Portfolio returns: Q2 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jan 30, 2023) |
IG Target Education 2040 Portfolio F | 2.68
| 5.01 | 4.82 | 15.16 | 14.43 | |||
Quartile rankings | 2 | 1 | 3 | 1 |
IG Target Education 2040 Portfolio Series F
Portfolio commentary
Q2 2025
Highlights
① The Target Education 2040 Portfolio underperformed its benchmark over the quarter, net of underlying fund and ETF fees.
② Asset allocation and U.S. equity sector rotation were additive over the quarter, while country positioning detracted.
③ Manager selection detracted from performance over the period, with allocations to T. Rowe and Fidelity driving most of the underperformance.
Portfolio Overview
The IG Target Education 2040 Portfolio underperformed its benchmark over the quarter. Asset allocation and sector selection in U.S. equities were positive, while country positioning and manager selection faced headwinds.
Asset allocation positioning was slightly positive over the quarter, with a duration underweight and an equity overweight adding modestly. Sector positioning in U.S. equities was a positive contributor, driven by overweight allocations to the industrials, information technology, and energy sectors. Within equity countries, overweight positions in Taiwan, Poland, Singapore, and Canada were additive, while underweight positions in Australia and Germany were the primary detractors. Active equity managers were challenged over the quarter, driven by the underperformance in T. Rowe U.S. equity and Fidelity Canadian equity funds.
Market overview: volatility gripped global markets during "Liberation Day" fallout
The second quarter of 2025 served as a stark lesson in the market’s ability to absorb sharp, politically driven shocks. The period was dominated by the U.S. administration's chaotic trade policy, beginning with the April announcement of sweeping tariffs, which sent global equities into a tailspin. The S&P 500 Index plunged into correction territory, marking its most significant retreat since March 2020.
This initial panic sent investors fleeing to safe havens, a move clearly reflected in the 5.7% surge in gold prices this quarter. However, the administration’s subsequent and rapid reversal of the policy triggered an equally dramatic V-shaped recovery. The initial fear that gripped the market evaporated, and major equity indices charged back into positive territory.
Throughout this turbulence, central banks remained on the sidelines. The U.S. Federal Reserve (the Fed) and the Bank of Canada (BoC) held rates steady, caught between the inflationary threat of tariffs and the risk of a corresponding economic slowdown.
Market outlook: the implications of global rebalancing
The ever-expanding imprint of U.S. fiscal policy continues to shape the contours of the macro environment and the gradual progress of the One Big Beautiful Bill through Congress should ensure market attention remains devoted to this topic. The practical constraints of large fiscal deficits – both in terms of creating vast financing needs and inhibiting domestic rebalancing – are increasingly binding and have led to progressively more direct policymaker references to the need to reduce interest expense through lower policy rates and source incremental demand for U.S. bonds through financial repression and policy innovation.
We do not perceive any of the current interventions as sufficient to induce a meaningful rally in long-term bonds and anticipate that yields have further to rise before more meaningful steps are taken. We remain underweight longer-dated developed market fixed income and the U.S. dollar, and overweight developed market equities (partially offset by a U.S. underweight). Given elevated uncertainty around tariff policy and high valuations for U.S. equities, we believe that foreign flows into the U.S. will continue to moderate as investors reconsider exposure and opportunities outside the U.S. look increasingly attractive. Given fiscal announcements in Europe, and to a lesser extent China, non-U.S. equities could be poised for continued outperformance.
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