Portfolio returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. July 12, 2013 |
IG Core Portfolio – Balanced F |
1.73 |
4.78 |
11.29 |
18.84 |
5.05 |
6.79 |
6.21 |
6.76 |
Quartile rankings |
3 |
3 |
3 |
3 |
2 |
1 |
2 |
IG Core Portfolio – Balanced Series F
Portfolio commentary
Q3 2024
Highlights
① The portfolio advanced as interest-rate cuts and diminishing fears of an economic slowdown lifted stocks and bonds.
② Canadian equities delivered the strongest returns and contributed the most to total returns.
③ Real property and alternative investments exposure weighed on results.
Portfolio overview
The IG Core Portfolio – Balanced rose (+4.8%) over the period as global inflation cooled, economic data reinforced expectations for a U.S. soft-landing and the U.S. Federal Reserve (the Fed) surprised investors with a 50-basis-point interest-rate cut. All component funds and pools in the portfolio were higher. However, the portfolio underperformed its Global Neutral Balanced peer group average (+5.0%), mainly due to its exposure to IG Mackenzie Real Property Fund, alternative investments and underperforming U.S. equities.
The portfolio benefited from the strong performance of its three Canadian equity components, the Mackenzie – IG Canadian Equity Pool, the Mackenzie – IG Canadian Equity Income Pool and the Fidelity – IG Canadian Equity Pool, which together comprise over 15% of the portfolio. The three pools were the best-performing segments of the portfolio. However, all three underperformed the S&P/TSX Composite Index Total Return.
The underperformance of U.S. equity components weighed on relative performance, especially the T. Rowe Price – IG U.S. Equity Pool. It and most of the other U.S. equity segments, which together comprise roughly 20% of the portfolio, underperformed the S&P 500 Index, which in turn underperformed other major developed equity markets. Of the U.S. equity segments, only the Aristotle – IG U.S. Small Cap Equity Pool (less than 1% of the portfolio) outperformed the S&P 500. However, it lagged the small-cap Russell 2000 Index.
The Mackenzie – IG Canadian Bond Pool was the top fixed-income contributor, in part because of its weight allocation (almost 20% of the portfolio), and it slightly outperformed the FTSE Canada Universe Bond Index. In anticipation of interest-rate cuts, duration of holdings was increased earlier this year, which benefited performance as yields fell. The Mackenzie – IG Canadian Corporate Bond Pool had similar performance and contributed to the portfolio’s total return. However, it trailed high-yield benchmarks, in part due to its focus on higher-quality bonds on average compared to its benchmark. The other fixed-income components delivered mixed results.
The poorest-performing portfolio components were the Mackenzie Global Macro Fund and the IG Mackenzie Real Property Fund. The Mackenzie Global Macro Fund is an alternative investment intended to provide a steadying influence when used as a diversifying component of broader portfolios and is expected to underperform global benchmarks in periods of strong capital markets. It had little impact on overall results due to its small weight allocation in the portfolio. IG Mackenzie Real Property Fund gained only slightly as Canada’s slower economic growth continued to weigh on real estate valuations. However, the fund has seen a stabilization this year of the property value write-downs which challenged performance through 2023.
Market overview: markets rallied with expanding breadth
Investor sentiment shifted to a “risk-on” attitude in the third quarter, in response to changes in central bank monetary policy across key economies. It began with the Bank of Canada (BoC) and the European Central Bank (ECB) in the second quarter and continued into the third. The BoC was particularly active, making two additional cuts of 25 basis points (0.25 percentage points) to its overnight rate this quarter.
The U.S. Federal Reserve (the Fed) started its own policy easing with a surprise 50 basis-point (0.5-percentage-point) cut in mid-September, launching rallies in both bonds and equity markets. The Fed noted an increase in the unemployment rate and that the battle against inflation was no longer a primary reason to maintain a restrictive monetary policy.
Market outlook: the inflation battle is over, soft-landing ahead
Looking ahead through the remainder of 2024 and into 2025, we can confidently say the inflation battle has been won. The focus has now shifted to supporting a weakening labour market in Canada and the U.S. Despite some of the geopolitical risk emanating from the ongoing conflict in the Middle East and the upcoming U.S. election, we see the market environment as generally improving, with neither event likely to have a meaningful impact on investment portfolios over the long term. We see a soft-landing scenario emerging in the U.S. and other areas around the world. This should support equity markets and help bond returns, as interest rates continue to fall from where they are today.
To discuss your investment strategy, speak to your IG Advisor.
Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus and speak to an IG Advisor before investing. The rate of return is the historical annual compounded total return as of September 30, 2024, including changes in value and reinvestment of all dividends or distributions. It does not take into account sales, redemption, distribution, optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, values change frequently, and past performance may not be repeated. Mutual funds and investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm). Any additional investment products and brokerage services are offered through Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund.
This commentary may contain forward-looking information which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of September 30, 2024. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
This commentary is published by IG Wealth Management. It represents the views of our Portfolio Managers and is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein.
Trademarks, including IG Wealth Management and IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to subsidiary corporations.
© Investors Group Inc. 2024