CC&L Financial Group Ltd.

Driven by years of underinvestment, rapid urbanization and the need to adapt to a power-driven, technology-led world, infrastructure spending is a key tool governments use to stimulate economic growth. Regardless of what drives the allocation, civil infrastructure – the systems that underpin essential societal functions – remains a foundational focus of government spending.

The US government’s current focus on infrastructure

The 2021 Infrastructure Investment and Jobs Act (IIJA) is in full swing and will last until 2030 and beyond. The approximately USD1.2 trillion US expenditure bill is allocated to roads, bridges, transport safety, transit, freight, chargers, power and broadband.

Spending on US highways and streets is currently at historic highs, reaching a seasonally adjusted annual rate of approximately $149.5 billion in January 2026. This sector remains a primary driver of public infrastructure growth, bolstered by long-term federal funding. But despite high spending, the American Society of Civil Engineers (ASCE) estimates a $684 billion funding gap for roads over the next decade (2025–2035).

The business cycle is such that architecture and engineering firms gain from the bulk of the work at the onset, executing on planning and design. Then come the bids and proposals on work and equipment, which ultimately fill the backlogs of suppliers and contractors.

The right tools for the job

Based in Downers Grove, Illinois, Federal Signal Corporation (FSS US) manufactures specialized equipment for infrastructure maintenance, public safety and environmental cleaning. The company operates between 24 to 27 principal manufacturing facilities worldwide and directly manages over 40 service centres. Already within our portfolio, the company is one that may be positioned to benefit from infrastructure spending by providing the necessary equipment and technology to support civil infrastructure projects.

Federal Signal’s diversified business groups offer products that serve multiple infrastructure subsectors. The Environmental Solutions Group is the largest manufacturer of dump trucks in the United States. They also manufacture street sweepers, sewer cleaners and industrial vacuum loaders, safe-digging and road-marking equipment. The Safety and Security Systems Group provides technology and systems used by first responders and industrial facilities to protect lives and property.

Federal Signal delivers a comprehensive suite of equipment designed to support a wide range of IIJA-funded project areas, as highlighted in the table below.

IIJA allocation (in USD)	Area of infrastructure investment	Federal Signal equipment
$10 billion	Roads and bridges	Street sweepers, vacuum excavators
$55 billion	Water and sewers	Sewer cleaners
$65 billion	Broadband	Safe-digging trucks
$73 billion	Electrical grid modernization	Safe-digging trucks
$11 billion	Transportation safety programs	Public warning systems, emergency vehicle equipment

Cementing a provider of construction materials

Large scale infrastructure projects such as bridges and transit require longer planning and often are fully realized toward the tail end of the spending period. Global Alpha is positioned through Eagle Materials Inc. (EXP US), an important producer of cement, to strategically capture the roughly USD550 billion allocated for new construction materials.

Eagle Materials possesses regional market dominance: The company’s 70+ facilities are concentrated in the US Heartland, Sun Belt and Mountain West. These inland markets are protected by high transportation costs, which limit competition from cheaper foreign imports.

Between 2024–2025, Eagle invested heavily in modernizing plants like the Laramie, Wyoming facility, increasing cement output by 50% specifically to meet the rise in IIJA-funded municipal projects. Within the same time frame, Eagle converted nearly 100% of its cement capacity to Portland Limestone Cement (or PLC). This low-carbon product is increasingly required for government-funded projects that prioritize environmental sustainability.

Strategically, the company shifted its sales mix toward non-residential and public infrastructure, sectors projected to grow by roughly 5% in 2026, to offset recent softening in the residential housing market.

Global phenomena

Civil infrastructure is being accelerated on a global basis; China spent USD550 billion on transport infrastructure in 2025 alone. Japan just began a USD140 billion mid-term plan for the implementation of national resilience. Global Alpha is exposed to global civil infrastructure buildout through Sany Heavy Equipment International Holdings Co. Ltd. (631 HK).

Hong Kong-listed Sany is the world’s third-largest heavy equipment manufacturer. Their equipment is designed with a focus on being “easy to own, easy to operate and easy to service,” prioritizing essential functionality over excessive technical complexity. The company is also a global leader in concrete machinery, especially after acquiring the legendary German brand Putzmeister. Products include truck-mounted pumps, stationary pumps and concrete mixers. Large-scale engineering contractors account for approximately 45% of Sany’s revenue.

That demand is increasingly coming from outside China: overseas markets now contribute 64% of revenue, led by Africa, where sales surged 55% on the back of infrastructure buildouts. To capitalize on this momentum, Sany has shifted its mix toward infrastructure-heavy “civil works” applications, helping drive a 41% increase in net profit in 2025.

Keeping assets clean, clear and operational

Global Alpha also holds Bucher Industries AG (BUCN SW), a Swiss industrial group that provides specialized machinery and components for essential infrastructure, specifically through its Bucher Municipal and Bucher Hydraulics divisions. Unlike heavy civil construction firms, Bucher focuses on the maintenance, cleaning and operational safety of existing civil assets.

Bucher’s connection to civil infrastructure is primarily functional, ensuring that public and commercial traffic areas remain operational and safe. For sewer and drainage infrastructure, Bucher produces specialized sewer cleaning and water recycling units essential for managing urban water networks and preventing flash flooding on major roadways. Bucher also provides construction site support through its heavy-duty sweepers, specifically engineered to handle the abrasive materials (e.g., aggregate, spoil) found on large-scale infrastructure construction sites.

Civil infrastructure is more than a standalone spending category – it is the operating backbone that enables other critical buildouts, from power and water management to digital connectivity. For Global Alpha, this creates diversified, real-economy exposure to long-duration public investment, spanning both new construction and the ongoing maintenance that keeps cities functioning.

The baseline view here has been that the global stockbuilding cycle would enter a downswing in 2026 into a low in H1 2027.

The stockbuilding cycle is a repeating fluctuation in the demand for production inputs and goods for final sale caused by inventories periodically over- and undershooting the level desired by manufacturers and distributors.

The approach here is to monitor the cycle using measures of the rate of change of G7 stockbuilding from national accounts data and business surveys.

The national accounts measure places the last cycle low in Q1 2023, implying that the current cycle is well-advanced – see chart 1.

Chart 1

The business survey measure is more timely and recently crossed below zero, consistent with the cycle moving into a downswing.

The original research on the cycle – by Joseph Kitchin, published in 1923 – used data on commodity prices, bank clearings and interest rates. Kitchin attributed the cycle to “psychological causes”, making no explicit link with inventory behaviour.

The cycle is evident in commodity prices because changes in demand for production inputs affect their price as well as volumes – chart 2.

Chart 2

Tech investors often dismiss the cycle as an “old economy” phenomenon but electronic components are a key production input subject to the same inventory-related demand swings as traditional industrial commodities.

There is no single price index capturing the changing nature of electronic components. However, export prices of key supplier economies are a rough proxy. Chart 3 shows that the annual rate of change of an average of Taiwanese and Korean export prices in US dollars tracks the national accounts-based measure of G7 stockbuilding changes.

Chart 3

Chart 4 overlays the annual rate of change of an average of 12-month forward earnings estimates, showing a similarly significant correlation.

Chart 4

Based on the cycle assessment here, the implication is that momentum of component prices and earnings should be at or close to a peak.

Why could this prove wrong? One possibility is that the current stockbuilding cycle will extend. This cycle is judged to be the last of a set of five constituting the current housing cycle (which began in 2009). Final cycles tend to be longer than the 3.5-year average, with one recent example (1986-91) reaching 4.5 years. The next low, therefore, could be delayed until H2 2027, in turn suggesting a later start to the downswing.

Another counter-argument is that strong demand for components is being driven by an ongoing upswing in the business investment cycle – narrowly focused on AI-related spending in the current cycle – as well as peak stockbuilding. This cycle last bottomed in 2020 and has ranged between 7 and 11 years historically, so the upswing could – in theory – continue for several more years. The thinking here is that the current cycle is more likely to be short, reflecting a long prior cycle (11 years) and a drag from the expected stockbuilding downswing.

Digital infrastructure is becoming an increasingly prominent topic in institutional investment discussions. In a recent Benefits and Pensions Monitor article, “Is it time to embrace digital infrastructure?”, managing directors Kaitlin Blainey and Andrew Parkes were interviewed, exploring how investors are approaching this fast‑growing segment and what it could mean for portfolio construction.

Highlighted in the piece is how digital infrastructure is being viewed as a complement to traditional infrastructure portfolios rather than a replacement. As investor demand for essential, long-duration assets grows, digital infrastructure is increasingly seen as aligned with the defensive and income-oriented characteristics long associated with the broader asset class.

The article also reflects the growing importance of expertise beyond asset selection alone. Digital infrastructure can play a strategic role within diversified institutional portfolios, particularly as investors weigh considerations around scalability, resilience and long-term capital deployment.

Read the full article

“The world is always changing.” – Sir John Templeton

Few areas illustrate this better than institutional investing. Nearly three decades ago, I moved from the UK to Canada, and over this time I have had a front-row seat to a remarkable transformation in the Canadian investment landscape, spanning defined benefit (DB) plans, public funds, endowments and foundations and increasingly, defined contribution (DC) investors. This personal reflection is not just a story about what changed, but on what truly matters: the lessons institutional investors should carry forward.

Canadian DB, public fund, endowment and foundation investors

Governance determines outcomes

Investment outcomes improve materially when investment decision‑making is insulated from political or sponsor influence. Canada’s experience offers a powerful example. In 1997, the establishment of the Canada Pension Plan Investment Board (now named CPP Investments) as an independent, arm’s‑length organization marked a defining shift in Canadian pension governance.

Prior to this reform, the Canada Pension Plan (CPP) operated largely on a pay‑as‑you‑go basis with limited reserves. The change was gradual, initially funded primarily through annual contributions and invested mostly in passive public equities. However, the move to independent governance fundamentally changed the trajectory of the fund, enabling better diversification, greater transparency and long‑term financial sustainability. The result was a globally respected investment organization that has helped secure CPP benefits for future generations, while avoiding far steeper contribution increases.

Lesson: strong governance is one of the most powerful drivers of long‑term investment success.

Removing constraints enables better outcomes

In 1996, Canadian institutional investors still operated under the foreign property rule, which limited direct foreign investment in tax‑deferred accounts to 20%, despite alternative fund structure or the use of synthetic or derivative workarounds. The result was forced concentration in Canadian assets, elevating domestic economic and market risk and allowing regulation, rather than portfolio theory, to drive long‑term asset allocation decisions.

The full elimination of the rule in 2005 marked a critical turning point. By removing political constraints from portfolio construction, investors gained flexibility to pursue broader global diversification.

Lesson: asset allocation decisions between domestic and global markets should be guided by relative opportunity and risk, not regulatory limits.

Risk always shows up – eventually

The past 30 years have delivered no shortage of defining risk events: the dot‑com boom and bust, the global financial crisis (GFC), the COVID‑19 shock, the inflation‑driven rate hikes of 2022 and ongoing geopolitical volatility. Each episode reinforced the same truth: risk may remain hidden for long periods, but it always emerges.

The dot‑com collapse sharpened DB sponsors’ understanding of asset–liability relationships, accelerating the adoption of liability‑driven investing, particularly among corporate plans. It also marked the beginning of broader diversification through alternatives, led by Canada’s large public funds. Investment policies became more formal, disciplined and explicitly risk‑focused.

The GFC shifted attention to liquidity risk, especially within less-liquid alternative strategies. While the COVID shock produced extreme but short‑lived liquidity stress, it once again exposed mismatches between portfolio liquidity and investor needs.

The next major shock to impact investors was the rapid rate hikes in 2022 to address rising inflation, which saw both equity and fixed income markets decline. There were several consequences depending on the type of investor and investment strategy. First, absolute total portfolio returns were generally negative. However, the rapid rise in interest rates created a different kind of outcome, such as many DB plans experiencing improved funded status with higher discount rates reducing the value of liabilities.

At the same time, the denominator effect increased allocations to alternatives, further highlighting the importance of liquidity management, rebalancing discipline and tactical flexibility. The impact was particularly pronounced for corporate DB plans pursuing de‑risking through annuity purchases, since funding typically had to be sourced from public market liquid assets, which unintentionally further increased the overweight to less‑liquid alternatives.

Lesson: liquidity often feels unnecessary, until it becomes essential.

Manage risk, not just asset allocation

Three decades of market stress have delivered a consistent message for institutional investors: problems arise from unmanaged risk, not from imperfect asset allocation. Asset allocation reflects expectations about how markets should behave. Risk reflects reality and prepares portfolios for when markets behave differently.

The most consequential risks do not appear clearly in asset allocation frameworks. Liquidity constraints, embedded leverage, hidden concentrations, implementation gaps and governance weaknesses often sit beneath the surface, only revealing themselves during periods of stress.

Figure 1: Hidden risks beyond asset class allocations

Risk type	How asset allocation misses it
Liquidity	Looks diversified on paper, but needs careful monitoring of individual strategies
Leverage	Often embedded and not explicit
Concentration	Hidden across several mandates; not always fully appreciated
Implementation	Occurs after the policy decision, where the selection process does not always reflect the risk profile identified
Governance	Formal processes are more reliable than sophisticated forecasting

This reality has driven growing interest in a total portfolio approach (TPA) to managing portfolios. By viewing the portfolio as a single, integrated system rather than a collection of asset class silos, a TPA allows decisions to be evaluated based on their marginal contribution to total portfolio risk and return.

The traditional strategic asset allocation (SAA) framework remains a widely adopted approach for developing long-term investment strategies, since its appeal lies in its intuitive structure and the quantitative discipline it brings to forecasting returns, volatility and correlations across asset classes. However, a critique of the SAA approach is the disconnect between asset allocation design and manager selection, since the processes are often conducted separately, which can lead to an understatement of the overall risk being adopted.

Lesson: investors do not manage what they allocate, they manage what they risk.

The growth of delegated investment structures

The COVID period exposed a reality many institutional investors had been grappling with for years: limited internal resources and the difficulty of responding quickly to changing market dynamics. At the same time, portfolio strategies were becoming more complex as investors diversified and governance demands increased.

In response, many plans have turned to delegated investment structures, most commonly the Outsourced Chief Investment Officer (OCIO) model, to support oversight, risk management and implementation. When thoughtfully designed, these structures can reduce governance burden, enable timelier decision‑making and improve execution relative to traditional committee‑driven models.

Today, investment managers and consultants offer sophisticated delegated platforms that allow institutions to remain focused on long‑term strategic objectives rather than day‑to‑day implementation. For example, these platforms have allowed smaller and mid-sized endowment and foundation investors to build diversified portfolios that increasingly resemble those of much larger institutional peers.

While delegation enhances governance efficiency, it does not replace fiduciary responsibility. Outsourcing decision‑making should never be confused with outsourcing accountability.

Lesson: do not equate outsourcing with abdication.

Responsible investing enters mainstream

Over the past decades, responsible investing has shifted from a secondary consideration to a core element of mainstream investment practice. Environmental, social and governance (ESG) factors are now widely recognized as financially material risks and opportunities, shaped by fiduciary duty, regulatory expectations and client demand.

This evolution was largely asset‑owner led. As investors increasingly asked how ESG risks were identified and managed, investment managers responded by embedding ESG analysis into portfolio construction and linking stewardship and voting to long‑term value creation.

What began in public equities has since expanded across fixed income and alternative assets, where ESG considerations are now evaluated alongside traditional investment risks. As ESG has gained prominence, it has also attracted political and cultural scrutiny, particularly in the US. Much of the resulting backlash reflects confusion and imprecise language, rather than a rejection of responsible investing itself.

Lesson: at its core, ESG remains about prudent risk management and long‑term value preservation.

The power of three: governance, flexibility, and risk management

Across three decades of market shocks, regulatory change and structural evolution, the message for institutional investors has been consistent: success has not come from perfectly forecasting markets or optimizing asset class weights, but from building governance frameworks that recognize risk early, respond decisively and endure through stress.

Where governance has been strong, constraints are removed and accountability clear, outcomes have improved. Where risk has been ignored, hidden or deferred, it has inevitably re-emerged, often at the worst possible moment.

The defining challenge for investors today is not complexity, but responsibility. Delegation, diversification and responsible investing are tools, not substitutes, for judgment and oversight. Managing risk requires seeing the portfolio as an integrated whole, understanding how decisions interact and ensuring that structures evolve as markets do.

Investors are not rewarded for what they intend, but for what they govern. Those who focus on monitoring and managing risk will be best positioned to deliver resilient outcomes in the next market cycles and future decades.

Canadian DC investors

Hidden cost of simplicity

In the mid‑1990s, many large private‑sector employers closed their DB plans to new entrants. The goal was to reduce balance‑sheet volatility and make retirement costs more predictable. But this shift had a profound consequence, with the investment and retirement security risk moving from the sponsor to the individual member.

The design of early DC plans reflected investment menus that were intentionally simple: a balanced fund, Canadian equity, foreign equity and fixed income funds. Members were given choice, but little guidance. At the time, simplicity was seen as prudence. In hindsight, it exposed a fundamental flaw regarding how member behaviour can lead to sub-optimal outcomes.

Lesson: When DC plans are simple but fail to actively manage behavioural and structural risks, those risks are not eliminated, they are transferred to members in ways that are often harmful.

Investment risk is tangible for DC plans too

The dot‑com bubble was the first true stress test for modern DC plans, and it exposed a fundamental weakness in early plan designs. For many members, this was their first experience with meaningful market losses. Unlike DB plans, there was no sponsor balance sheet to cushion the impact or smooth outcomes over time. Losses were felt directly and immediately by individual members.

The experience made investment risk tangible for DC members. What emerged was not simply a lesson about volatility, but one about behaviour. Most DC members remain disengaged during normal market environments, allowing risk exposures to drift unnoticed.

When markets fall, engagement spikes, but often in the worst possible way. Members react by reducing risk or moving to cash, locking in losses just as recovery potential is greatest.

Lesson: Left to their own devices, DC investors do not just bear risk, they often amplify it through poorly timed decisions, materially undermining retirement outcomes.

Default options and education became essential

The dot‑com crash marked a turning point in the evolution of DC plans. It exposed the limits of member‑directed choice and accelerated a structural redesign that shifted responsibility back toward plan sponsors and professional portfolio construction.

What became clear was that choice without context creates risk. When members are asked to make complex investment decisions without guidance or safeguards, behavioural biases dominate. Subsequent market shocks, most notably the GFC, reinforced this lesson, particularly as members approached retirement and sequencing risk became an issue.

In response, plan sponsors increasingly adopted default investment solutions, most notably target‑date and lifecycle funds. These portfolios diversified risk across asset classes and gradually reduced equity exposure as participants aged, directly addressing behavioural and timing risks.

For members who continued to self‑direct, sponsors enhanced education and decision‑support tools, shifting from technical disclosures to plain‑language materials and practical online tools. Over time, default solutions proved effective and target‑date and lifecycle funds have come to dominate DC assets.

Lesson: Unmanaged choice leads to concentrated risk and poor timing by members. Solutions and education need to be part of the offering to manage these risks.

Decumulation, the real measure of success

DC plans do not succeed when participants retire with large balances. They succeed when those balances deliver reliable income for life. Yet DC design effort often stops at accumulation.

Target‑date funds are optimized to grow assets, not to manage the more fragile transition into retirement. As members reach retirement, this imbalance becomes the central risk.

Unlike their DB counterparts, DC plans place the responsibility for managing longevity, market, inflation and sequencing risks on individuals, making the years immediately before and after retirement especially important, when individual investment balances are at their peak.

Without a deliberate decumulation strategy, even disciplined saving can result in disappointing retirement outcomes. Decumulation is the critical phase of a DC plan and a growing governance responsibility for sponsors. How savings are converted into income and how long that income lasts, ultimately determines whether members experience financial security in retirement.

Lesson: Accumulating assets is only half the job in DC plans. Without effective decumulation, appropriate saving behaviour can still lead to poor retirement outcomes.

Progress has been made, but still more to do

The Canadian DC market has evolved from a low-cost DB replacement into a more sophisticated, but still incomplete retirement system where design, defaults and decumulation can matter more than choice.

History has made one lesson unmistakably clear: risk does not disappear simply because it is individualized. When DC plans emphasize simplicity without structure, or choice without guidance, they do not empower members, they expose them.

The real responsibility of modern DC design is not to maximize optionality, but to manage the risks that could undermine retirement outcomes: behavioural errors, poor timing and an unmanaged transition into retirement.

Default solutions, thoughtful education and deliberate decumulation frameworks are the mechanisms that can turn savings into retirement security. Ultimately, DC plans will be judged not by account balances at retirement, but by the income they deliver after it.

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