Portfolio returns: Q4 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. July 16, 2014 |
IG Core Portfolio – Global Income F | -0.60
| 0.32
| 3.22
| 3.22
| 4.14
| 0.96
| 2.26
| 2.76
|
Quartile rankings | 2 | 2 | 3 | 3 | 3 | 2 | 1 |
IG Core Portfolio – Global Income Series F
Q4 commentary 2025
Highlights
① The portfolio appreciated during the quarter, led predominately by global bond exposure.
② Real properties detracted slightly from returns during the period.
③ Global bonds ended the year firmly in positive territory.
Portfolio Overview
Despite the late-quarter volatility, global bond markets ended the year in firmly positive territory. The quarter was characterized by continued divergence in central bank policies and a growing focus on the interplay between fiscal stimulus, inflation risks and future monetary policy paths.
In the U.S., the Federal Reserve delivered its third consecutive 25-basis-point (quarter-percentage-point) rate cut in December, bringing the federal funds rate to a 3.50%–3.75% range. The decision, however, highlighted a growing divide within the committee, with three members dissenting. The Federal Reserve’s updated economic projections signalled a more resilient economy, with upward revisions to GDP growth for both 2025 and 2026. Our portfolios remain tactically short U.S. duration, particularly in 10-year and 30-year maturities, reflecting our view that expectations may be overly optimistic on the extent of future easing.
Across the Atlantic, many central banks appeared to have concluded their easing cycles, with the notable exceptions of the Bank of England. In the U.K., long-end gilt yields fell following the government's budget announcement, with 30-year yields dropping 30 basis points. Our European duration positioning remains underweight, primarily expressed through German Bunds. We have maintained a preference for peripheral sovereign debt, such as Italy, where improving fiscal discipline has been recognized with credit upgrades.
In Canada, the narrative is distinctly different. The Bank of Canada held its policy rate at 2.25% in December, after growth surprised to the upside in the third quarter. However, we anticipate a path of least resistance characterized by prolonged easing due to softer growth drivers, including lower immigration and housing market weakness. Our positioning is constructive on Canada but concentrated in the front end of the curve (around five years), remaining cautious on longer-dated bonds given concerns around term premiums and deficit overhangs.
The Mackenzie IG Global Bond Pool is the largest weighted allocation in the portfolio and largest contributor to performance. Fixed income investors benefited from attractive yields in global bonds offering a buffer against policy-related uncertainty. The Mackenzie AAA CLO ETF is the third largest holding in the portfolio and the second largest contributor to performance. The IG Mackenzie Real Property Fund was the largest detractor from performance during the period.
Market overview: global growth strengthened, inflation eased, policy supportive
Markets ended the fourth quarter of 2025 on a strong note, capping a year defined by resilience and broad-based gains. Equities led performance, as investors looked beyond policy noise and focused on improving fundamentals. Global markets advanced, supported by steady corporate earnings, easing inflation pressures and a clear shift toward lower interest rates. Canada outperformed most developed peers, driven by strength in materials and financials, while European and Asian markets rebounded on firmer trade activity and renewed investor confidence. In the U.S., equity performance remained positive, led by technology and communication services, with improving breadth across sectors signalling a healthier market foundation.
Fixed income delivered modest but positive returns, as central banks continued to ease policy. Government yields declined on the short end while longer maturities remained stable, allowing coupon income to drive returns. Credit conditions stayed firm, underscoring the strength of corporate balance sheets entering 2026.
Market outlook: an elevated level of volatility expected
Looking ahead to 2026, we expect the divergence in central bank policies, coupled with fiscal and political uncertainties, to maintain an elevated level of volatility across global fixed income markets. This environment, in our view, creates a fertile ground for active allocators to identify attractive opportunities. We believe expectations for U.S. rate cuts could be too aggressive, as a firm domestic economy and persistent core inflation near 3% argue for a more cautious U.S. Federal Reserve.
We are favouring a more neutral duration stance overall, with tactical underweights in the U.S. and Europe, and overweights in Canada and Australia. High-quality corporate credit remains a core allocation, providing attractive income, with a preference for defensive sectors like utilities and pipelines. We complement these positions with selective allocations to emerging market sovereigns that we believe offer compelling risk-adjusted returns. Flexibility in portfolio construction will remain paramount as we navigate the evolving landscape.
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