CC&L Financial Group Ltd.

Positive for emerging markets

Source: Bloomberg, as at April 10, 2026

Learn fast and adjust

In last month’s commentary, we discussed our approach to forecasting and portfolio management in times of market stress with reference to the OODA (Observe, Orient, Decide, Act) Loop below.

To quickly recap:

Through periods of high uncertainty and violent market moves like what we have currently, we lean heavily into this OODA Loop. This involves a constant testing and re-testing of our macro views and investment hypotheses, and tweaking of the portfolio as conditions change.

We thought this thematic would be worth unpacking further, as these markets provide a great illustration of how a robust process can help navigate periods of high volatility and uncertainty.

Sweating the capital

This approach helps us to remain disciplined, learn fast as new information arrives and make small, frequent adjustments to ensure there is tight alignment between evolving beliefs and portfolio risk.

We call this “sweating the capital,” with the aim being to:

Limit the size and persistence of errors without dulling upside capture; and
Maximise risk-adjusted returns over the long run.

In a volatile quarter, the portfolio outperformed thanks to a balance of investments in focused, volatile, risk-on names across niches in the AI supply chain in Taiwan and South Korea, alongside more defensive holdings including oil producers, Asian financials and Brazilian water utilities. The former outperformed through January and February, while the latter helped us hold on to relative gains through a risk-off period in March.

Achieving the right balance of risk across the portfolio is the output a rigorous process based on a set of long held beliefs (the impact of liquidity in driving prices, importance of macro sensitivity in EM and peer review to guard against behavioural error), all of which is all geared to matching the capital in the portfolio with the conviction of the team.

It sounds very simple, but it is a demanding process, requiring tight collaboration across a team of experienced and opinionated investors, as well as the discipline and energy to continually update beliefs, capital and conviction as conditions change.

That discipline is especially important for navigating times of high uncertainty and market volatility.

Process under pressure

The testing and re-testing of investment beliefs in our process takes place formally through weekly investment policy meetings, along with monthly country and stock meetings. This structure helps us orient ourselves and debate how best to move ahead while documenting everything as we go.

Gulf War III is a powerful example of how volatile markets expose habits and test investment beliefs. These periods throw so much information at investors that it can be paralysing to a team without well-established and repeatable decision-making routines.

For us, disciplined preparation, structured collaboration and strong behavioural standards are key tools for us to maintain emotional control and remain focused on execution.

Calm, clear and deliberate decision making

One example of how structure and routine help aid our decision making is through the team stock meeting. Here we discuss any portfolio companies whose stock has moved up or down by a certain threshold amount in relative terms. In either case, this involves the team re-testing the investment hypothesis for a given name to assess whether it remains intact.

We do not rely on static forecasts from the original stock research notes on companies to guide us through an uncertain period like this. Instead, the review trigger – a fairly modest relative stock move – forces us to re-underwrite our forecasts and adjust conviction accordingly.

The result is that we can quickly identify winning ideas and scale them up, as the meeting and team discussion help us cut through the market noise and identify improving fundamentals earlier, even when uncertainty is high. Equally, it allows us to cut losers faster when new information invalidates an investment thesis, helping to avoid thesis drift and subsequent drawdowns.

This process has been crucial for operating in whipsawing markets like this.

It has provided opportunities to tilt the portfolio towards areas where attractive long-term prospects remain intact, and are also more insulated from the energy shock. Below are two examples.

AI memory bottleneck

“High bandwidth memory is the single biggest bottleneck to scaling AI systems today.”
— Dylan Patel (SemiAnalysis), as discussed in an interview on the Dwarkesh podcast, March 2026

As we wrote back in early 2024, the difficulties in scaling up high bandwidth memory supply amid explosive demand to support AI GPU clusters is driving a cycle of unusually strong margins, cash generation and earnings visibility for DRAM giants SK Hynix and Samsung Electronics.

Historically significant – this cashflow is off the scale

Source: KB Securities, March 2026

However, our level of exposure is tempered by caution over risks of US hyperscalers pulling back AI investment, the emergence of circular financing arrangements and increasing reliance on debt.

Necessity is the mother of invention – cheap energy is China’s answer to US compute edge

Source: Bernstein, March 2026

China playing catch-up through more (and less efficient) chips and bigger data centres

Source: Bernstein, March 2026

Last year, China added an enormous 500 GW of power capacity to its grid, more than the rest of the world combined. Much of this comes from rapid growth of solar energy, by some measures now cheaper than coal power in China.

The battery and power management technology supplied by portfolio company CATL is crucial to this revolution.

Lime and limestone are materials that have shaped human civilization for thousands of years. Limestone is a common sedimentary rock formed mostly from calcium carbonate. It develops over millions of years from either marine organisms (shells, coral, plankton, etc.) or chemical precipitation in oceans and lakes.

Limestone is converted into lime by burning (calcining) it in a kiln at 1000ºC. Lime can then be mixed with water (hydrated) to form hydrated lime. Finished lime then absorbs CO2 and slowly transforms back to calcium carbonate (i.e., limestone). The lime cycle is one of the oldest known chemical cycles used by humans

Limestone been used as building material for centuries, from pyramids to great cathedrals of Europe, including Notre Dame, Westminster Abbey and St Peter’s Basilica. More commonly it is used as an ingredient in cement and concrete, and in building roads. It is also a widely used industrial mineral, either unprocessed or transformed into a lime derivative.

Limestone is estimated to account for 15% of surface rock on Earth, but high-purity limestone valued in industrial, construction, environmental and agricultural applications is much rarer as are deposits of scale that can be commercially exploited.

Applications across industries

SigmaRoc PLC (SRC LN), a recent addition to the portfolio, is a lime and minerals group targeting quarried materials assets in the UK and Northern Europe. The business is asset backed with over 2.7 billion tonnes of mineral reserves and resources, the equivalent of over 100 years of resources.

SigmaRoc has exposure to the construction, industrial and environmental end markets with applications such as:

Construction

Quarried limestone and granite materials are used in both infrastructure and residential applications such as the construction of roads, railways, bridges, ports, airports and buildings. The main products include aggregates, asphalt, ready mix concrete, pre-cast concrete and dimension stone.

Industrial

Lime is used as a flux in steel and copper production to remove impurities and control melt chemistry.
Quicklime is involved in pulp and paper production.
Limestone powder is used as a filler in paints and adhesives.

Environmental

Quicklime, slaked lime and limestone powder remove acidic compounds from flue gas.
Lime treats drinking water by raising pH, and wastewater by reducing toxicity.
In soil treatment, lime raises soil pH.

Quarries and their locations

SigmaRoc has an advantage in that it owns quarries. In countries where it does not own quarries (the UK and Poland), it has on-site kilns and long-term supply agreements with the quarry owner. Owning the quarry means fixed costs are manageable and ensures both the quantity and quality of supply.

Having quarries located close to customers has key logistical advantages. Firstly, the weight of the product means it is not feasible to ship long distances. Lime products are dangerous to transport due to lime’s high chemical reactivity. It is classified as corrosive under transport regulations and producers need regulatory compliance to ship. Quicklime degrades over time, meaning shipping long distances is unfeasible, reducing the threat of imports.

Integration, growth and megatrends

The three main lime producers in Europe are SigmaRoc and two privately owned Belgian companies. After those, the market is fragmented and the SigmaRoc has a “buy-and-build” growth model. The strategy is to acquire assets (quarries, lime and limestone businesses, related infrastructure) in fragmented local markets, then integrate them to extract synergies, scale and efficiency.

SigmaRoc has cyclical recovery potential and is poised to benefit from megatrends that support long-term growth. If macro conditions improve – supported by infrastructure spending, lower rates and renewed housing policy – SigmaRoc’s scale and flexibility could drive outperformance. Its diversified presence across geographies also helps smooth region-specific cycles.

Future growth is also supported by the ongoing electrification of economy. This creates a huge increase in demand for batteries, and lime is required in the mining and refining of lithium. European steel – and especially green steel – should also benefit from electrification, so long as the industry is protected from high carbon inputs, potentially reduced import quotas and higher tariffs. Beyond electrification, flue gas scrubbing creates an environmental market for lime, a process that addresses shipping emissions.

Limestone and lime are attractive markets due to high barriers to entry, the irreplaceable nature of product and the lack of material import flow into Europe. With an M&A track record as the foundation for future growth, we believe that makes SigmaRoc a compelling investment in the materials sector.

What’s New

We are pleased to announce the recent expansion of our LP Fund platform with the addition of an international equity strategy managed by our Quantitative Equity team and available to eligible US investors.

Market Index Returns (USD)	Q1 (%)	YTD (%)
MSCI All Country World	-3.1	-3.1
MSCI All Country World ex-US	-0.6	-0.6
S&P 500	-4.3	-4.3
MSCI Emerging Markets	-0.1	-0.1

Quantitative Equity Strategies

Long Only Strategies	Q1 (%)	YTD (%)
CC&L Q Global Equity	0.1	0.1
MSCI ACWI Net	-3.2	-3.2
CC&L Q International Equity	2.2	2.2
MSCI ACWI ex-US Index Net	-0.7	-0.7
CC&L Q Emerging Markets Equity	3.6	3.6
MSCI Emerging Markets Net	-0.2	-0.2
CC&L Q Global Small Cap	4.8	4.8
MSCI ACWI Small Cap Index Net	1.1	1.1
CC&L Q International Small Cap Equity	3.4	3.4
MSCI ACWI ex-US Small Cap Net	-0.5	-0.5

Long/Short Equity Extension Strategies¹	Q1 (%)	YTD (%)
CC&L Q ACWI Equity Extension	0.2	0.2
MSCI ACWI Net	-3.2	-3.2
CC&L Q Emerging Markets Equity Extension	4.7	4.7
MSCI Emerging Markets Net	-0.2	-0.2
CC&L Q World ex-US Equity Extension	2.5	2.5
MSCI World ex-US Index Net	-0.9	-0.9
CC&L Q US Equity Extension	-1.6	-1.6
S&P 500 Index (Net 15%)	-4.4	-4.4

Equity Market Neutral Strategies¹	Q1 (%)	YTD (%)
CC&L Q Global Equity Market Neutral (USD)	6.4	6.4
Merrill Lynch 3-month T-bill Index	0.8	0.8

About Connor, Clark & Lunn Investment Management Ltd.

Founded in 1982, Connor, Clark & Lunn is a privately owned investment management organization dedicated to delivering outstanding client service and a wide range of attractive investment solutions to our diverse client base. We understand the investment challenges faced by individuals, pension plans, corporations, foundations, mutual funds, First Nations and other organizations, and focus our efforts on meeting their investment needs by offering a comprehensive array of investment strategies, spanning traditional and alternative asset classes in a variety of quantitative and fundamental styles.

All data is as of March 31, 2026 and stated in US dollars. Source: Connor, Clark & Lunn Financial Group Ltd., FTSE Global Debt Capital Markets Inc., MSCI Inc., Thomson Reuters Datastream and S&P. Portfolio performance is preliminary, based on a representative account for the applicable strategy and may be subject to change. All performance data is gross of fees unless otherwise stated. Gross performance figures are stated after trading expenses and operating expenses but before management fees and performance fees, if applicable. Operating expenses include items such as custodial fees for segregated accounts and for pooled vehicles would also include charges for valuation, audit, tax and legal expenses. Management fees and additional operating expenses would reduce the actual returns experienced by investors. 1. These strategies are subject to performance fees, which will further reduce actual returns experienced by investors.

This publication is for information purposes only and is not an offer to buy or sell, nor a solicitation of an offer to buy or sell any security or other financial instrument advised by CC&L.

For further information on performance, please contact us at [email protected].

Source: MSCI Inc. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. MSCI makes no express or implied warranties or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. This report is not approved, reviewed or produced by MSCI.

What’s New

Market Index Returns (Local Currency)	Q1 (%)	YTD (%)
MSCI All Country World	-2.5	-2.5
MSCI All Country World ex-US	1.1	1.1
S&P/TSX Composite	3.9	3.9
S&P 500	-4.3	-4.3
MSCI Emerging Markets	2.2	2.2
FTSE Canada Universe Bond	0.2	0.2

Foreign Equities

Foreign Equity Strategies	Q1 (%)	YTD (%)
CC&L Q Global Equity	1.8	1.8
CC&L Q Global Equity Extension¹	1.7	1.7
MSCI ACWI Index (CAD) (net)	-1.5	-1.5
CC&L Q Global Small Cap	6.8	6.8
MSCI ACWI Small Cap Index (CAD) (net)	2.9	2.9
CC&L Q International Equity	4.1	4.1
MSCI ACWI ex-US Index (CAD) (net)	1.1	1.1
CC&L Q International Small Cap	5.3	5.3
MSCI ACWI ex-US Small Cap Index (CAD) (net)	1.3	1.3
CC&L Q Emerging Markets Equity	5.3	5.3
MSCI Emerging Markets Index (CAD) (net)	1.6	1.6
CC&L Q US Equity Extension¹	1.4	1.4
S&P 500 Index (Net 15%)	-2.6	-2.6

MSCI ACWI Sector Q1 Total Returns (Local)

TOP 3

34.8%

Energy

9.3%

Utilities

7.6%

Materials

BOTTOM 3

-6.1%

Information Technology

-7.5%

CommunicationCommuni-cation Services

-10.2%

Consumer Discretionary

MSCI ACWI Country Q1 Total Returns (Local)

TOP 3

27.2%

Norway

24.1%

Korea

21.1%

Thailand

BOTTOM 3

-12.2%

Denmark

-13.6%

India

-18.9%

Indonesia

Canadian Equities

Canadian Equity Strategies	Q1 (%)	YTD (%)
CC&L Fundamental Canadian Equity	3.0	3.0
CC&L Equity Income & Growth	4.3	4.3
CC&L Equity Income & Growth Plus	3.6	3.6
CC&L Q Canadian Equity Core	8.2	8.2
CC&L Q Canadian Equity Growth	8.2	8.2
CC&L Q Canadian Equity Extension¹	7.8	7.8
CC&L Canadian Equity Combined (Q Core/Fundamental)	5.6	5.6
S&P/TSX Composite Index	3.9	3.9
CC&L Fundamental Canadian Small/Mid Cap	11.2	11.2
60% S&P/TSX Small Cap Index & 40% S&P/TSX Completion Index	9.8	9.8

TSX Sector Q1 Total Returns

TOP 3

30.1%

Energy

11.2%

Utilities

10.7%

Materials

BOTTOM 3

-4.3%

Real Estate

-4.5%

Health Care

-22.5%

Information Technology

Canadian Fixed Income

Fixed Income Strategies	Q1 (%)	YTD (%)
CC&L Core Bond	0.3	0.3
CC&L Universe Bond Alpha Plus¹	1.9	1.9
CC&L Core Plus Fixed Income	0.2	0.2
CC&L High Yield Bond²	-0.3	-0.3
FTSE Canada Universe Bond Index	0.2	0.2
CC&L Long Bond	0.0	0.0
CC&L Long Bond Alpha Plus¹	1.6	1.6
FTSE Canada Long Term Overall Bond Index	0.0	0.0
CC&L Short Term Bond	0.2	0.2
FTSE Canada Short Term Overall Bond Index	0.3	0.3
CC&L Money Market	0.6	0.6
FTSE Canada 91 Day T-Bill Index	0.5	0.5

Bond Market Statistics

Balanced Strategies

Balanced Strategies	Q1 (%)	YTD (%)
CC&L Balanced	1.8	1.8
25% S&P/TSX Capped Composite Index & 35% MSCI ACWI Net (CAD$) & 40% FTSE Canada Universe Bond Index	0.6	0.6
CC&L Enhanced Balanced	2.1	2.1
20% S&P/TSX Capped Composite Index & 40% MSCI ACWI Net (CAD$) & 40% FTSE Canada Universe Bond Index	0.3	0.3
CC&L Core Income & Growth	2.6	2.6
50% S&P/TSX Composite Index & 25% S&P/TSX Capped REIT Index & 25% FTSE Canada All Corporate Bond Index	2.4	2.4

Absolute Return Strategies

Absolute Return Strategies¹	Q1 (%)	YTD (%)
CC&L Multi-Strategy	6.0	6.0
CC&L All Strategies	8.4	8.4
CC&L Fundamental Equity Market Neutral	7.4	7.4
CC&L Q Global Equity Market Neutral (Cdn)	5.6	5.6
CC&L Fixed Income Absolute Return	0.1	0.1
CC&L Absolute Return Bond	-0.2	-0.2
FTSE Canada 91 Day T-Bill Index	0.5	0.5

About Connor, Clark & Lunn Investment Management Ltd.

All data is as of March 31, 2026 and stated in Canadian dollars, unless otherwise stated. Source: Connor, Clark & Lunn Financial Group Ltd., FTSE Global Debt Capital Markets Inc., MSCI Inc., Thomson Reuters Datastream and S&P. Portfolio performance is preliminary, based on a representative account for the applicable strategy and may be subject to change. All performance data is gross of fees unless otherwise stated. Gross performance figures are stated after trading expenses and operating expenses but before management fees and performance fees, if applicable. Operating expenses include items such as custodial fees for segregated accounts and for pooled vehicles would also include charges for valuation, audit, tax and legal expenses. Management fees and additional operating expenses would reduce the actual returns experienced by investors. 1. These strategies are subject to performance fees, which will further reduce actual returns experienced by investors. 2. CC&L High Yield Bond Strategy has a custom benchmark, please contact us for more information.

This publication is for information purposes only and is not an offer to buy or sell, nor a solicitation of an offer to buy or sell any security or other financial instrument advised by CC&L.

For further information on performance, please contact us at [email protected].

Not long ago, alternative investments played only a marginal role in the portfolios of Canadian university endowments. Exposure to assets such as commercial real estate, infrastructure, private equity, private credit and hedge funds was limited, not by philosophy, but by practicality. Smaller endowments often lacked the scale required to meet minimum commitments, as well as the internal resources needed to manage the added operational complexity.

That landscape has changed. According to the latest investment survey from the Canadian Association of University Business Officers (CAUBO), Canadian endowments have expanded their use of alternative strategies at a rapid pace over recent years.

What’s driving the shift?

Smaller and mid-sized endowments now have access to thoughtfully designed platforms from investment managers and consultants. These solutions lower minimum commitments, streamline operations and enable endowments to build diversified portfolios that increasingly resemble those of much larger institutional peers.

Marked shift in alternatives allocations

Larger Canadian endowments, those with assets exceeding $150 million, have long incorporated alternative investments into their portfolios. By contrast, the average allocation for smaller endowments is much lower, as shown in Figure 1.

Figure 1: CAUBO Asset Allocation Averages (end of 2024)

Source: Investment survey of the Canadian Association of University Business Officers.

Importantly, headline averages understate the extent of this shift. For endowments with assets below $150 million, aggregate figures include a meaningful number of funds with no allocation to alternatives at all. When the analysis is limited to endowments that do invest in alternatives, a different picture emerges where average allocations rise materially, from 10% to 18% for funds under $150 million, and from 6% to 16% for those under $50 million (Figure 2).

Figure 2: CAUBO Asset Allocation Averages (end of 2024) – only if invested

Source: Investment survey of the Canadian Association of University Business Officers.

Why invest in alternatives?

The growing allocation to alternative investments reflects a set of structural advantages that align well with long‑term endowment objectives. Alternatives can enhance return potential, improve diversification, provide inflation protection and contribute to overall portfolio resilience. Private assets are not priced daily, resulting in lower reported volatility. For long‑horizon investors, this characteristic can be valuable, supporting smoother portfolio outcomes and more stable spending policies. In addition, alternative strategies often exhibit low or even negative correlation with traditional equity and bond markets, helping to improve portfolio efficiency and risk‑adjusted returns.

While some endowments continue to rely primarily on equities and fixed income and have benefited from strong equity market performance in recent years, the current environment underscores the value of revisiting total portfolio diversification. Incorporating alternatives may help build a more resilient risk‑and‑return profile, particularly as market conditions evolve.

Cycle analysis indicates that the global economy is in a time window for weakness, suggesting a significant risk that the Gulf War III shock triggers a recession. Real money trends will be key for assessing whether a negative scenario is playing out.

The housing, business investment and stockbuilding cycles average 18, 9 and 3.5 years respectively. The most recent lows are judged to have occurred in 2009, 2020 and 2023, suggesting that the next bottoms will be reached around 2027, 2029 and 2027. All three cycles, therefore, are expected to be in downswings over the next 1-3 years.

Cycle history suggests two possibilities. If the three downswings coincide, a major recession is likely. Historical precedents include the severe global downturns of 1974-75 and 2008-09.

If the cycle lows are spaced out over several years, the template would be the early 1990s – a longer period of rolling economic weakness involving a less damaging recession.

An earlier episode of triple cycle weakness in the late 1950s was also associated with a less pronounced recession but the fall in output on that occasion was limited by strong trend economic growth, reflecting post-war reconstruction.

The impact of shocks on the global economy depends on the cyclical backdrop. Activity bounced back strongly after the 2020 covid shock partly because the stockbuilding and business investment cycles were in time windows to enter recovery phases, while the housing cycle remained in an upswing.

Similarly, economic damage from the 2022 energy shock due to Russia’s invasion of Ukraine was limited by support from the business investment and housing cycles, with only the stockbuilding cycle then in a weak phase.

The timing of the Gulf War III shock echoes the 1973 Arab oil embargo, which hit as the three cycles were peaking and resulted in synchronised and self-reinforcing downswings into 1975 lows.

There are important mitigating differences from the 1973 shock. The oil price rise has been much smaller, while the oil intensity of GDP has fallen significantly. The 1973 shock occurred against a backdrop of double-digit G7 money growth, ensuring an inflationary outcome – current expansion is still low. Surging inflation forced major monetary policy tightening, the combined result being a severe real money squeeze – see chart 1.

Chart 1

Real money trends appeared modestly supportive before the current shock: global / G7 growth had firmed into early 2026, suggesting that economic expansion was on course to hold up through Q3.

The mechanical impact of higher energy and other costs on consumer price inflation will ensure a sharp slowdown in real money momentum into mid-year – chart 2. The extent of the decline will be key for assessing the likely degree of economic weakness. As noted, modest money growth argues against significant “second-round” inflation effects but central banks are hinting at precautionary tightening, which would magnify monetary weakness.

Chart 2

A further risk is of “endogenous” monetary tightening if the Gulf War III shock interacts with recent problems in private lending, leading to a generalised reduction in credit availability. Such a shift could be signalled in ECB and Fed loan officer surveys due in late April and early May respectively.

Country real money numbers through February suggest that US economic prospects were improving absolutely and relative to other majors before the shock – chart 3.

Chart 3

Japanese monetary weakness continues to argue that BoJ policy tightening – via large-scale QT as well as rate hikes – has been misguided. As expected, core CPI inflation – ex. food and energy – has fallen and is below 2% even stripping out the impact of government subsidies.

Recoveries in Eurozone and UK real money momentum have stalled at unimpressive levels, suggesting dull economic prospects before the shock. Within the Eurozone, readings are similar across the large economies, with France no longer a negative outlier.

Chinese real money momentum has slowed but may hold up better than elsewhere going forward, reflecting stable interest rates and government intervention to limit price rises. A strong balance of payments position, partly stemming from a still significantly undervalued currency, is generating monetary inflows.

Cyclical equity market sectors had started to underperform before the shock. The cyclical / defensive relative is correlated with the stockbuilding cycle, which is not expected to bottom before late 2026 at the earliest – chart 4.

Chart 4

While market commentary in late 2025 focused on the question of the sustainability of high valuations of mega-cap US technology stocks, Canadian equities quietly delivered material outperformance, as illustrated below. This phenomenon was not restricted to large cap stocks as the TSX Small Cap Index was up a remarkable 50.2%, outpacing the Russell 2000 at 7.5%, in CAD.

Exceptional Year for Canadian Equities
Source: S&P Global Intelligence

We may look back at 2025 as a positive inflection point for the Canadian economy with multiple drivers now in place to enhance future growth prospects.

Market Leadership Rotates — Often for Long Periods

History demonstrates that Canadian and U.S. equity markets experience long cycles of relative outperformance and underperformance. US equities have outperformed for 10+ years following the Global Financial Crisis until more recently, while Canadian equities outperformed in the 10+ years following the bursting of the technology bubble in the late 90s:

Market Leadership Rotates Over Extended Periods
Source: Bloomberg

The Case for Continued Canadian Equity Outperformance

While relative performance cycles are difficult to predict, there are several tailwinds that should support Canadian outperformance going forward.

1. Canadian Economy at an Inflection Point

Canada’s productivity decline during the ‘Lost Decade’ from 2015 to 2025 is well documented, as are the challenges facing the domestic economy as a result of changing US nationalism and trade policy. However, we may look back at 2025 as a positive inflection point for the Canadian economy with multiple drivers now in place to enhance future growth prospects:

Structural exposure to secular growth industries: Canada has outsized exposure to energy and materials critical to rising global power demand. Electrification, AI infrastructure and grid investment are driving sustained demand for copper, natural gas and uranium, while years of underinvestment limit new supply. In addition, de-globalization and protectionist trade policies increase the risk of persistently higher inflation, supporting elevated precious metals prices.
Fiscal policy turning from drag to tailwind: Recent U.S. trade actions have accelerated a shift in Canada’s fiscal approach. The new federal government under Prime Minister Carney is pursuing a more pro-growth, pro-business agenda focused on investment, targeted spending and tax relief. We estimate these measures could add ~40bps to GDP growth each year over the medium term, marking a clear economic inflection point.
Monetary policy now firmly supportive: The Bank of Canada has cut rates by nearly 300bps over the past 18 months, moving policy decisively into accommodative territory. Easier financial conditions should support growth, investment and earnings across the Canadian equity market.

2. Attractive Equity Market Dynamics

Improved economic growth does not always translate into equity market outperformance. There are several unique attributes of the S&P TSX Composite Index though, that bode well for future performance:

Compelling Valuations and Attractive Sector Composition

The lower P/E multiple for the TSX relative to the S&P 500 is often attributed to its lower exposure to high-growth, mega-cap technology-related stocks. While the technology-related exposure weight is much larger in the S&P 500, investors may be surprised to learn that virtually all sectors are more attractively valued in the TSX, despite very similar estimates for earnings growth in 2026, as illustrated below:

Expect Strong Earnings Growth in 2026
Source: Bloomberg, as of December 31, 2025

“Our team is as excited about the prospects for Canadian equities as we’ve been in at least a decade. We’re finding large, mid and small-cap opportunities that should continue to benefit from the emergence of multiple secular tailwinds. It’s a good time to be a Canadian investor.”

Michael McPhillips, Portfolio Manager, Co-Chief Investment Officer & Research Director, Fundamental Equity

Canadian Valuations More Attractive at Index and Sector Level

Source: Bloomberg, *for Real Estate using fwd P/AFFO, for Technology using fwd EV/Sales, Utilities using fwd EV/EBITDA and Energy using fwd P/CF. Data as of Dec 31, 2025.

Outsized Exposure to Power Generation and Gold Producers

US Leadership in Technology Complements Canada’s Strength in Commodities and Banks
Source: S&P Global Intelligence

The table above illustrates the diversification benefits that Canadian equities provide investors who are allocated to US equities, given the very different and complementary sector exposures. Over the past decade, outsized Technology exposure has been a driver of US equity market outperformance.

However looking forward, we expect that the strong representation of companies linked to power generation and gold production in Canadian equity markets will be a strong contributor to performance:

Canadian Companies as % of MSCI ACWI Sector
Source: S&P Global Intelligence as of December 31, 2025

With global investors seeking to access these types of assets and to diversify their US equity exposure, the return of foreign investors could produce a further tailwind.

3. Currency Stability Matters for CAD-Based Investors

Currency risk is often underappreciated until it becomes material. Over the past 12 months alone, the Canadian dollar has experienced approximately a +10% move versus the U.S. dollar. For investors with Canadian-dollar liabilities — pensions, endowments, insurance pools, or domestic spending needs — this represents a meaningful source of portfolio volatility.

CAD/USD Spot
Source: Bloomberg

The main driver of this currency move has been twofold. First, a diminished view of the USD as a safe haven asset by global investors has led to diversification into gold and other assets. The strong representation of gold and other commodity producers in the Canadian equity market have compounded this strength in the Canadian dollar. With each of these trends expected to persist, currency could remain a headwind for CAD-based investors owning US equities.

4. An Attractive Market for Active Management

As with virtually all liquid markets, Canadian equity investors can choose between active and passive exposure.

We believe that Canadian equities offer a far more compelling opportunity for active managers relative to US equities. Using analyst coverage as an indication of how efficiently stocks are priced, certainly supports that assertion, as illustrated below. Consider an example relating to pure-play beneficiaries of AI: US listed NVIDIA is covered by more than 90 sell-side analysts, versus only ~18 for Celestica, Canada’s AI analogue. As dispersion within and across sectors increases amid an uneven economic recovery, we expect stock selection to be an increasingly important driver of returns, positioning active management in Canada particularly well.

Canadian Market is Less Efficient
Fewer Analysts Cover the Canadian Market
Source: Bloomberg. Data as of Dec 31, 2025.

Risks to Our Outlook

The primary risk we are monitoring is heightened geopolitical uncertainty, particularly around the renegotiation of CUSMA. While U.S. trade rhetoric has intensified and created pockets of volatility, the macro impact on Canada to date has been limited. Notably, Canada has added more jobs on a per-capita basis than it has lost since the start of the Trump presidency. While upcoming CUSMA negotiations are likely to generate headline risk and renewed tariff threats, the political sensitivity of inflation and cost-of-living pressures in a U.S. mid-term election year should constrain the scope for materially adverse outcomes. We continue to monitor developments closely.

Canada Blows Away Trump Era on Jobs
Source: Scotiabank Economics, Statistics Canada, Bureau of Labor Statistics

Conclusion

After a decade dominated by U.S. technology leadership, a regime shift is underway as the investment backdrop broadens. Canada’s equity market is uniquely aligned with the next wave of global investment, offering attractive valuations, currency stability, differentiated sector exposure, and meaningful leverage to rising demand for commodities. With a structurally favourable environment for active management, Canadian equities deserve renewed and potentially increased allocation within global portfolios.

About Connor, Clark & Lunn Investment Management Ltd.

Material presented in this article should be considered for background information only and should not be construed as investment or ﬁnancial advice. Further, information on this article should not be construed as an offer or solicitation by the Connor, Clark & Lunn group of companies to provide investment management services or to buy or sell any products.

Certain securities regulations prohibit the publication of speciﬁc registration information about the registered entities in the Connor, Clark & Lunn group of companies. For more information, please contact the Connor, Clark & Lunn Compliance Department at [email protected] or 604-685-2020.

Connor, Clark & Lunn Financial Group (CC&L Financial Group) is pleased to announce that Josh Borys is joining its leadership team as a Managing Director with a focus on private market affiliates, effective April 1, 2026.

Josh has deep experience in private debt, with prior roles at Sagard Credit Partners and CPP Investment Board in this asset class. He holds an HBA from the Richard Ivey School of Business at Western University.

“Josh strengthens our Managing Director group by adding dedicated capacity in private markets – an area that represents a significant portion of our business today and will be a key driver of future growth, both with existing affiliates and new affiliates over time,” said Michael Walsh, President & Managing Director, CC&L Financial Group.

Josh will be based in Toronto.

At the heart of our organization is the commitment and desire to provide superior performance and service to our clients. Our primary objective is to meet our clients’ expectations while ensuring our people are highly motivated and enthusiastic. This requires that we keep the business narrowly defined on what we do best, and endeavour to remain at the cutting edge of research and development initiatives within financial markets.

Standing still is not an option

Each year, we take the opportunity to provide our clients with an update on our business, outlining how we are directing our efforts within Connor, Clark & Lunn Investment Management (CC&L) to fulfill our commitment to delivering investment performance and superior client service.

Our business has always been defined by continual reinvestment and innovation – standing still is not an option. As we navigate a volatile financial and policy environment, we have focused our efforts on three core areas that are foundational to the long-term strength and sustainability of our firm: our people, our technological capabilities and our physical infrastructure.

Our most important investment is in our people. In 2025, we welcomed 28 new colleagues to the firm, and we plan to add approximately the same number in 2026. These additions span investment and client functions, reinforcing both our current capabilities and our future leadership pipeline. This growth reflects our commitment to building a sustainable business across generations. By investing in talent development, succession planning and the cultivation of emerging leaders, we are ensuring that our clients will continue to benefit from a strong, stable and forward-looking organization.

Technology is the second pillar of our reinvestment strategy. We are upgrading systems across our back- and mid-office functions to enhance operational resilience, improve data integration and expand reporting capabilities. These enhancements strengthen the infrastructure that supports our investment processes and client service delivery. In parallel, we are developing a disciplined approach to artificial intelligence (AI). Our strategy is focused on enabling each area of our business to leverage AI tools and technology to improve investment and business processes. The introduction of AI tools requires adequate and deliberate oversight. Regardless of the complexity and sophistication of the AI integration, our people remain responsible for ensuring the quality and suitability of output and retain ultimate accountability for each function.

Finally, we are making meaningful investments in our office spaces in Vancouver and Toronto. These enhancements are intended to create environments that foster collaboration, creativity and connection. Our redesigned spaces support team-based work, cross-functional dialogue and stronger engagement across investment, client and operational teams. The goal is to create the conditions where ideas can be challenged, refined and implemented efficiently – ultimately benefiting our clients. We look forward to welcoming clients to our new offices in 2026 and sharing these updated spaces in person.

In closing, I extend my sincere gratitude to our clients for your trust, confidence and continued partnership.

Sincerely,

Martin Gerber
President & Chief Investment Officer

Our People

In 2025, our firm continued to grow, welcoming 28 new hires and bringing our personnel count to 150. Our business also benefits from the broader Connor, Clark & Lunn Financial Group, which employs over 500 professionals supporting business management, operations, marketing and distribution.

Our firm’s stability and specialization remain key drivers of our business. Succession planning and career development are central to our approach, ensuring continuity and long-term success.

We are pleased to share that several employees were promoted to Principal, effective January 1, 2026, in recognition of their important and growing contributions to our firm.

CC&L’s Board of Directors is also pleased to announce the promotion of new business owners, effective January 1, 2026, in recognition of their leadership and impact in their roles.

Fixed Income

Over the past decade, the Fixed Income team has invested meaningfully in building a quantitative framework to identify and harvest attractive premia in fixed income markets, initially within benchmark-relative strategies and subsequently in absolute return mandates. As these systematic return streams have proven both attractive and diversifying, client demand for dedicated solutions has begun to grow. In response, the team is developing these capabilities into dedicated quantitative strategies that can be implemented as total return solutions or as a source of portable alpha on top of a full suite of market return streams. We continue to invest in research, infrastructure and talent to deepen these capabilities and support growing client interest in resilient, diversifying sources of return across different market environments.

Sandy McArthur joined the Fixed Income team in May 2025 and quickly became a central driver of strategic initiatives across the platform. Sandy combines strong market experience with technical fluency, enabling the team to move faster and operate with greater discipline. His tenacity, cross-functional skillset and willingness to own complex workstreams have already had a meaningful impact on the business. We are pleased to welcome Sandy as a business owner in 2026.

Fundamental Equity

After more than a decade of US equity outperformance, the team believes the Canadian equity market is well positioned to outperform over the medium term. Attractive valuations, differentiated sector exposure and meaningful leverage to rising global commodity demand create a compelling backdrop for Canadian equities.

The Fundamental Equity team continues to support client investment objectives across mandates. In what has been a challenging environment for active managers in 2025, all strategies – including Canadian All Cap, income-oriented, and Small Cap equities – delivered top-quartile performance relative to their respective peers.

For several years, the Fundamental Equity team has been focused on developing the next generation of investment leaders. Three experienced Senior Research Associates joined the team over the past 12 months, further deepening research capabilities. This deliberate reinvestment underscores the team’s commitment to sustaining performance, enhancing analytical depth and maintaining a competitive advantage relative to peers over the long term. At the same time, the team is actively executing Gary Baker’s succession plan. Effective January 1, 2026, Michael McPhillips was appointed Co-Chief Investment Officer alongside Gary, sharing responsibility for equity strategy, portfolio leadership and overall investment direction. In 2027, Michael will transition into the CIO role, with Gary moving into an advisory role – ensuring continuity, mentorship and a seamless transition. Michael joined CC&L’s Board of Directors in 2026, succeeding Gary.

Quantitative Equity

2025 was a strong year for the Quantitative Equity team. The team met or exceeded added-value objectives across all key strategies, building on successful long-term track records, with sustained growth in clients and assets under management. To support that growth, the team continued to expand its capabilities, growing to 92 members, with 21 new hires in 2025. Investment professionals were added to all sub-teams during the year and investment in leadership resources across sub-teams will continue at a similar pace this year. The steady growth of the team reflects the need to continually expand and reinvest in our capabilities as the size and scope of the quantitative business has grown. At the same time, the focus on implementing differentiated insights remained front and centre, with a new investment model update that was successfully deployed in November.

To support clients in international markets, our pooled fund structures were expanded. This includes our Europe-based UCITS Fund platform for non-US-based investors, a Collective Investment Trust (CIT) platform in the United States for ERISA-regulated pension plans, a Cayman platform for US and other eligible global investors, and an LP Fund platform for eligible US investors. This investment will allow us to serve a broader client base.

Client Solutions

Consistent with the growth in our business, the Client Solutions team continued to grow. Tim Elliott joined the team in June. He was previously President & CEO of Connor, Clark & Lunn Funds Inc., a retail wealth affiliate he founded within the CC&L Financial Group 15 years ago. Tim started making an immediate impact on our business, bringing insights and specialist knowledge of the retail and wealth markets and increasing leadership in the team. He became a business owner in 2026.

Responsible Investing

2025 marked the passing of a decade since the creation of the CC&L ESG Committee. As such, our Board of Directors felt it was appropriate to undertake a review of the committee mandate and governance structure. The outcome of this undertaking led to confirmation that we continue to have the appropriate structure and resources to meet our responsible investing (RI) objectives and concluded that no material changes were warranted.

Business Update

Assets under management

CC&L’s AUM increased by CA$35 billion in 2025 to CA$112 billion as of December 31, 2025. We are pleased to report that our business grew through new client mandates across all investment teams. In 2025, CC&L gained over 100 new clients and 19 additional mandates from existing clients. Most new mandates were for quantitative equity strategies from global institutional investors.

We are proud to be the recipient of a 2025 Coalition Greenwich Award: Best Asset Manager for Institutional Investors in Canada.* This award reflects excellence across both investment performance and client service, as measured by the Greenwich Quality Index.

Final Thoughts

We sincerely appreciate the trust and support of our clients and business partners. We look forward to continuing to help you achieve your investment objectives in the years ahead.

*Throughout 2025, Crisil Coalition Greenwich conducted interviews with 147 of the largest corporate pension funds, public pension funds, financial institutions, endowments and foundations in Canada and other global regions. Senior fund professionals were asked to provide detailed evaluations of their investment managers, assessments of those managers soliciting their business, and insights on important market trends. Connor, Clark & Lunn Investment Management did not provide Crisil Coalition Greenwich with any compensation for this survey.

The technology that harnesses wind and solar power is highly noticeable at a glance – it is hard to miss towering wind turbines or gleaming fields of solar panels. But what is not so obvious is how the power gets from those visible generators into the electrical grid that eventually powers your home.

Nexans S.A. (NEX FP) is increasingly emerging as a differentiated way to play the next phase of the energy transition, where the focus shifts from building renewable capacity to connecting it at scale.

While the first wave of the energy transition was defined by rapid growth in wind and solar generation, the current phase is more complex: integrating that capacity into power systems. This is where Nexans sits – at the intersection of renewable buildout and the infrastructure required to make it usable.

Europe’s plan for energy security

In this context, offshore wind is becoming a central driver of demand once again. Following a period of delays linked to cost inflation and project economics, Europe is now moving to re-accelerate deployment. At the January 2026 North Sea Summit, governments committed to developing ~100GW of offshore wind capacity, with a longer-term ambition of 300GW by 2050, alongside coordinated investments in cross-border grid infrastructure.

This renewed momentum is not just about decarbonization, it is increasingly tied to energy security and affordability. European policymakers are prioritizing domestically generated electricity to reduce dependence on imports, while structurally higher and more volatile power prices continue to incentivize investment in renewable capacity.

Nexans ready to support Europe’s wind commitments

For Nexans, offshore wind is particularly attractive. Each project requires significant volumes of high-voltage subsea export cables and increasingly complex interconnection solutions, positioning cable suppliers as critical enablers of deployment. As projects scale and networks become more integrated, demand is shifting toward higher-specification, higher-margin systems areas where Nexans has strong technological capabilities.

At the same time, the company’s strategic repositioning over recent years has sharpened this exposure. By exiting more commoditized cable activities and focusing on electrification and high-voltage segments, Nexans has aligned its portfolio with the fastest-growing and most structurally supported parts of the market.

Buying local – Nexans is Europe-based

This is further reinforced by an evolving policy backdrop in Europe. The EU’s industrial strategy is increasingly incorporating local content requirements and procurement incentives aimed at strengthening domestic manufacturing in key energy technologies. For a Europe-based player like Nexans, this creates a supportive competitive environment, particularly in large-scale infrastructure linked to renewables.

Importantly, supply dynamics remain favourable. High-voltage subsea cable capacity is limited globally, with long lead times and high technical barriers to expansion. As offshore wind deployment accelerates again, this constraint is likely to support pricing and contract discipline across the industry.

Disciplined execution, rising returns

The key focus for investors is increasingly on Nexans’ ability to translate strong structural demand into consistent and higher-quality earnings. As the group continues to prioritize selective project execution and disciplined contract structures, visibility on margins and cash generation is improving. This reflects a more mature operating model, with greater emphasis on value over volume and a clear focus on returns.

In that context, Nexans offers a differentiated exposure to renewables, not through generation itself, but through the critical systems that enable renewable electricity to be delivered, scaled and monetized. As Europe enters a renewed phase of offshore wind expansion and electrification, the company may be well positioned to capture both growth and improving returns.