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From the desk of the Mackenzie Global Equity & Income Team Q3, 2025
Mackenzie Global Dividend Fund
Highlights:
- The Fund gained 6.9% in Q3 2025 but trailed the MSCI World’s 9.5%, as momentum factors and AI-driven concentration dominated market performance. Underweights in information technology and weaknesses in exchange/data-service holdings accounted for much of the shortfall, partly offset by strong healthcare results
- Quality, dividend, and valuation-sensitive strategies continue to lag as investors crowd into AI-related names. The team acknowledges near-term headwinds for its diversified, quality-bias approach but views the relative underperformance as reasonable given market concentration. They remain committed to a long-term process focused on enduring, cash-generative franchises.
- While recognizing AI’s transformative potential, the managers see parallels with past bubbles. They continue to own core beneficiaries such as Microsoft, Broadcom, TSMC, Alphabet, Lam Research, and NVIDIA, while avoiding more speculative entrants with unsustainable capex cycles. The fund retains an overweight in healthcare and other under-owned quality sectors trading near multi-year relative lows, expecting prudence and diversification to be rewarded when momentum fades.
Market Review
For the third quarter of 2025, the Mackenzie Global Dividend Fund posted a strong absolute return of 6.9% but trailed the broader global equity market return of 9.5%. This relative shortfall is largely attributable to the massive outperformance of momentum factors and the continuing dominance of a narrow group of artificial intelligence (AI)-themed investments. Almost half the 225bp of underperformance came from our underweight in information technology (~24% vs 26%) and relative performance from security selection (+11.6% vs +14.7% for the benchmark). Share weakness in some of our exchange and data services holdings contributed to ~80bp of the underperformance in financials. After having been a massive drag last quarter, the fund’s overweight in the healthcare sector (10.7% weight vs 9.5% in the benchmark) and positive stock selection (13.1% vs 7.7%) contributed over 140bp to overall returns.
Quality, dividend-factor, and valuation-sensitive strategies—approaches that have historically compounded capital consistently over full market cycles—have all underperformed both year-to-date and over the last five years. In a market characterized by record concentration, style leadership has been unusually one-sided. Against this backdrop, the fund’s focus on owning high-quality, predominantly dividend-paying businesses and maintaining global diversification across multiple sectors and economic growth drivers has naturally been a headwind. Over the past five years the portfolio has been up over 90% compared to the 105%+ return of the MSCI World index. Given the narrow set of market drivers our relative underperformance, while never pleasant, is reasonable given the context. As in past episodes of speculative fervor, we will stay true to our disciplined investment process and history suggests prudence will eventually be rewarded.
The first half of 2025 ended with major equity indices at new all-time highs, propelled by unrelenting enthusiasm for artificial intelligence and the ecosystem of companies enabling its adoption. Quality factors have historically outperformed roughly three-quarters of the time outside the US yet in 2024-25 any portfolio tilted toward quality has faced a headwind. Momentum has ruled the day: high-momentum stocks—those that outperformed over the previous twelve months—have beaten their low-momentum counterparts by roughly 45 percentage points year-to-date, extending a three-year streak of exceptional relative returns.
At the centre of this move lies the AI “boom” – the Morgan Stanley AI Tech Beneficiaries basket is up over 55% year-to-date. The early winners have been the infrastructure enablers—the semiconductor designers, equipment makers, hyperscale cloud platforms, and network specialists supplying the digital picks and shovels for a new computational gold rush. Investor enthusiasm has been reinforced by enormous passive inflows into thematic ETFs and quantitative strategies programmed to chase recent winners. Retail investors, who now account for over 36% of trading volumes (versus 26% a decade ago), also tend to follow and exacerbate recent trends. The increased retail presence in the market is behind the proliferation of levered ETFs and also makes up the majority of options volumes. The resulting self-reinforcing dynamic has driven equity market concentration and single-day security volatility to levels more extreme than during the late-1990s technology bubble.
The market has been through many booms and busts over the last several decades. The Asian economic miracle of the late 1980s, the dot-com mania in the 1990s, and the subprime credit expansion in the 2000s each shared a common truth: they were grounded in genuine structural change and/or fact, but markets extrapolated those truths far beyond what fundamentals could sustain. In 1989, for instance, it was widely claimed the Tokyo Imperial Palace grounds were “worth more than all of California”. The internet was going to transform the economy in the late 1990s. Up until the Global Financial Crisis, real estate prices in nominal terms had shown a long-run upward trend for many decades. Today’s transformational force—AI—could have profound implications for productivity, but some parts of the narrative have potentially outrun reasonable valuation.
We recognize the enabling potential of AI and have long owned several of its foundational beneficiaries: Microsoft (held since 2013), Broadcom (2015), TSMC (2018), Alphabet, Lam Research, and, more recently, NVIDIA (added mid-2024). These companies represent durable, cash-rich franchises that have compounded value through innovation. But the fund is deliberately not a concentrated AI portfolio. We have resisted the temptation to chase late entrants or businesses with little “right to win.” We will not pay peak-cycle multiples for companies dependent on flawless execution or bound to disappoint when forecasts inevitably normalize. One could argue the current AI-fueled rally is starting to exhibit hallmarks of the late 1990s dotcom bubble – increasingly lofty valuations and deteriorating cash flows due to an estimated $7 trillion in AI capex spend by 2030 (including about $3 trillion over the next 36 months). AI capex spending is currently running roughly six times ahead of revenues. For context, at the height of the US railroad expansion in the 1870s, capex was running about two times ahead of revenues. In the late 1990s at the top of the telecom bubble, capex was four times ahead of revenue. It’s also worth noting that about half of that spending is being covered by the hyperscalers, who have the cash flow to underwrite these expenditures. The other half comes from private equity, sovereign governments, and neo-cloud providers (i.e. non-hyperscalers with less proven business models). Much of this spending is also happening through Special Purpose Vehicles (SPVs) where some combination of hyperscalers, governments, and private and/or venture capital are creating vehicles to own data centers effectively “off the books”, which a cynic might say obfuscates ecosystem profitability.
We don’t doubt the current conviction of everyone involved but we are increasingly questioning the potential underlying economic returns. The question we are trying to answer is whether AI revenues are going to increase fast enough to catch up with the infrastructure spending. Thus far, the market is answering, “yes” – that the money being spent is in response to the fastest expansion of any general-purpose technology in human history. For instance, OpenAI recently committed $300 billion to use Oracle’s cloud-computing services to support their AI needs. For context, OpenAI is projected to generate ~$13 billion in sales this year and is losing money. In no small part because of this commitment Oracle’s revenues are expected to more than double over the next three years – the stock jumped over 25% on the day of the announcement - but is also estimated to lose over $30 billion in cash flow and is currently ~$100 billion in net debt. In other words: Oracle’s stock jumped after being promised ~$60 billion per year from OAI to provide cloud computing facilities that Oracle has yet to build, which will require 4.5 gigawatts of power that America’s electrical grid will have to provide. Oracle is a fine business – and one we owned earlier this year – but we feel more comfortable maintaining our AI capital commitment via companies like Microsoft, which is also looking to spend over $200 billion on AI-related investments over the next three years but is expected to generate almost $300 billion in free cash flow (i.e. after accounting for the $200 billion in capex) and has over $50 billion of net cash on the balance sheet. In addition, almost half of Broadcom’s operating income comes from highly recurring infrastructure software (not semis) and TSMC has over $60 Billion in net cash. If the AI Revolution goes sideways, these companies will not escape unscathed, but we are confident it will be more of a flesh wound versus an amputation.
In markets driven by a few narratives, the inverse also holds true: everything outside those narratives is punished. Quality industrials, healthcare, consumer staples, and financial data service companies have all lagged, despite resilient earnings and strong balance sheets. Many of these companies are selling well below their historic multiples, which is in stark contrast to the overall market selling at almost two standard deviations above its long-term valuation trend-line. As an investor that is measured against the benchmark it’s hard not to chase momentum when you see those companies that are benefitting from the AI story. For instance, healthcare has had the weakest relative returns compared to any sector in the benchmark since late 2022, when the Cambrian Moment for Generative-AI was introduced with the release of ChatGPT. More recently, policy uncertainty in the US has weighed on sentiment, but healthcare fundamentals remain intact. The newly established Medicaid drug-pricing framework, which benchmarks prices to the lowest levels among peer nations, appears to represent a clearing event. The impact is modest—Medicaid accounts for roughly 10% of US drug spending—and most companies already price near those levels. With a three-year tariff hiatus and greater clarity around research funding, valuations across healthcare now stand near 25-year lows relative to the market. We maintain an overweight in healthcare despite its recent relative performance, reflecting both our conviction in long-term profitability and the asymmetric risk reward now available.
As investors focused on risk-adjusted returns, this discipline has meant lagging markets that have rewarded thematic purity over prudence, but it has also preserved the portfolio’s diversification and balance. We have seen such divergences before, and experience tells us that momentum regimes end abruptly as marginal buyers evaporate and capital routes back toward more reasonably priced franchises. The fund’s record rests on owning enduring businesses capable of growing cash flow (and dividends) through multiple cycles. While we cannot predict when the market will again reward this approach, we believe our balanced exposure – owning an appropriate amount of genuine AI beneficiaries alongside attractively valued compounders outside the theme – will ultimately serve our unitholders well.
What contributed positively to performance?
Alphabet’s share price appreciated 41% during the third quarter, firmly cementing it as a top performer. The narrative surrounding Google was mixed to begin the year, with fears that AI chatbots would reduce the number of monetizable Google Search queries and erode their ~90% market share within the space. Google’s second quarter results were able to dispel these concerns for the time being, with search revenue increasing 12% year-over-year combined with paid clicks growth accelerating to 4%. AI features appear to be complimentary to search, with embedded AI overviews driving 10% more queries when included. AI strength can also be seen within Gemini and AI Mode in Search, having grown to 450mn and 100mn monthly average users, respectively. Google Cloud, YouTube, and Waymo also continue to grow and increase Google’s revenue diversification. While it was a strong quarter for Google, we continue to closely monitor Search for any potential disruption from AI.
CRH (+34%), North America’s #1 player in aggregates, cement and asphalt, was a material outperformer this quarter. CRH continues to benefit from a favourable industry structure – the cement businesses are natural monopolies due to high capital intensity, high transportation costs, and extremely high regulatory barriers for new kilns. Considering a lack of substitutes, pricing power for the industry remains extremely strong on tempered supply. From a demand perspective, bipartisan support continues to fund projects in North America (where CRH generates 70% of EBITDA) – including the IIJA highway funding which over 60% of funds are still yet to be dispersed, on top of aging water infrastructure and reindustrialization. Given CRH is vertically integrated, it can generate profits from aggregates directly, sell liquid asphalt, or complete an entire road system, at 6x the price of raw aggregates. Given the consistent demand for road paving, this provides stability and growth to support dividends and reinvestments into the business. At a recent investor day, CRH unveiled high single digit revenue growth ambitions to 2030. This is supported by organic investments and a steady M&A engine. Since 2015, CRH has completed over 320 acquisitions, of which 88% have been smaller bolt-on deals – these are typically family run and are sold cheaper than a brokered sale through an investment bank. CRH expects to invest another ~$28BN in M&A investments to 2030, bolstering growth while rewarding shareholders with a steady dividend in the interim.
AbbVie’s stock was up strongly (+29%) as sentiment across biopharma improved and the group re-rated on easing policy risk and resilient fundamentals. The White House–Pfizer agreement, which clarified how Medicare drug pricing caps and rebate structures will be phased in, eased fears of aggressive government intervention and removed a major policy overhang on the sector. AbbVie stood out within the group as investors refocused on its successful transition from Humira—whose US exclusivity expired in early 2023—to next-generation immunology assets Skyrizi and Rinvoq, which now deliver over $25 billion in combined annualized sales and represent one of the largest immunology franchises globally. The company’s scale, entrenched physician reach, and deep clinical data advantage form a durable competitive moat that continues to compound. Investors also gained confidence in AbbVie’s visible pipeline renewal across neuroscience, oncology, and expanded immunology indications, supporting a durable growth trajectory well into the next decade. Combined with the sector’s regulatory de-risking and AbbVie’s cash-generative, innovation-led model, the stock saw renewed conviction and relative outperformance through the quarter.
CATL (+64%) was a key Q3 performer, driven by renewed confidence in China’s EV and energy storage supply chains and strong execution across businesses. CATL has ranked first in global EV battery volumes for eight years and is also ranked first in global energy storage systems – utility scale batteries used to store electricity generated by alternative sources. The approval of its Jianxiawo lithium mine reserve report removed a key overhang on raw material security. Downstream, both EV and ESS demand surprised to the upside, with the new technology launch and record backlog underscoring CATL’s dominance in grid-scale storage, where shipments are expected to rise over 30% annually into 2027. International momentum remains strong, led by Europe, where CATL’s 164GWh capacity pipeline and deep partnerships with Stellantis, Volkswagen, and BMW have lifted its market share to mid-40s, with further gains likely given it now anchors over half of EU OEM battery orders. Domestically, ESS tender activity reached record highs following policy normalization, favouring high-quality suppliers like CATL. With capacity additions coming online in 2026 and continued product leadership in sodium-ion and solid-state batteries, CATL is well positioned to extend its technological and commercial edge in-line with our long-term thesis and outlook of the company.
What detracted from performance?
Novo Nordisk (-19%) detracted in Q3 as investor sentiment toward the GLP-1 class weakened following competitive data from Eli Lilly and a rotation away from defensives. These general concerns and fears surrounding Novo’s dominance in obesity and diabetes are overstated in our view. Novo’s SELECT and FLOW studies have already demonstrated clear cardiovascular and renal benefits for semaglutide, reinforcing its leadership in real-world outcomes. On the supply side, Novo has expanded visibility and capacity for both Ozempic and Wegovy through 2026, alleviating previous bottlenecks. Accessibility continues to improve as US insurers broaden obesity-drug coverage and as more GLP-1 prescriptions are fulfilled through certified formularies and compounding pharmacies. The company also retains a meaningful first-mover edge in oral GLP-1 delivery in addition to its superior clinical profile over Eli Lilly’s competitive oral GLP-1 drug — its high-dose oral semaglutide (OASIS program) is roughly six months ahead of Lilly’s orforglipron and has shown injectable-like efficacy with favourable tolerability. We have owned Novo Nordisk since 2015 at various weights and had sold it down to a minimum position throughout 2024 and this year. Given the above points and the drastic decline in investor expectations for the company, we used the pullback to add to the position.
Deutsche Boerse (-16%) underperformed this quarter, largely due to a valuation reset across European exchanges as investors shifted toward more cyclical, “risk-on” assets following the market rally that began in April. Data service companies in general were also impacted by a narrative around AI impacting their business models. We are less concerned as much of their data is proprietary real-time and entrenched in their customers’ workflow. The company’s H1 2025 results showed slower sales in its index business, particularly in ESG data, as regulatory and political changes weighed on the broader industry. However, its larger software division continued to grow revenue by 10% year-on-year, supported by new client wins. Overall, DB1 reported strong financial results — total revenue up 10% and EBITDA up 15% year-on-year — demonstrating strong operating leverage and in line with medium-term targets set at its 2023 Investor Day. Despite the valuation correction, fundamentals remain intact.
SAP (-10%), like Deutsche Boerse, lagged the broader market this quarter amid negative sentiment toward software companies, as investors debated the potential disruption from AI — the so-called “death of software” narrative. While we recognize these risks, we believe SAP is structurally better positioned than many peers. Its strength lies in deeply integrated enterprise applications, mission-critical software, and its Business Technology Platform (BTP), which connects AI tools directly with complex business data. Our research indicates that AI disruption risk varies widely across software types. Simpler, niche applications are more exposed, whereas SAP’s systems — embedded in complex enterprise workflows — are far less vulnerable. We believe SAP’s AI strategy will actually accelerate cloud migration and strengthen customer relationships over time that will become more, not less, valuable in an AI-driven world.
After a 50%+ share price increase in the first half of the year, Philip Morris (-9%) detracted from performance in Q3. Despite reporting a strong 9% organic sales gain on June 22, investors focused instead on slowing US growth in its nicotine pouch franchise ZYN, which rose only 41% year over year amid heightened competition from British American Tobacco and Altria. Both rivals increased promotional spending aggressively, pressuring category growth and price dynamics. Even so, Philip Morris maintained roughly 60% US market share—an impressive outcome given ZYN’s prior 50% price premium versus peers and confirming evidence that the company enjoys exceptional brand strength, pricing power, and distribution leverage. While the share price performance is disappointing, we are optimistic about Philip Morris’ prospects, particularly the international expansion of ZYN, the US launch of IQOS ILUMA, and management’s continued progress towards a portfolio where Reduced-Risk products represent the majority. We continue to view Philip Morris as attractively valued for a business expected to deliver high-single-digit growth through the end of the decade.
What changes have we made to the Mackenzie Global Dividend Fund?
We initiated a position in Seven & I Holdings (3382 JP) this quarter, the world’s largest convenience retail operator and parent of 7-Eleven, with over 85,000 stores worldwide. Historically a diversified Japanese conglomerate, Seven & I is now undergoing a major transformation under new CEO Stephen Dacus to become a focused, high-return global convenience business. Following years of activist pressure and the collapse of a private-equity bid, management is delivering long-delayed structural reforms—divesting its low-margin Superstore division to Bain Capital and preparing to exit its stake in Seven Bank. The resulting portfolio will consist almost entirely of the global 7-Eleven franchise, where unmatched scale, network density, and brand equity provide durable competitive advantages. A planned US IPO of the North American 7-Eleven business in FY2026 should further simplify the group and crystallize value. With a ¥2 trillion share buyback (~40% of market cap) and ¥800 billion in dividends over five years, alongside meaningful margin uplift from fresh food, private label, and fuel optimization, Seven & I offers a rare combination of self-help, cash generation, and re-rating potential at a compelling valuation following the pulled bid from Alimentation Couche-Tard.
We completely exited our position in Altria this quarter as part of a deliberate shift away from companies overly dependent on declining combustible cigarette volumes. Although Altria has successfully grown its oral nicotine brand on! to 14% of total revenue, this remains well behind peers—Philip Morris derives 42% and British American Tobacco 22% of sales from Reduced-Risk Products. Despite its limited diversification, Altria currently trades at valuation levels not seen since before the pandemic. The market appears to be pricing in stability that may prove temporary if volume declines accelerate or pricing power wanes. That said, Altria remains a Dream Team company that offers an attractive 6.5% dividend yield. We would consider reinitiating a position if its valuation and product-mix trajectory become more compelling.
With global banks pivoting toward renewed easing and fiscal deficits - especially in the US – gold’s strategic relevance as a reserve asset has been strengthening for almost three years. AngloGold Ashanti offers an excellent entry point for long-term investors seeking disciplined exposure to gold with improving quality and declining geopolitical risk. Under CEO Alberto Calderon, the company has executed one of the sector’s most credible turnarounds—streamlining its portfolio, exiting South Africa, deleveraging to a net-cash balance sheet, and acquiring Centamin’s Sukari mine, now its lowest-cost, highest-margin asset. Obuasi’s ramp-up and the Nevada district development provide visible, organic growth optionality without reliance on higher-risk M&A. At a gold price of ~US$3,700/oz, AngloGold should generate over $2.5 billion in annual free cash flow—an 8–10% FCF yield—and has doubled its shareholder payout to 50% of post-growth FCF, introducing quarterly dividends and potential buybacks. Importantly, portfolio risk is structurally improving: by 2030 more than a quarter of production will come from tier-1 political jurisdictions (USA, Australia). For investors, AngloGold combines expanding free cash flow, a growing 3.5% dividend yield, self-funded growth, and rising jurisdictional quality—positioning it to deliver value throughout the cycle while offering leverage to structurally higher gold prices and disciplined capital returns.
We introduced Tokyo-based Chugai Pharmaceutical into the portfolio this quarter. Chugai offers a combination of platform innovation, capital efficiency, and high margin royalty-driven growth via its partnership with Roche. Its strength in antibody technologies has underpinned its historical development of best-in-class assets like Hemlibra and Alecensa, with broad pipeline monetized mainly via Roche. This model yields pharma-scale global upside without commensurate SG&A risk, as all sales outside of Japan are licensed to third parties (with Roche having right of first refusal). We feel the market is underestimating potential for the rollouts of NXT007 (next-gen Hemlibra), royalty streams from their atopic dermatitis molecule nemolizumab (via Galderma), and exposure to Eli Lilly’s orforglipron — a once-daily oral GLP-1 with ~$15B peak sales potential. It is among the most profitable pharma companies in the world (EBIT margins 50%+) and has ¥1T net cash on the balance sheet. Importantly, Chugai’s mid-size molecule and macrocyclic peptide platforms could unlock intracellular targets previously considered “undruggable,” offering investors additional optionality to breakthrough technology. The company has a 2.5% dividend yield, is trading below its average multiple and at a significant discount to global biotech peers.
Portfolio Management Team
Darren McKiernan, Head of Team, Senior Vice President, Portfolio Manager, Investment Management, Mackenzie Investments
Katherine Owen, Vice President, Portfolio Manager, Investment Management, Mackenzie Investments
Dave Chan, Vice President, Portfolio Manager, Investment Management, Mackenzie Investments
James Barnby, AVP, Portfolio Manager, Investment Management, Mackenzie Investments
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On July 26, 2013 the Mackenzie Global Dividend Fund changed its mandate from investing in equity and fixed income securities of companies that operate primarily in infrastructure related businesses to investing primarily in equity securities of companies anywhere in the world that pay or are expected to pay dividends. The past performance before this date was achieved under the previous objectives.
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