IG Core Portfolio – Balanced rose (+1.3%) over the period as stocks and bonds gained ground in most regions. It outperformed its Global Neutral Balanced peer group average (+0.9%), mainly due to its exposure to U.S. equities.
The portfolio benefited from the strong performance of most of its U.S. equity components and several other segments that hold significant exposure to U.S. equities. The two largest of these, the T. Rowe Price – IG U.S. Equity Pool and the Mackenzie – IG U.S. Equity Pool, together comprise a little more than 18% of the portfolio and yet accounted for more than 50% of the portfolio’s total return. T. Rowe Price – IG U.S. Equity Pool was the best-performing U.S. segment and outperformed the S&P 500 Index mostly due to its stock selection in the information technology and consumer discretionary sectors.
The top-performing segment in the portfolio was not invested in U.S. equities, but rather in emerging markets equities. Relative to the MSCI Emerging Markets Index Total Return (Net) $ CAD, the J.P. Morgan – IG Emerging Markets Pool benefited mainly from an overweight exposure to the information technology sector, especially in Taiwan and South Korea.
The poorest-performing component was the Mackenzie U.S. Mid Cap Opportunities Fund, which declined as small- and mid-cap stocks underperformed large-caps in the U.S. Two of the Canadian stock segments – the Mackenzie – IG Canadian Equity Income Pool and the Mackenzie – IG Canadian Equity Pool – also weighed on portfolio results as the S&P/TSX Composite Index Total Return fell over the quarter. The third Canada equity segment – the Fidelity – IG Canadian Equity Pool – had a small gain and outperformed the TSX, but underperformed the portfolio as a whole.
All fixed income elements were higher over the period. Mackenzie – IG Canadian Bond Pool was the top contributing fixed income segment, in part because of its weight allocation (almost 20% of the portfolio). The pool outperformed the FTSE Canada Universe Bond Index Total Return. In anticipation of interest rate cuts in Canada and the U.S., duration of the North American holdings was increased in recent months, which benefited performance as yields edged lower in May and June. The pool also benefited from a continuing negative (short) position in Japanese government bonds (JGBs), which fell over the period.
The other fixed income components delivered mixed results, with corporate, high-yield and short-term segments lifting the portfolio’s aggregate return, while global bond exposure, although positive, weighed on overall results. IG Mackenzie Floating Rate Income Fund and the IG Mackenzie Mortgage and Short Term Income Fund were the best-performing fixed income segments.
The portfolio’s second-largest segment, the BlackRock – IG Active Allocation Pool, was higher but detracted from relative results as it underperformed its blended benchmark over the period due to sector strategy in U.S. equities.