Portfolio returns: Q1 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jul 12, 2013) |
IG Growth Portfolio – Canadian Equity F | -3.66
| -0.71
| -0.71
| 12.89
| 8.21
| 14.93
| 7.78
| 8.96
|
Quartile rankings | 3 | 3 | 3 | 2 | 2 | 3 | 2 |
IG Growth Portfolio – Canadian Equity Series F
Portfolio commentary
Q1 2025
Highlights
① The portfolio declined over the quarter as equities generated mixed performance.
② Exposure to U.S. equities weighed on performance.
③ EAFE equities, Canadian bonds and Canadian equities were top contributors to returns.
Portfolio Overview
In the first quarter of 2025, global financial markets experienced notable shifts in regional equity performance. Contrary to investors’ original expectations of continued U.S. market dominance, EAFE equities were among the best performers while U.S. equities were among the weakest as investors rotated away from the U.S. U.S. trade policy was a key cause of concern for investors, resulting in the outflow of capital from U.S. equities, a flight towards safer assets, and a hostile global trade environment that threatens global economic growth. Value stocks led over growth stocks and gold prices skyrocketed over the period, benefiting Canadian equity markets. Global bond prices appreciated as yields declined, particularly in the U.S. Canadian bonds performed well, supported by the Bank of Canada’s rate cuts over the quarter.
The IG Growth Portfolio – Canadian Equity generated a negative return this quarter. The portfolio’s exposure to U.S. equity was the leading detractor to returns, while allocations to EAFE equities, Canadian bonds and Canadian equities benefited the portfolio.
The Mackenzie IG U.S. Equity Pool, the Mack EAFE Equity Pool and the Mackenzie Enhanced Fixed Income Risk Premia Fund were the largest contributors. The Mackenzie IG U.S. Equity Pool generated a positive return due to strong contributions from the materials sector, but modestly underperformed its benchmark due primarily to security selection in the same sector. Security selection in the energy sector was the largest contributor to performance. The Mack EAFE Equity Pool was a strong performer, benefiting from its allocation to European equities. Underweight allocations to Japan and security selection in France contributed to relative performance. A slight detractor to returns was the pool's overweight allocation to Australia. The Mackenzie Enhanced Fixed Income Risk Premia Fund is a levered alternative fixed income fund. The investment team uses the fund to efficiently manage total portfolio fixed income exposure. Falling bond yields led to rising bond prices and were beneficial to fixed income returns.
The Mackenzie IG U.S. Equity Pool and the Mackenzie Enhanced Equity Risk Premia Fund were the largest detractors. The Mackenzie IG U.S. Equity Pool was led lower by stocks in the information technology and consumer discretionary sectors. Security selection in the health care and industrials sectors was a drag on relative performance. The pool's underweight allocation to the information technology sector was a leading contributor to relative returns. The Mackenzie Enhanced Equity Risk Premia Fund is a levered equity fund. The investment team uses leverage to manage total portfolio equity exposure in a capital efficient way. The fund slightly detracted from returns as broad equity markets declined.
Market overview: increased uncertainty in U.S. markets favoured international equities
Investor sentiment turned cautious in the first quarter of 2025, driven by heightened market uncertainty following significant shifts in U.S. trade policy under President Trump. Abrupt tariff changes targeting major trade partners — notably Canada, Mexico and China — increased volatility and pressured equity market performance, particularly affecting the S&P 500 Index. In contrast, European markets outperformed significantly, reflecting investors' preference for Europe's attractive valuations and perceived stronger growth potential.
Despite trade-related headwinds, global manufacturing activity showed resilience, signalling potential earnings growth ahead, provided trade tensions stabilize. Central banks diverged in response: the Bank of Canada proactively lowered its overnight rate to 2.75% to bolster growth amid trade uncertainties, while the U.S. Federal Reserve maintained its rate at 4.5%, viewing tariff-related inflation impacts as temporary.
Market outlook: global diversification and a balanced approach are key to navigating tariff volatility
The portfolio management team is bearish on global equities, which appear expensive relative to fundamentals. The U.S. equity market is pricier than most global markets and appears to be running out of steam. Investor sentiment has shifted against it in favour of other more attractively priced markets like international equities, which offer a more attractive risk-return trade-off. The team believes that the U.S. will maintain tariff pressure on Canada throughout the next few quarters and the Canadian dollar will likely weaken further to help the economy absorb the heavy blow of tariffs.
The portfolio management team has a neutral view on duration (sensitivity to interest rates). Trump’s economic policies – government job cuts, trade wars and general uncertainty – will weigh on economic growth. Markets are now expecting three U.S. Federal Reserve cuts this year.
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