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Q2 2023
Performance Statement
During the second quarter, the Mackenzie Global Women's Leadership Fund underperformed the MSCI World Index (World Index).
Investment Strategy
A global large cap diversified equity strategy guided by the Impax Gender Score1, the portfolio seeks to invest in the highest-rated companies in the world for advancing gender equity and diversity in the workplace. The strategy seeks to systematically identify and invest in companies advancing gender equity and diversity through gender balanced boards, senior leadership teams, as well as pay equity and other policies and programs. The portfolio’s systematic investment process overweight’s the highest-rated gender leadership companies, as determined by the Impax Gender Score, regardless of their market capitalization, and manages risk by implementing constraints at the sector, region, country, and individual security levels relative to the World Index.
Market Review
Equity markets continued to rebound in the second quarter, as lower energy prices and moderating inflation supported the market view that interest rates are near to peaking and a soft economic landing is likely. A notable feature over this period was the concentration of performance in a few stocks and sectors, as mega-cap tech companies dominated market performance. Despite stronger equities, economic data has been mixed and bond yields remain inverted. Manufacturing has continued to slow, with global manufacturing Purchasing Managers’ Index (PMIs) contractionary. Whilst the services PMIs are still in expansion territory, there are signs of weakening as higher interest and mortgage begin to impact. China growth rates have disappointed after an initial rebound from the lifting of Covid-19 restrictions. US consumer confidence and employment remain healthy, but services indices, which have been resilient, are starting to lose momentum. Investors have taken comfort from the nearterm pause narrative from the Federal Reserve, but it may still be too early to determine the impact of higher interest rates on consumption and employment. The current result season is yet to start in earnest, but earnings momentum has moderated somewhat, and caution is still warranted. The reversal of previous inflationary pressures, due to lower energy prices and easing of supply chains disruptions, is expected to bring some margin of relief to businesses. However, destocking of inventory channels and weakness in some end markets has been evident in certain sectors, with lower volumes and weaker pricing impacting margins.
Impax Gender Score
After a good start to 2023, the portfolio’s exposure to companies identified as gender leaders by the Gender Score, was the key detractor to performance in the second quarter. Several stocks, with strong Impax Gender Scores, within Consumer Discretionary struggled in the quarter, notably Ulta Beauty, Pearson PLC and Starbucks. Additionally, mega cap stocks that are not held in the portfolio as they fall outside of the portfolio’s gender universe due to their low Gender Score, performed exceptionally well with Nvidia, Meta, Tesla, and Alphabet attributable to almost half of the portfolio’s underperformance in the period. Gender leaders, like Cardinal Health, Amazon and DNB bank were the top three individual contributors and which helped limit the impact of the detractors.
GICS Sector
Sector positioning is an outcome of the portfolio construction process rather than an active portfolio decision. Sector positioning detracted from portfolio performance as the portfolio was overweight to defensive sectors with high gender scores like Consumer Staples and Healthcare that underperformed over the quarter, and was underweight to Information Technology, a sector with several stocks that posted outsized returns. However, some of the portfolio’s underperformance related to sector positioning was offset by the continued tailwinds from avoiding Energy, which was the worst performing sector during the reporting period.
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