How 2025 happened and how our Canadian Equity managers chose to navigate it
The Canadian stock market’s standout performance in 2025 caught everyone by surprise. While global attention remained on U.S. megacap tech and “AI everything,” the S&P/TSX Composite quietly produced its best year since 2009. It returned 31.7% in 2025 and outperformed the S&P 500 by roughly 19 percentage points and the MSCI World by nearly 16 percentage points (returns in CAD)
This performance isn’t a mystery to those who know this market’s spine. Gold led the materials sector, and materials led Canada.
Why this happened is embedded in the index itself. Materials hold a significant weight in the Toronto Stock Exchange (TSX) at approximately 18.1% and gold producers dominate that sector
- The S&P 500 allocates only about 1.8% to materials and is instead led by technology and financials
- The MSCI World allocates just 3.3% to materials and is led by technology, financials, and industrials
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This leaves global peers far less sensitive to moves in gold. Canada’s leadership last year wasn’t mysterious; it was mechanical.
Within Canada, the S&P/TSX Capped Materials Index returned 100.6% and, at the narrowest end, gold led the pack with the S&P/TSX Global Gold Index returning 146.2% (as of February 18, 2026, it is up 21.2% YTD) and gold futures up well over 70%
But numbers alone don’t tell the full story. To understand the forces behind the rally and how disciplined process shaped positioning in a historic year, the Investment Manager Research team reached out to the following Canadian Equity and Dividend asset managers for their perspectives on gold and how they managed exposure in their portfolios
- PICTON Investments Inc. (Picton)
- Fidelity Investments Canada ULC (Fidelity)
- Mackenzie Financial Corporation (Mackenzie Investments)
- Connor, Clark & Lunn Financial Group Ltd. (CC&L)
- Morguard Lincluden Global Investments Limited (Morguard Lincluden)
- AGF Investments Inc. (AGF)
- Beutel, Goodman & Company Ltd. (Beutel)
- Fidelity Investments Canada ULC (Fidelity)
- Value Partners Investments Inc. (VPI)
The asset managers’ insights reveal the diverse, process‑driven approaches that guided decision‑making amid a powerful commodity cycle and anchor the commentary that follows. Note: asset manager remarks were received by email and edited for clarity and formatting.
- Picton captured the mood: “We view gold as a sentiment‑driven commodity that has benefited from heightened geopolitical tensions and growing fiscal deficits globally.”
- AGF took a structural view, calling 2025 “a historic re‑rating of gold… transitioning from a ‘barbarous relic’ to the cornerstone of a new, multipolar financial architecture.”
- Fidelity emphasized consistency over excitement: “We cap exposure at a consistent percentage,” underscoring the role of discipline even in a surging market.
- Beutel warned against extrapolation, noting that today’s elevated prices should not anchor long‑term valuation work.
- VPI offered a clear counterpoint: “Gold is a non‑producing asset with little fundamental value – industrial demand accounts for less than 10% – and while its price can be speculated on, it’s very difficult to predict with certainty.”
Together, these viewpoints outline a coherent narrative of a powerful price move validated not by momentum‑chasing, but by selective, process‑driven allocation that allowed investors to benefit.
In 2025, macro policy and capital flows deepened that tailwind. The Bank of Canada reduced its policy rate to 2.25%, easing financial conditions as gold‑led materials powered the index
To ground the story in the numbers, the following snapshot in Table 1 highlights the key drivers of Canada’s gold‑powered breakout year and why they matter.
Table 1: 2025 at a glance – Canada’s gold-powered breakout
| Metric |
2025 Result |
Why it mattered |
|---|---|---|
|
S&P/TSX Composite Index |
Returned 31.7% |
Strongest year since 2009; Canada’s structure lined up with the year’s macro regime. Materials make up 18.1% of the Index. |
|
S&P/TSX Capped Materials Index |
Returned 100.6% | Showcased how a gold‑heavy materials sector can transmit the metal’s repricing into outsized equity gains across the Canadian market. |
|
S&P/TSX Global Gold Index |
Returned 146.2% | Gold equities delivered the highest equity leverage to the metal, with improving balance sheets and rising capital returns making the case shift from hedge to cash‑flow. |
| Gold Futures | Climbed 70% | Safe‑haven demand, geopolitics and rate expectations drove a historic repricing of the metal. |
Source: Morningstar Direct. ©2026 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Critically, by late 2025, fundamentals began catching up with price. CC&L observed, “We expect gold producers to generate record free cash flow in 2026, with free cash flow yields in the mid‑teens.” This underscores that today’s elevated prices are translating into real operating cash flow, stronger balance sheets and the potential for sustained capital returns.
This convergence between fundamentals and market behaviour sets the stage for the bigger idea explored in the next section: gold’s evolution from a volatility buffer to a genuine funding engine within diversified portfolios in 2025.
The asset managers offered two complementary views on where gold sits today.
The first is the traditional one.
- Fidelity captured it clearly: “The general approach to gold allocation has historically been to cap exposure (to a comfortable level), as price is largely driven by sentiment.”
- Beutel echoed this view, noting that gold can be “driven by factors based more on sentiment… fueled by concerns about the independence of the U.S. Federal Open Market Committee (FOMC) and investor FOMO (fear of missing out).”
This is the gold most investors recognize. Protective, reactive, and sentiment‑sensitive.
2025 added a second lens: operating strength.
- As AGF put it: “Historically high prices, paired with all-in sustaining costs (AISC) below $2,000/oz, imply margin expansion and higher levels of free cash flow generation,” supported by improving margins, cleaner balance sheets, and more consistent capital returns. Mergers and acquisitions (M&A) restraint, dividends, and buybacks are becoming more common, building a clearer equity case grounded in cash generation rather than narrative.
- At the same time, VPI’s caution keeps the long view in focus: “Based on the price of gold, the near‑term earnings and cash‑flow outlook can look compelling – but these remain lower‑quality and unpredictable businesses over the long run.”
Across the asset managers, one theme stayed constant: process over prediction. As Mackenzie put it: “We do not speculate on the future direction of commodity prices; our models and stock selection criteria use spot prices.” The message is simple: stick to your process, not a forecast.
Discipline includes knowing when to step back. Morguard Lincluden reminded us that “gold’s rarely stable or income focused.” Even as fundamentals improve, valuation and volatility still matter.
In short, gold’s role has expanded from hedge to a cash‑flow engine. However, the asset managers haven’t abandoned discipline; instead, they’ve sharpened it. That leads naturally to the next question. How do you stay disciplined when prices run?
When prices accelerate, discipline matters more. Across asset management teams, process stayed ahead of performance. Positions were sized deliberately, trimmed into strength, and added only where risk/reward all aligned. As of February 2026, here’s how the asset managers approached it specific to the mandates they manage:
- AGF: “We… trimmed our gold weight via written call options as we thought the volatility and blow‑off‑top performance was too much, too fast. We have bought every dip over the past few years and always focus on high‑quality producers.”
- Picton: “We have modestly added to our gold positioning… while maintaining the discipline of our investment framework, [concentrating exposure on] names exhibiting positive change.”
- Beutel: “We are cautious on using the current gold price for long‑term valuation of gold stocks,” trimming Franco‑Nevada twice as targets were reached.
- Mackenzie (North American Equity Team): “Currently the funds have some exposure to gold, but we stick to our process… We prefer companies that develop resources organically… and do not add to the risk profile via geopolitical risk.”
- Mackenzie (Growth Team): “Benchmarks inform our risk context… but do not dictate holdings,” with position sizes driven predominantly bottom‑up.
- VPI: “We have not increased exposure to gold or gold‑related stocks. When client goals are prioritized over peer or benchmark comparisons, it makes little sense to speculate with clients’ capital in hopes of outsized returns.”
Across styles, the pattern was the same: process beat momentum. Asset management teams used the rally to harvest gains and avoid stretching for beta when fundamentals were already doing the work.
This same mindset shaped how the asset managers navigated the benchmark’s heavy gold weight by being benchmark‑aware and conviction‑led.
The TSX’s gold‑heavy composition prompted portfolio construction conversations, but it didn’t dictate portfolio behaviour. Every asset manager acknowledged the benchmark, yet acted from philosophy, valuation and discipline rather than index pressure. Their comments make that clear:
- CC&L: “In April 2025, we moved to an overweight position in gold.” They ultimately held a slight overweight versus the benchmark by February 2026. It’s a deliberate expression of conviction rather than a chase for beta.
- Fidelity: “The general approach has historically been to cap exposure at a consistent percentage.” We maintained an underweight despite gold driving index returns. It’s a reminder that discipline can mean not following the benchmark higher.
- Picton: “We manage a benchmark-relative mandate.” They recognized the constraint, but kept exposures selective, leaning on their framework rather than index weight.
- Mackenzie (North American Equity Team): “We acknowledge the benchmark weight,” yet “do not consider being ‘left out’ of the category return a driver.” Their changes were measured: the Canada Life Canadian Dividend Fund increased exposure without abandoning its underweight, while Canada Life Canadian Equity added slightly only after a justified pullback.
- Morguard Lincluden: They stayed consistent across mandates. Counsel Canadian Dividend fund avoided gold entirely.
- VPI: “Our Pool currently has no exposure to gold or gold‑related stocks. There are more certain ways to invest—with higher confidence in positive outcomes—than risking client capital in lower‑quality, highly volatile businesses.”
Across asset managers and styles, the message was steady. The benchmark is a reference point, not a leash.
In the first quarter of 2026, gold has come under sharp, war‑driven selling pressure. It’s a reminder that discipline is more important than ever.
After a year when fundamentals finally began to catch up to price, the early‑2026 pullback has reintroduced dispersion across the gold complex, creating opportunities for investors who stayed valuation‑anchored while exposing the risks of chasing beta in 2025’s rally. CC&L’s view that producers could generate mid‑teens free‑cash‑flow yields if prices held now underscores the importance of assessing fundamentals under a more volatile price regime.
The takeaway: the early‑2026 environment appears to still be constructive. However, it increasingly rewards selectivity over broad exposure.
Gold earned its spotlight last year, but not all gold exposure delivered the same outcome. The real story was how Canada’s index composition, anchored by a gold‑centric materials sector, interacted with supportive policy conditions and disciplined portfolio construction to produce exceptional results.
The takeaway isn’t that investors should pile into gold. Rather, it’s that consistent process and thoughtful sizing mattered far more than simply owning gold.
Looking ahead to 2026, the question isn’t whether gold sets new records, it’s who:
- Owns the companies with durable free‑cash‑flow strength
- Positions with intention
- Maintains valuation discipline when volatility invites shortcuts
Canada’s index composition creates a natural tailwind.
The edge, however, remains selectivity.
Across the asset managers polled, approaches to gold remain diverse. Some teams maintain higher allocations supported by improving balance sheets and free‑cash‑flow strength, while others keep exposure modest, or have none at all, reflecting valuation discipline, mandate design and income objectives. This range of perspectives underscores the strength of a multi‑manager platform built on independent process and differentiated expertise.
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S&P/TSX Composite: Measures the performance of Canadian-based, Toronto Stock Exchange listed companies, with approximately 95% coverage of the Canadian equities market.
S&P/TSX Capped Materials: Imposes capped weights on the index constituents included in the S&P/TSX Composite that are classified in the GICS® materials sector.
S&P/TSX Global Gold: Designed to provide an investable index of global gold securities. Eligible Securities are classified under the GICS® Code 15104030 which includes producers of gold and related products, including companies that mine or process gold and the South African finance houses which primarily invest in, but do not operate, gold mines.
Asset Managers listed within this document are sub-advisors to the following funds:
- Picton is sub-advisor to Counsel Canadian Growth
- AGF is sub-advisor to CAN Canadian Dividend and Income 75/75 (P)
- CC&L is sub-advisor to Canada Life Canadian Fundamental Equity Fund and CAN Canadian Fundamental Equity 75/75 (P)
- Mackenzie is sub-advisor to Canada Life Canadian Growth Fund, Canada Life Canadian Focused Small-Mid Cap Fund and Canada Life Canadian Dividend Fund
- Fidelity is sub-advisor to CAN Fidelity True North® 75/75 (P)
- Beutel is sub-advisor to CAN Canadian Focused Value 75/75 (P), Canada Life Canadian Focused Value Fund and Counsel Canadian Value
- Lincluden is sub-advisor to Counsel Canadian Dividend
VPI is the portfolio manager of the VPI Canadian Equity Pool (refer to VPI’s Simplified Prospectus for more details, available at www.valuepartnersinvestments.ca/documents).
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