Portfolio returns: Q4 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. July 12, 2013 |
IG Core Portfolio – Income F | -0.08
| 0.49
| 3.51
| 3.51
| 4.66
| 2.19
| 2.72
| 2.77
|
Quartile rankings | 2 | 2 | 3 | 3 | 3 | 2 | 1 |
IG Core Portfolio – Income Series F
Q4 commentary 2025
Highlights
① The portfolio delivered a positive performance during the period, navigating elevated volatility in bond markets.
② Exposure to short-term bonds contributed to portfolio performance.
③ Exposure to real property detracted during the period.
Portfolio Overview
The final quarter of 2025 unfolded amid a complex environment, heavily influenced by a U.S. government shutdown that left a data-dependent Federal Reserve effectively “driving in the fog”. The absence of timely economic releases introduced significant uncertainty, which was only partially resolved when the shutdown ended in November. For markets more broadly, the quarter marked a pivotal moment, as the monetary easing that had provided a tailwind for risk assets began to fade.
In the United States, the Federal Reserve delivered its third consecutive 25-basis-point (quarter-percentage-point) rate cut at its December meeting, bringing the federal funds target range to 3.50%–3.75%. The decision, however, highlighted a growing divide within the committee. Federal Reserve Chair Jerome Powell noted that policy is now in the range of "neutral", suggesting a potential pause in the easing cycle as the central bank weighs risks to its dual mandate of maximum employment and price stability. Adding a dovish tilt to the meeting was the announcement of a significant increase in short-term Treasury purchases, with the Federal Reserve planning to add approximately $160 billion in T-bills over the coming months. This move, seen by some as a form of "quantitative easing lite", provided a tailwind for risk assets. The Federal Reserve also raised its growth forecasts for 2025 and 2026 while slightly lowering its inflation projections.
In Canada, the narrative was one of surprising economic strength. The Bank of Canada held its target overnight rate at 2.25% in December, signalling that the current policy rate was appropriate. This decision was supported by a string of robust data. Third-quarter GDP expanded at a solid 2.6% pace, while the labour market showed improvement. After a period of rising unemployment, the rate fell to 6.5% in November, its lowest level in 16 months, as the economy added over 50,000 jobs per month for three consecutive months.
The IG Mackenzie Mortgage and Short Term Income Fund was the largest weighted allocation in the portfolio and largest contributor to performance. The IG Mackenzie Canadian Money Market Fund was the second largest weighted allocation in the portfolio and second largest contributor to performance.
During the period, the fund’s exposure to Mackenzie - IG Canadian Corporate Bond Pool remained consistent at 15.5%. The fund’s allocation to IG Mackenzie Canadian Money Market Fund ended the period at 18.4%. The fund ended the period with a 3.1% allocation to the Mackenzie High Quality Floating Rate Fund.
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: potential for policy accommodation in Canada
Looking ahead to 2026, we are maintaining a neutral duration stance, nuanced by our geographic views: overweight in Canada and underweight in the U.S. In the U.S., we believe expectations for rate cuts may be too optimistic, given underlying economic strength. Conversely, in Canada the potential for softer growth, primarily due to significantly lower immigration and housing weakness, suggests a path of least resistance characterized by prolonged policy accommodation. We remain cautious on the back end of the curve, due to fiscal deficit concerns, and therefore our Canadian exposure is concentrated in the front end of the curve (around five years).
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