IG Core Portfolio – Income Focus rose (+0.9%) over the period as stocks and bonds gained ground in most regions. It slightly outperformed its Global Fixed Income Balanced peer group average (+0.8%), mainly due to its exposure to U.S. equities.
All fixed income elements of the portfolio were higher over the period. Mackenzie – IG Canadian Bond Pool was the top contributing segment to portfolio returns, in part because of its weight allocation (almost one third of the portfolio). The pool outperformed the FTSE Canada Universe Bond Index Total Return. In anticipation of interest rate cuts in Canada and the U.S., duration of the North American holdings was increased in recent months, which benefited performance as yields edged lower in May and June. The pool also benefited from a continuing negative (short) position in Japanese government bonds (JGBs), which fell over the period.
The other fixed income components, which together comprise almost another third of the portfolio, delivered mixed results, with corporate, high-yield and short-term segments lifting the portfolio’s aggregate return, while global bond exposure, although positive, weighed on overall results. IG Mackenzie Floating Rate Income Fund and the IG Mackenzie Mortgage and Short Term Income Fund were the best-performing fixed income segments.
The portfolio benefited from the strong performance of most of its U.S. equity components and several other segments that hold significant exposure to U.S. equities. The two largest of these, the T. Rowe Price – IG U.S. Equity Pool and the Mackenzie – IG U.S. Equity Pool, together comprise less than 8% of the portfolio and yet accounted for roughly 40% of the portfolio’s total return. T. Rowe Price – IG U.S. Equity Pool was the best-performing U.S. segment and outperformed the S&P 500 Index mostly due to its stock selection in the information technology and consumer discretionary sectors.
The top performing segment in the portfolio was not invested in U.S. equities, but rather in emerging markets equities. Relative to the MSCI Emerging Markets Index Total Return (Net) $ CAD, the J.P. Morgan – IG Emerging Markets Pool benefited mainly from an overweight exposure to the information technology sector, especially in Taiwan and South Korea, and stock selection in the health care, energy and communication services sectors. However, due to its relatively small weight in the portfolio, this segment had limited impact on overall results.
The poorest-performing component of the portfolio was the Mackenzie U.S. Mid Cap Opportunities Fund, which declined as small- and mid-cap stocks underperformed large-caps in U.S. markets. The two Canadian stock segments – the Mackenzie – IG Canadian Equity Income Pool and the Mackenzie – IG Canadian Equity Pool – also weighed on portfolio results as the S&P/TSX Composite Index Total Return fell over the quarter.