Portfolio returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jul 12, 2013) |
IG Income – Series F |
2.12 |
5.38 |
8.33 |
15.08 |
2.97 |
3.36 |
3.65 |
4.10 |
Quartile rankings |
1 |
1 |
2 |
3 |
2 |
2 |
2 |
IG Income Portfolio Series F
Portfolio commentary
Q3 2024
Highlights
① The portfolio gained over the quarter, buoyed by a strong economic backdrop that supported both equity and bond returns.
② Sector rotation of markets away from growth-oriented stocks into sectors such as financials and utilities was a primary contributor to returns.
③ Sovereign bonds delivered strong returns as several major central banks moved to lower rates.
Portfolio overview
The portfolio was up in the quarter. All funds within the portfolio generated positive returns.
Equities exposure, represented by the portfolio’s 34% allocation to the Mackenzie Global Equity Income Fund, was the largest contributor to performance. The performance was driven in large part by a market rotation away from growth-oriented stocks into less favoured sectors such as financials, utilities and real estate. The fund outperformed its benchmark as dividend-focused stocks like financial institutions and energy companies outperformed growth-oriented technology stocks. Less volatile stocks also tended to outperform this quarter. An overweight allocation to Canadian equities also boosted performance as the Canadian equity market hit record highs.
The Mackenzie Global Equity Income Fund also utilizes a stock options strategy designed to help preserve capital during times of severe equity market stress. As expected, the options strategy detracted from returns as equity markets rallied – the opposite is expected when equity markets decline rapidly.
Mackenzie Unconstrained Fixed Income Fund, representing 29% of the portfolio, was the top contributor to fixed income performance in the portfolio. Relative to its benchmark, an overweight allocation to corporate bonds and security selection within the industrials and communication services sectors added value, as did short exposure to Japanese government bonds.
Mackenzie Sovereign Bond Fund, representing 12% of the portfolio, was the top returning fixed-income fund in the portfolio, although it slightly underperformed its benchmark. Predominantly comprised of 10-year bonds invested across the world, central banks’ move to lower rates, including the U.S. Federal Reserve (the Fed), the European Central Bank (ECB), the Bank of England and the Bank of Canada, helped boost bond prices.
The Mackenzie Gold Bullion Fund, representing 2% of the portfolio and held as an inflation-sensitive asset, performed extremely well this quarter as the price of gold reached a record high and returned 17%. Geopolitical uncertainty coupled with strong Asian investment and resilient global retail consumer demand has boosted gold prices this year.
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: strategic diversification for stability
The portfolio management team believes that although U.S. economic growth is moderating, with the job market showing early signs of deterioration, the U.S. is not in a recession. Federal government spending remains high, boosting growth. The team believes additional cuts to the federal funds rate by the Fed would stabilize the labour market and the economy.
However, signaling rate cuts can loosen financial conditions, push stock prices higher and tighten credit spreads, increasing growth and inflation pressures.
In anticipation of further interest-rate cuts by developed central banks, the team sees duration exposure as beneficial. Given expensively valued global equities, the team favours diversifying into cheaper markets with positive economic catalysts, such as Europe and Asia. Maintaining a well-diversified investment portfolio is crucial for managing risk and achieving long-term financial stability.
To discuss your investment strategy, speak to your IG Advisor.
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