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Written by the Mackenzie Betterworld Team
Prospects and Outlook
The five-month winning streak for equities came to an end in April and was the longest since 2021. Expectations for US interest rate cuts were deferred as inflation measured by US CPI printed higher than expected and remained persistently above the Federal Reserve target levels maintaining central banker’s hawkish tone. The prospect of higher interest rates for longer deflated investor sentiment resulting in a decline for both equities and bonds over the month. Despite these developments, economic indicators suggest that the US economy remains in good shape and may lead equity markets into an expansion territory of the economic cycle according to the OECD Composite Leading Indicator (CLI). The OECD CLI is designed to provide early signals of turning points in business cycles, and market strategists note that in the 16 previous expansion cycles since the late 1950’s equity returns have been favourable and driven by above average earnings growth.
Portfolio and Sectors review
Within the Mackenzie Betterworld Global Equity Fund, stock selection within healthcare and industrials contributed most to portfolio performance. The team’s holding in AstraZeneca (+14% in local currency on the month) reported strong Q1 revenue growth (+19%) and product sales growth (+18%) driven by their oncology franchise. The team looks forward to AstraZeneca’s investor day on May 21st where the firm will profile the company’s exposure to three mega themes: (1) "Smart-chemo" >$140bn total addressable market (TAM) (2) "Next-gen Immuno-Oncology", a $70bn TAM: that addresses standards of care in lung, cervical and head & neck cancers from 2027-2029; (3) "Cardiovascular-kidney-metabolic (CKM) syndrome" – details the company’s portfolio of oral medicines targeting obesity, heart failure, kidney disease and cholesterol provides access to a >$100bn TAM.
Prysmian (+8% in local currency on the month), also contributed positively. The firm is an Italian based wire, cable and fibre optics manufacturer acting as a key supplier of transmission cables to the offshore wind sector. Prysmian announced the acquisition of based Encore wire for $4.2 bn USD. Encore is a 100% US-based supplier of building and industrial cables. The acquisition will continue to build Prysmian’s US exposure and meaningfully increase the company’s low voltage exposure.
Within the Mackenzie Betterworld Canadian Equity Fund, exposure to the materials sector continues to contribute positively to fund’s performance. Portfolio holdings Wheaton Precious Metals and Capstone were up +13% and 11% respectively for the month. The rise in the price of copper and precious metals in the past couple of months have been tailwinds for both companies.
The Fund’s exclusion of fossil fuels, particularly to upstream and drilling companies and therefore lack of investment in the energy sector, detracted most from performance.
Company Engagement
During the month, the team engaged with WSP Group, a Canadian based global engineering and professional services firm, on good governance practices and their AGM proposal to increase their board of directors’ membership. The team’s initial review of WSP’s proxy circular highlighted a standout point on their proposal to increase the size of the board 50%, from 10 to 15 - above the general board size viewed as optimal. This appeared to be a material and perhaps, an excessive increase in size relative to the number of board committees chaired. We requested a conversation with management to better understand their rationale. While we believe that smaller boards are beneficial (less chance of groupthink, higher accountability, quicker decisions etc.), we came away comfortable with the management’s justifications around succession planning and securing talent with complementary skills to ensure strong oversight of a rapidly growing global firm.
Proxy Voting
In April, the Betterworld team participated via proxy in 22 company meetings including portfolio holdings in Teck Resources Ltd, the London Stock Exchange Group and Agnico Eagle Mines Ltd.
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