Manulife North American Dividend Income
Mandate commentary
Q3 2025
Highlights
① Underweight allocation to high-concentration names across multiple sectors detracted from solid stock selection.
② Balancing geopolitical uncertainty with positive economic fundamentals.
③ Broad diversification remains the best way to handle mixed market conditions.
Mandate overview
The portfolio’s core focus on diversifying business risk led to relative underperformance during the quarter. This was primarily due to the benchmark index’s gains being driven by a narrow group of high-weight stocks, notably Shopify and RBC. The index maintained significantly larger exposures to these names, which boosted its returns but also increased its overall risk profile. While the portfolio did include some exposure to these companies, it remained committed to its disciplined approach of business risk diversification. This strategy provided investors with a lower beta and reduced volatility, though it came at the cost of short-term performance.
Additionally, the portfolio was underweight in sectors such as financials and gold, which further impacted relative performance. In particular, the lower allocation of large-cap financials limited upside participation during a period of strength for the sector. Similarly, the underweight position in gold-related equities detracted from returns, as the commodity rallied during the quarter.
Mandate: Underperformed benchmark over Q3
Performance contributors
Alphabet: the company’s shares grew by 38% in Q3, fuelled by growth in its AI-powered cloud and advertising businesses, and a favourable anti-trust ruling that eased regulatory concerns.
Agnico Eagle: the company’s shares soared to a 52-week high in the quarter, driven by record gold prices, strong operational performance and persistent earnings beats. This was underscored by the company’s high-quality portfolio in low-risk jurisdictions.
Performance detractors
Constellation Software: shares declined sharply in Q3 following the unexpected resignation of founder and president Mark Leonard, due to health reasons. Despite appointing a long-time COO as successor, the leadership change and investor uncertainty led to a 17% drop.
Intact: stock declined in Q3 despite strong Q2 results, including an 8% rise in net operating income and a combined ratio of 86.1%. Shares fell nearly 5% post-earnings, as cautious investor reaction to management’s outlook and modest commercial premium growth weighed on sentiment.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18 2025) |
MANULIFE NORTH AMERICAN DIVIDEND INCOME | 5.37%
| 5.34%
|
Mandate repositioning
The portfolio management team has not changed its positioning this quarter. They believe that the portfolios are well-positioned to deliver absolute returns and provide uncorrelated business risk diversification.
Market overview: signs of optimism emerge, despite the noise during "Liberation Day" fallout
The third quarter delivered broad gains across asset classes, with market performance largely overriding a backdrop of cautious sentiment. Investors looked past persistent trade policy headlines, increasingly treating the U.S. administration's tariff policy as noise rather than a core risk. The primary catalysts for the positive performance were a subtle shift toward lower-interest-rate expectations and resilient corporate earnings.
Signals from the U.S. Federal Reserve of imminent rate cuts were followed by a quarter percentage cut in September. Government bond yields eased into the quarter's end, supporting bond prices, while corporate bonds outperformed government bonds.
Market outlook: solid reasons for optimism, despite ongoing uncertainty
Looking ahead, the normalization of inflation is a key development, providing central banks with the flexibility to begin an easing cycle over the next six to 12 months. This anticipated shift toward more accommodative monetary policy is expected to lower borrowing costs, creating a supportive foundation for economic activity.
This should help the macroeconomic environment sustain corporate strength. Earnings are projected to remain robust, building on a consistent trend of exceeding expectations. Resilient corporate profitability continues to be a primary driver of market performance.
The combination of impending rate cuts and durable earnings growth establishes a constructive outlook for equities. This environment reinforces the principle that focusing on underlying fundamentals, rather than reacting to short-term market volatility, is a prudent strategy for capturing future growth potential.
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This commentary may contain forward-looking information, which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of September 30, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised, whether as a result of new information, changing circumstances, future events or otherwise.
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