Mawer's Strategic Reallocation: From Softchoice to Stronger Growth Drivers

Mawer Investment Management’s 2025 portfolio reallocation reflects a calculated shift toward sectors with stronger growth potential and resilience in a volatile market environment. The firm’s decision to divest from Softchoice, a Canadian technology services provider, underscores its commitment to rebalancing risk exposure while capitalizing on emerging opportunities in defense and infrastructure. This strategic pivot is not merely a reaction to short-term turbulence but a deliberate alignment with long-term structural trends, particularly in a world grappling with trade wars, geopolitical instability, and shifting public spending priorities [1].

The divestment from Softchoice, which saw a -3.14% portfolio impact after exiting its position in the company [2], highlights the vulnerabilities of Canadian tech firms in an era of U.S. policy uncertainty. Softchoice, like other Canadian technology and consulting firms, faced headwinds from U.S. tariffs and speculative concerns about cost-cutting measures under the Department of Government Efficiency (DOGE) administration [1]. These risks, coupled with AI-driven supply chain disruptions, made the sector less attractive for a firm prioritizing stability. By contrast, Mawer’s increased exposure to defense contractors such as Germany’s Rheinmetall (which more-than-doubled in Q1 2025) and France’s Thales illustrates a focus on companies with durable competitive advantages and demand insulated from cyclical downturns [1].

The firm’s emphasis on defense and infrastructure is further justified by the sector’s alignment with global macroeconomic tailwinds. Rising defense budgets in Europe, driven by heightened security concerns, have created a tailwind for firms like BAE and Leonardo, which saw stellar returns in Q1 2025 [1]. Similarly, infrastructure investments, such as Canada’s AltaGas, have benefited from trade tensions with the U.S., positioning them to capitalize on cross-border energy dynamics [1]. These holdings exemplify Mawer’s preference for “attractively valued, well-managed companies” capable of generating long-term wealth amid market turbulence [1].

Critically, Mawer’s strategy avoids overexposure to high-flying technology and consumer stocks, which have historically been prone to sharp corrections during periods of economic uncertainty. While companies like NVIDIA and Tesla delivered strong returns in previous cycles, their valuations and reliance on speculative growth metrics made them less appealing in 2025 [1]. Instead, the firm has doubled down on sectors where demand is driven by geopolitical necessity and long-term public policy commitments, reducing its reliance on volatile tech-driven narratives.

The resilience of Mawer’s reallocated portfolio is evident in its performance metrics. European defense stocks, for instance, outperformed U.S. equities in Q1 2025, supported by lower valuations and robust demand [1]. Meanwhile, Canadian equities as a whole benefited from a surge in gold prices, though Mawer’s lack of exposure to gold mining stocks slightly detracted from its relative performance [2]. This trade-off, however, reflects a disciplined approach to risk management, prioritizing sectors with clearer revenue visibility over speculative bets.

In reassessing portfolio resilience, Mawer’s 2025 strategy demonstrates a nuanced understanding of market dynamics. By exiting underperforming tech positions and reallocating to defense and infrastructure, the firm has positioned itself to weather economic headwinds while capturing growth in sectors with structural tailwinds. This approach not only mitigates downside risk but also aligns with a broader narrative of global reallocation toward security and stability—a trend likely to persist in the coming years.

Source:
[1] First Quarter | 2025 [https://www.mawer.com/institutional-us/insights/mawer-quarterly/first-quarter-2025]
[2] Mawer New Canada Fund Exits Softchoice Corp, Impacting ... [https://uk.finance.yahoo.com/news/mawer-canada-fund-exits-softchoice-170133665.html]