Franklin ClearBridge Canadian Equity
Mandate commentary
Q4 2025
Highlights
① The mandate’s positive absolute returns in the last quarter of 2025 were driven primarily by the portfolio’s allocations in the financials, energy and utilities sectors.
② Global growth strengthened as inflation eased, and policy turned supportive.
③ Equities and quality fixed income remain positioned for growth.
Mandate overview
Despite the strong absolute returns, the mandate underperformed its benchmark, the S&P/TSX Composite index. Primary detractors included the underweight to and selection within materials, in addition to security selection within information technology, financials and communication services. This was partially offset by the positive contribution from security selection within the utilities and energy sectors.
Gold’s “safe haven” status continued to shine in the fourth quarter, in the face of a weakened U.S. dollar and heightened geopolitical concerns. This resulted in a narrow leadership in the Canadian equity market, where the materials sector returned over 100% in 2025.
Mandate: with strong fundamentals
Performance contributors
Headwater Exploration: the overweight position in this energy company was the largest contributor for a single security in the mandate.
Wheaton Precious Metals: the underweight position in this large cap gold producer was the second largest contributor for a single security.
Performance detractors
Materials sector: the underweight position in the top-performing sector was the largest detractor from relative performance.
Barrick Mining: the lack of exposure to this primarily gold-producing large cap company was the largest detractor by a single security.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | since INC. (NOV. 14, 2016) |
FRANKLIN CLEARBRIDGE CANADIAN EQUITY | 2.94% | 21.61% | 21.61% | 16.11% | 15.42% | 10.84% |
Mandate repositioning
Trading activity in the mandate was elevated, as market dislocations created opportunities to both add to and trim positions. Exposure was increased in several out-of-favour cyclical names and durable high-quality businesses that have come under significant pressure, while paring back areas that proved more resilient, including defensive sectors such as consumer staples and utilities. An emphasis was put on durable, high-quality businesses with strong competitive positions and resilient cash-flow profiles.
Heightened uncertainty, driven by a shifting U.S. policy landscape, CUSMA negotiations and both risks and opportunities tied to AI, highlights the need to stay focused on long-term fundamentals. The largest risk we currently face is elevated market valuations. We seek to avoid short-term noise and to act deliberately as risks and opportunities evolve, supported by a disciplined valuation framework grounded in discounted cash flow analysis.
Market overview: global growth strengthened, inflation eased, policy supportive
Markets ended the fourth quarter of 2025 on a strong note, capping a year defined by resilience and broad-based gains. Equities led performance, as investors looked beyond policy noise and focused on improving fundamentals. Global markets advanced, supported by steady corporate earnings, easing inflation pressures and a clear shift toward lower interest rates. Canada outperformed most developed peers, driven by strength in materials and financials, while European and Asian markets rebounded on firmer trade activity and renewed investor confidence. In the U.S., equity performance remained positive, led by technology and communication services, with improving breadth across sectors signalling a healthier market foundation.
Fixed income delivered modest but positive returns, as central banks continued to ease policy. Government yields declined on the short end while longer maturities remained stable, allowing coupon income to drive returns. Credit conditions stayed firm, underscoring the strength of corporate balance sheets entering 2026.
Market outlook: equities and quality fixed income positioned for growth
Entering 2026, global markets are positioned on a solid footing. Easing monetary policy and supportive fiscal conditions are expected to sustain growth across major economies. In the U.S., healthy earnings and productivity gains continue to anchor performance. Canada benefits from resource strength and steady financials, while Europe and Asia offer improving valuation opportunities through accelerating trade and industrial expansion. Fixed income markets provide renewed income potential as yields stabilize, and credit quality remains robust.
Overall, conditions favour a balanced, diversified approach.
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This commentary may contain forward-looking information, which reflects 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 do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of December 31, 2025. 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.
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