Q1 2026 Fund Commentary

Commentary and opinions are provided by AGF Investments Inc..

Market commentary

Canadian equities had a challenging first quarter of 2026 as stability in the opening months of 2026 gave way to energy-driven volatility in March. Global investors rotated out of mega-capitalization technology companies amid earnings scrutiny, fading artificial intelligence (AI) optimism and rising inflation risk. Canadian equities benefited from lower index concentration in the information technology sector relative to other equity markets.

Canada’s gross domestic product (GDP) contracted in the fourth quarter of 2025 because of a business inventory drawdown and a mismatch between rising imports and modest export gains. Labour market softness continued as the unemployment rate rose to 6.7% and employment declined. Inflation continued its descent, with the headline Consumer Price Index easing to 1.8% in February, helped by favourable base effects following the expiry of temporary tax breaks and a slowdown in food inflation. Against this backdrop, the Bank of Canada held its policy interest rate unchanged at 2.25% in March, acknowledging that near-term economic growth was likely to come in weaker than anticipated. Policymakers also warned that renewed volatility in global energy markets has amplified uncertainty.

The Canadian equity market gained during the quarter, as the energy and materials sectors, which outperformed during the quarter, represent a larger share of the Canadian market than peers. A sharp rise in crude oil prices in March, driven by disruptions in global shipping lanes, supported energy-related stocks. Energy, utilities and materials were the strongest-performing sectors, while information technology, health care and real estate lagged. Small-capitalization stocks outperformed large-capitalization stocks, and value stocks outpaced growth stocks.

Performance

Canadian Natural Resources Ltd. contributed to the Fund’s performance. The company delivered its strongest operational year on record, marked by higher production, improved cost efficiency and a strengthened capital-return framework. Cameco Corp. contributed to performance as uranium prices rose and long-term earnings visibility improved amid tightening supply conditions. Agnico Eagle Mines Ltd. contributed to performance following record free cash flow generation, supported by higher realized gold prices.

Security selection in the information technology and consumer staples sectors also contributed to performance.

Thomson Reuters Corp. detracted from the Fund’s performance after the company’s earnings release drew investor attention to intensifying competition and long-term AI-related disruption risks, despite earnings broadly meeting expectations. Microsoft Corp. detracted from performance after the company’s update highlighted moderating cloud-computing growth alongside elevated AI-driven capital expenditure, prompting concerns about near-term margin pressure. Constellation Software Inc. detracted from performance after reporting a drop in net income, with sentiment further dampened by a broader valuation reset across software companies.

Security selection in the industrials sector detracted from performance. An underweight allocation to the materials sector also detracted from performance.

Portfolio activity

The sub-advisor did not make any changes to the Portfolio during the quarter.

Outlook

In the sub-advisor’s view, Canada’s economic outlook for 2026 remains cautiously constructive, with moderate GDP growth expected despite geopolitical uncertainty and trade tensions that continue to strain business sentiment. While household debt and trade dependence pose risks, domestic resilience may be supported by stable employment, real wage gains and positive wealth effects. The energy sector benefits from elevated oil prices, which may support a favourable fiscal policy stance.

The sub-advisor remains focused on sectors with earnings momentum and continues to identify opportunities across the market. The sub-advisor believes market pullbacks may provide opportunities to build exposure to longer-term growth trends.