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Commentary

Q4 2025 Fund Commentary

Commentary and opinions are provided by Brown Advisory

Market Commentary

During the year, U.S. equity markets were volatile. The U.S. administration’s tariff and global trade announcements led equities to fall sharply, despite a resilient U.S. economy and corporate earnings. Despite a weakening U.S. labour market, U.S. consumer spending strength helped performance.

Investor concerns early in the year about a threat to U.S. artificial intelligence (AI) leadership from the Chinese startup DeepSeek quickly dissipated amid rising demand for semiconductor chips and data centre infrastructure. Although equities were briefly down more than 20% for the year following the U.S. administration’s April 2025 tariff announcement, the market quickly rose, climbing to record highs late in the year. Most of the market winners for the latter nine months of the year were exposed to the AI theme.

Performance

The Fund’s relative exposures to Intuitive Surgical Inc., Danaher Corp. and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) contributed to performance. Intuitive Surgical’s shares rose because of better-than-expected procedure growth and increased da Vinci 5 placements. Danaher reported momentum in its bioprocessing and diagnostics segments and provided positive commentary about 2026. TSMC posted record revenue and net profit in its latest earnings report, benefiting from demand for its AI chips.

Relative exposures to Microsoft Corp., Arthur J. Gallagher & Co. and Uber Technologies Inc. detracted from the Fund’s performance. Microsoft’s shares fell despite positive company results. Investors had concerns about the status of the company’s relationship with OpenAI Inc. and increases in expected capital intensity for 2026. Arthur J. Gallagher reported weaker-than-expected earnings results, as did several of its key competitors. This fuelled concerns about property pricing softness across the broader brokerage industry. Shares of Uber Technologies fell as the company’s earnings forecast underwhelmed against high investor expectations.

At a sector level, stock selection in the consumer discretionary sector contributed to the Fund’s performance. Underweight exposure to the information technology sector contributed to performance, as did no exposure to the consumer staples and utilities sectors. Stock selection in the communication services, industrials and information technology sectors detracted from performance. Overweight exposure to the industrials sector and underweight exposure to the communication services sector also detracted from performance.

Portfolio Activity

A holding in Broadcom Inc. was added to the Fund for its semiconductor segment, which represents roughly 60% of the company’s revenue. The sub-advisor believes the company’s semi-custom AI chip business could be much larger than it is today and represent a majority of revenue for Broadcom in the future.

The Fund’s holding in Chipotle Mexican Grill Inc. was sold after the company lowered its earnings forecast, driven by weakness in traffic and same-store sales. A holding in The Trade Desk Inc. was also sold. The proceeds of these sales were used to increase holdings in Samsara Inc. and Equifax Inc. A holding in KLA Corp. was sold after strong share price performance. The company’s stock more than doubled during the 18 months it was held in the Fund.

Outlook

U.S. equity performance has been dominated by a narrow, top-heavy, momentum-driven market environment. In comparison, the sub-advisor’s investment approach of economic diversification and quality fell out of favour during this market’s recent rebound. According to the sub-advisor, this level of concentration has supported index-level performance, but the sub-advisor believes this narrow leadership is not sustainable over the long term.

In the sub-advisor’s view, periods dominated by a handful of mega-capitalization stocks have historically given way to broader market participation. The sub-advisor believes that today’s environment is no exception. It is the inherent fragility of such narrow leadership that reinforces the sub-advisor’s conviction in keeping the Fund’s exposure diversified.

Disclaimer

The commentaries on the company specific information and purchases and sales were provided by the fund manager. Canada Life Investment Management Ltd. will not be liable for any loss, or damages whatsoever, whether directly or indirectly incurred, arising out of the use or misuse of errors or omissions in any information contained in this commentary. The data provided in this commentary is for information purposes only and, except where otherwise indicated, is current as of December 31, 2025.

The views expressed in this commentary are those of fund manager as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Prospective investors should review the offering documents relating to any investment carefully before making an investment decision and should ask their Advisor for advice based on their specific circumstances.

The content of this commentary (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is 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 December 31, 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.

There can be no assurance that the Fund’s return or volatility targets will be met, or met over any particular time horizon. Targeted returns and volatility should be evaluated over the time period indicated and not over shorter periods. Targeted returns are not actual performance and should not be relied upon as an indication of actual or future performance.

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.

Counsel Portfolios are managed by Canada Life Investment Management Ltd. Counsel Portfolios are distributed by Quadrus Investment Services Ltd., IPC Investment Corporation, and IPC Securities Corporation, and may also be available through other authorized dealers in Canada.