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Commentary

Q2 2026 Fund Commentary

Commentary and opinions are provided by Brown Advisory

Market Commentary

In the sub-advisor’s view, three recent trends have challenged active managers focused on cash flow generative business models. From 2023 to 2025, fewer than one-quarter of Russell 1000 Growth Index constituents outperformed, compared with a long-term average of more than 40%. Roughly 70% of the index’s return over that period came from just eight companies. More capital-intensive companies also significantly outperformed those with the highest cash flow generation per dollar invested.

During the second quarter of 2026, these trends were neutralized. Roughly 35% of constituents outperformed the index, and only two of the eight largest companies outperformed, contributing just under 50% of the benchmark return against an average weight of nearly 58%. Companies with the highest cash flow per dollar invested performed in line with more capital-intensive peers, creating a more favourable environment for bottom-up investors.

Fundamentals across the index were mixed, with the average company seeing a 1.1% increase in 2026 earnings-per-share (EPS) estimates, while cumulative free cash flow estimates declined 3.0%. The Fund’s holdings showed stronger incremental performance, with 2026 EPS and free cash flow estimates climbing roughly 3.4% and 2.7%, respectively, and median year-over-year growth of 25% and 18%.

Performance

Marvell Technology Inc., Palo Alto Networks Inc., Datadog Inc. and Snowflake Inc. contributed to the Fund’s performance. Marvell Technology Inc. benefited from a favourable outlook driven by strengthening demand from its largest hyperscaler customers and its addition to the S&P 500 Index, which created forced buying among index funds and exchange-traded funds. Datadog Inc. delivered strong results as artificial intelligence (AI) workloads and cloud-computing complexity drove demand, with customers generating more than USD$100,000 in annual recurring revenue, climbing more than 20% year over year. Taiwan Semiconductor Manufacturing Co. Ltd. also contributed to performance, posting 39% top-line and 63% EPS year-over-year growth in the first quarter of 2026 amid healthy AI-related demand.

Underweight positions in the communication services and consumer staples sectors contributed to performance. Stock selection within the information technology sector also contributed.

Intuit Inc., Intuitive Surgical Inc. and Equifax Inc. detracted from the Fund’s performance. Intuit Inc. sold off on a disappointing result from its TurboTax unit, particularly in the price-sensitive DIY segment, amid concerns that AI tools could commoditize parts of the workflow. Intuitive Surgical Inc. saw its forward price-to-earnings multiple cut in half since late January amid a broad sell-off in medical technology and possible competition, though the company reported 16% procedure growth in the first quarter. Equifax Inc. was pressured as it didn’t raise full-year revenue guidance because of near-term U.S. mortgage activity uncertainty and possible changes at the Federal Housing Finance Agency.

An overweight position in the financials sector detracted from performance, as did the omission of data centre infrastructure beneficiaries within the industrials sector and an underweight position in Alphabet Inc.

Portfolio Activity

The sub-advisor added Arista Networks Inc., a provider of cloud and AI networking infrastructure whose software-centric architecture supports high-speed connectivity for modern data centres and AI workloads. The sub-advisor also added Alphabet Inc., having previously sold the position last summer on concerns tied to an anti-trust case and potential erosion of the company’s dominance in search. The sub-advisor now believes anti-trust concerns were overstated, and the company’s Cloud Platform accelerated growth to 63% in the most recent quarter. The sub-advisor added a small position in Space Exploration Technologies Corp. through its initial public offering, with a thesis resting on the strength of its Space, Connectivity and AI businesses, and the synergies among them.

The sub-advisor sold ServiceNow Inc. because of difficulty underwriting a long-term favourable outlook. The sub-advisor also sold Veralto Corp., whose growth profile and long-term upside the sub-advisor believes are limited relative to existing holdings.

Outlook

In the sub-advisor’s view, durable investment outcomes are driven by competitive positioning, management execution, capital allocation discipline, sustainable business advantages and the ability to compound in value over years. The sub-advisor remains optimistic about the Fund and its individual holdings because of current fundamental strength and longer-term prospects for value creation. As the market environment shifts toward one that may be more favourable for bottom-up stock picking, the sub-advisor believes the Fund is positioned to benefit from the fundamental strength of its diversified holdings across the economic landscape.

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 June 30, 2026.

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 June 30, 2026. 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.