IG Core Portfolio – Balanced Series F

Portfolio commentary
Q1 2025

Highlights

① The portfolio advanced mainly due to gains in fixed income securities as North American bond yields fell in response to rising economic risks.

② Canadian bonds contributed the most to total returns, in part due to their dominant weight in the portfolio.

③ European equities delivered the strongest returns, while U.S. equities were weakest.

Portfolio returns: Q1 2025

Total Return 1M 3M YTD 1YR 3YR 5YR 10YR Since Inc.
July 12, 2013

IG Core Portfolio – Balanced F

-1.85

0.68

0.68

9.10

6.21

9.20

5.58

6.71

Quartile rankings

2

2

2

2

2

1

2

 

Portfolio overview

The IG Core Portfolio – Balanced rose (0.7%) over the first quarter of 2025, mainly due to positive returns from all the fixed income components of the portfolio and strong performance from European equities. It slightly outperformed the Global Neutral Balanced peer group median (0.5%).

Fixed income and equity markets were mixed. Bonds in Canada and the U.S. were mostly higher as yields declined, while bonds in Europe and the Asia Pacific region tended to fall and underperformed North American bonds. In equity markets, the S&P 500 Index (total return $CAD -4.6%) and Canada’s S&P/TSX Composite Index (total return 2.0%) touched record highs, only to then plunge in response to the U.S. tariff drama which has pushed economic policy uncertainty to its highest level in several years and, in the eyes of many forecasters, significantly increased the risk of a recession in the U.S. and Canada. The MSCI EAFE Index Total Return (Net) $ CAD rose more than 7%, with European equities significantly outperforming North American markets.

European equity components (the IG Mackenzie European Equity Fund and the IG Mackenzie European Mid-Cap Equity Fund) and the BlackRock – IG International Equity Pool, which has substantial exposure to Europe, were the portfolio’s top performers. The BlackRock – IG International Equity Pool was the portfolio’s best performer. European economic data generally exceeded expectations during the period, while the European Central Bank, Bank of England and Swiss National Bank have all been cutting interest rates. Recent political changes, especially the German election, have led to more aggressive fiscal policies that support economic growth. Most other (non-U.S.) equity components, as well as the BlackRock – IG Active Allocation Pool, made modest gains.

U.S. equity components (the T. Rowe Price – IG U.S. Equity Pool, the Mackenzie IG U.S. Equity Pool, the Mackenzie U.S. Mid Cap Opportunities Fund and the Aristotle – IG U.S. Small Cap Equity Pool), which together comprise more than 20% of the portfolio, all declined and detracted from performance. The Aristotle – IG U.S. Small Cap Equity Pool was the portfolio’s weakest performer. Other components with substantial U.S. equity exposure (the Mackenzie – IG Equity Hedge Pool and the Wellington – IG Global Equity Hedge Pool) also fell.

In the fixed income portion of the portfolio, the Mackenzie – IG Canadian Bond Pool was the top contributor, mainly due to its weight in the portfolio. The Mackenzie Sovereign Bond Fund was the best-performing fixed income component. However, due to its lower weight it had a limited impact on aggregate results. Portfolio components focused on corporate investment grade bonds and global bonds also contributed to relative performance, while high-yield segments (such as the Putnam – IG High Yield Income Pool and the IG Mackenzie Floating Rate Income Fund), which are more sensitive to rising recession risks, were higher but lagged the broad fixed income universe.

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 overview: increased uncertainty in U.S. markets favoured international equities

Market outlook: volatility creates opportunities

Looking ahead, we remain optimistic despite recent market volatility and lingering uncertainties. While U.S. equities have faced challenges, including a pullback from February highs and sensitivity to tariff concerns, other regions, such as Canada, Europe, and emerging markets, offer compelling opportunities. These regions have shown resilience, supported by stronger fundamentals and more attractive valuations compared to U.S. markets. As long as unemployment remains low, consumption is expected to continue at a steady pace, supporting economic growth.

Uncertainty can be difficult, but history shows that markets and economies recover over time. Ongoing volatility, driven by evolving and unpredictable U.S. trade policies, has created uncertainty in global markets. Diversification across sectors, asset classes and geographies remains critical. Despite short-term turbulence, global opportunities continue to emerge, and maintaining a long-term perspective is key to navigating current conditions and achieving growth.

To discuss your investment strategy, speak to your IG Advisor.