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

On a country basis, security selection in India, China and Indonesia 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 was the primary performance driver. Among the broader factor exposures, growth and value contributed to performance. The Fund's smaller size bias also contributed.

Samsung Electronics Co. Ltd. contributed to the Fund's performance. The company benefited from ongoing strength in artificial intelligence (AI)-related technologies and semiconductor demand. Delta Electronics Inc. and ASPEED Technology, Inc. also contributed to performance, supported by continued momentum in AI-driven semiconductor demand across the region.

At a country level, selection in Brazil and Turkey detracted from the Fund's performance. At a sector level, selection in the energy and utilities sectors detracted. Quality as a factor modestly detracted, and market sensitivity exposure also detracted from performance.

Kanzhun Ltd. detracted from the Fund's performance amid weakness in Chinese equities as slow domestic growth and weaker export demand weighed on sentiment. Geely Automobile Holdings Ltd. also detracted because of broader weakness in Chinese equities. Canara Bank detracted from performance during a weak quarter for India as growth concerns, higher energy costs and expensive valuations pressured the market.

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.