The John Hancock Multimanager 2045 Lifetime Portfolio experienced a period of underperformance relative to its benchmark during the third quarter of 2025. This outcome aligns with expectations given the prevailing market conditions, which saw a strong momentum-driven rally, sustained dominance of a select group of mega-cap technology firms, and exceptional gains from lower-quality companies. Despite these dynamics, the broader financial markets showcased robust performance, with both equity and fixed-income assets recording positive returns. This was supported by a conducive global economic environment, marked by declining interest rates across developed economies and a less restrictive monetary policy stance from the Federal Reserve.
During the third quarter, financial markets experienced significant upward movement, largely fueled by a positive global growth narrative and declining interest rates in developed markets. This environment, coupled with the absence of major economic disruptions, created a tailwind for both equities and bonds. The Federal Reserve's increasingly favorable policy shifts further bolstered the fixed-income markets, contributing to positive returns globally. However, the portfolio's specific asset allocation, which involved a lower exposure to U.S. large-cap equities and a higher allocation to defensive, mid-cap, and international equities, resulted in it trailing its benchmark. This was primarily due to the market's preference for high-momentum, mega-cap technology stocks and other less fundamentally sound companies.
In response to evolving market valuations and the observed underperformance, strategic adjustments were implemented within the portfolio. This included reducing exposure to higher-beta equities, which tend to be more volatile, and reallocating capital towards U.S. large caps and developed-market international equities. Additionally, the portfolio increased its holdings in short-term bonds, aiming to enhance overall risk-adjusted returns. Despite the broader underperformance, certain exposures within the fund delivered positive contributions. Notably, overweight positions in real assets, particularly those within the metals and mining sectors, as well as an overweight to equities relative to bonds, and investments in emerging-market debt, all played a role in buffering the portfolio's returns.
The management team acknowledged that the portfolio's positioning, while designed for long-term stability and diversification, diverged from the market's short-term focus on growth and momentum. The strategic rebalancing efforts underscore a commitment to optimizing the portfolio for future market cycles, emphasizing a balanced approach to risk and return. The insights gained from this quarter's performance will continue to inform allocation decisions, ensuring the portfolio remains aligned with its long-term objectives while adapting to dynamic market conditions. The overarching goal remains to deliver sustainable returns through a carefully constructed and actively managed investment strategy.
