October 2025
In the third quarter, equity markets continued their strong progress, supported by robust corporate earnings, heightened demand in the artificial intelligence and technology sectors, and an easing of monetary policy.
The TSX posted strong double-digit returns, primarily driven by the technology and natural resource sectors. U.S. equities remained resilient, with small caps outperforming during the quarter. International equities also rallied, with emerging markets outperforming developed regions, supported by a weaker U.S. dollar and improving trade signals.
Fixed income delivered modest gains, as renewed expectations for rate cuts in North America supported both U.S. and Canadian bonds. Precious metals, particularly gold reached record levels amid ongoing inflation concerns and geopolitical uncertainty.
CANADIAN BALANCED STRATEGY
Our Canadian Balanced Strategy produced strong absolute returns, driven by gains in the equity portion of the portfolio. The fixed income positions also saw an increase, helped by interest income and their rising value due to declining interest rates.
Although recent returns have favoured equity investments more heavily, the fixed income allocation is intended to provide stability in uncertain times. The balanced and diversified asset allocation of the portfolio reduces volatility for investors with more conservative risk tolerance profiles or shorter-term liquidity needs.
Role in a Diversified Portfolio
This strategy provides an exposure to targeted Canadian growth businesses with steady cash flow and dividend growth potential, as well as a targeted but diversified fixed income exposure. The aim is to achieve comprehensive Canadian diversification, providing a steadier experience. The strategy can be used as a core holding in a portfolio.
GLOBAL BALANCED STRATEGY
Pembroke’s Global Balanced Strategy primarily invests in Pembroke-managed active equity funds, as well as in externally managed active equity and fixed income funds, and passive funds (exchange-traded funds, or ETFs). It has a custom-blended benchmark comprising 30% FTSE Canadian Universe Bond Index, 45% MSCI All Country World Index (ACWI) and 25% S&P/TSX Composite Index.
Its objective is to generate long-term capital growth and income through diversified exposure to global equities and bonds. It has the flexibility to invest in publicly traded real assets, such as gold. The portfolio is diversified by asset classes, regions, sectors, styles, managers and approaches.
The portfolio produced positive absolute returns in the third quarter, but underperformed against the benchmark, which also grew. Canadian, U.S. and international equities, as well as the fixed income and gold allocations, made positive contributions to absolute returns.
On a relative basis, underperformance in the quarter was mainly driven by the Canadian all cap and dividend strategies, as well as the international growth strategy. This was partially offset by outperformance from the fixed income and gold allocations.
At the end of September, bond allocations represented approximately 22.4% of the portfolio. Cash and the gold bullion ETF accounted for approximately 2.2% and 5.0% of holdings, respectively.
Role in a Diversified Portfolio
This strategy offers broad exposure to businesses across the market capitalization spectrum, as well as to fixed income and gold. It aims to capture the full range of market capitalization and achieve global diversification, providing a steadier investment experience. It can be used as a core holding in a portfolio.
Other Articles Of Interest
Disclaimer
This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.
