drifted higher on inflation concerns. High-yield bonds delivered mixed results, with energy-linked issuers outperforming as oil prices surged while higher-risk non-energy issuers faced more pressure as risk appetite declined late in the quarter.

Performance

The Fund’s European government bond positioning contributed to performance. An underweight allocation to European government bonds contributed as yields moved higher and weighed on bond prices. The positioning reflected a cyclical view that increased fiscal spending, particularly on defence, could place upward pressure on yields across the region.

The Fund’s U.S. government bond positioning detracted from performance. An overweight allocation to U.S. rates detracted as the Treasury yield curve proved volatile, with yields declining early in the period before rising later on. The move higher in yields weighed on duration-heavy positioning.

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 U.S. multi-state cannabis operator with operations across cultivation, processing and retail. In the sub-advisor’s view, the cannabis sector has an evolving regulatory and demand backdrop. The bond provides attractive yield and enhances the Fund’s diversified credit exposure.

Cenovus Energy Inc. (2.65%, 2032/01/15) was increased during the quarter. Cenovus is a Canadian integrated energy producer with a disciplined approach to capital allocation. The increase aligns with the sub-advisor’s constructive view on Canadian energy, supported by improving balance sheets and stable cash flow generation. The bond provides investment-grade exposure while enhancing portfolio diversification within the energy sector.

U.S. Treasury (4.625%, 2055/02/15) was sold as part of active duration management. The sub-advisor’s U.S. duration stance was dynamic over the period, beginning the year underweight the back end, moving to neutral in February as geopolitical risks intensified and briefly adding long exposure to hedge against a potential growth shock. As inflation risks re-emerged as the dominant market driver, the sub-advisor reduced exposure and returned to a neutral duration position.

Sunoco LP (4.375%, 2029/03/26) was reduced during the quarter. Sunoco remains a large, well-established fuel distributor with a diversified asset base. The reduction was driven by portfolio rebalancing and position sizing, reflecting active risk management while maintaining selective exposure to the energy sector.