Monthly commentary - Mackenzie Ivy Team

Portfolio Manager Monthly Insights

James Morrison, MBA, CFA
Vice President, Lead Portfolio Manager
Mackenzie Ivy Canadian Fund

In a World of Information Overload, Ivy Has a Strategy

Since the US election, the status quo has been upended, forcing investors to re-evaluate foundational assumptions and consider countless potential consequences. From threats of trade barriers to shifting military alliances, from inflation to foreign exchange, how can one make sense of it all? In a world of information overload, Ivy has a strategy to cut through the noise. Rather than attempting to position our investments for a particular scenario (an exercise likely to be wrong), we take a long-term view and build our portfolios with three lines of defense:

1. Investing in high-quality businesses:  We focus on companies that can leverage their competitive position, end-market resilience, and financial flexibility to grow over time and adapt to unforeseen challenges.
2. Maintaining valuation discipline: By ensuring that our investments are not overpriced, we create a buffer against market volatility.
3. Diversifying risk: We spread risk across our portfolio, ensuring that no single factor can derail the train.

This approach works because it’s built to endure. By staying grounded amid uncertainty and focusing on quality, valuation, and diversification, Ivy has delivered stability when it’s needed most and the compounding that comes with it.

Ivy Canadian on Tariffs

While there are many risks to consider, tariffs are particularly pressing for Canada. The range of potential outcomes is broad, depending on which products are affected, the tariff rates applied, and how long they remain in place. Macro estimates suggest that tariffs at the threatened levels could create a 2% headwind to Canadian GDP if sustained over an extended period. While this estimate should be viewed with caution due to the complexity of the situation, it underscores that tariffs have significant disruptive potential.

However, rather than relying on other’s macro projections, we focus on our own bottom-up analysis to assess how tariffs could impact our individual holdings. After running sensitivities on each of our positions and validating our findings with management teams, we believe that Ivy Canadian is well-positioned to navigate the risks posed by tariffs. While it may be early days, this belief is supported by the resilient performance of the fund so far this year. Below, we outline the key attributes that explain why we believe the fund is well equipped to handle the threat of tariffs to the Canadian economy:

1. Economic resilience: We favour businesses where success is more reliant on management execution than the health of any given economy.
2. Global diversification: One-third of our portfolio is invested in world-class businesses outside Canada, such as Microsoft, Abbott Laboratories, and Compass Group. Furthermore, many of our Canadian holdings, including Brookfield, CGI, and Alimentation Couche-Tard, have expanded beyond Canada to become global leaders in their respective industries.
3. Resilient Canadian holdings: Many of our domestically focused businesses, such as Intact Insurance, Metro, and Dollarama, serve highly resilient end-markets.
4. Cyclical businesses with strong fundamentals: While we do invest in cyclical Canadian businesses like CN Rail and TD Bank, they tend to be high-quality, well diversified and reasonably priced.

Overall, Ivy Canadian is bringing together the best of what Canada has to offer with world class global businesses to provide investors with a portfolio that is well prepared for a range of macro-scenarios, including a more protectionist trade environment.

Capitalizing on Opportunity where Conviction and Volatility Meet

Conviction is a cornerstone of our investment philosophy. It means building deep-understanding of our businesses, identifying key drivers and risks, and resisting the distractions that can undermine this understanding. It allows us to capitalize on opportunities when they arise.

Volatility often brings opportunity for those less affected. In the current environment, Ivy Canadian’s been able leverage our outperformance to capitalize on the volatility and put our conviction to work. We’ve done the analysis to understand the risks and been quick to move when share prices have responded disproportionately. Further, we have a clear view of businesses where headline risks outweigh fundamental risks and we stand ready to capitalize if they should sell-off. 

This is an exciting time for Ivy Canadian, with our defensive positioning providing dry powder to capitalize on a growing list of attractive opportunities. Although we have no idea how markets will play out from here, we are confident that we are well positioned to weather the storm if conditions deteriorate further, while benefiting from the actions already taken if conditions improve.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

The contents of this document (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) are not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

This document may contain forward-looking information which reflect 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 not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of March 24, 2025. 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.

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