Artemis Global Income Fund
Q2 2025 update

Objective

The fund’s objective is to grow both income and capital over a five-year period.

Performance

The Artemis Global Income Fund rose 11.7% in the quarter, compared with gains of 5.0% from its MSCI AC World benchmark¹ and 2.8% from its IA Global Equity Income sector² average.

This takes returns for the first half of this year to 20.1%, which is a significant degree of outperformance versus both the benchmark (up 0.6%) and the peer-group average (up 2.8%). 

For full five-year discrete performance, please see the table below. Please remember that past performance is not a guide to the future.

The second quarter was one of the most action-packed in recent memory. Global stock markets sold off sharply in April following ‘Liberation Day’ when US president Donald Trump announced ‘reciprocal’ tariffs (a tax on imports) on America’s trading partners. However, thanks to several last-minute tariff suspensions and robust economic data, US and global shares posted a jet-propelled recovery in May and June³.

Technology companies were hit particularly hard in the sell-off, but the sector mounted a brisk recovery⁴, albeit with significant divergence across its biggest names. 

Calendar year performance (%)

Past performance is not a guide to the future. Source: Artemis/Lipper Limited, class I distribution units to 30 June 2025. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. Our benchmark index is MSCI AC World NR.

Positives

Our aerospace & defence allocation (some 20% of the portfolio⁵) was once again the most significant contributor to outperformance. 

Rheinmetall beat increasingly lofty investor expectations by improving its profitability and free cashflow (the amount of cash available to a company after it has paid for all capital expenditures) significantly during the first quarter of this year⁶.

Hanwha Aerospace also reported strong growth⁷ as did BAE Systems, which announced significant new orders in 2024 and an increased backlog⁸.

Elsewhere, our power exposure was also additive to returns, helped along by policy announcements aimed at bringing a ‘nuclear renaissance’ to the US⁹. Siemens Energy’s quarterly earnings comfortably beat expectations, with management upgrading free cashflow expectations this year and announcing a lengthy order backlog¹⁰. 

Mitsubishi Heavy Industries, which has the highest global market share in gas turbines for power stations¹¹, also posted a strong quarter of performance¹². It has been one of our top contributors to returns in recent years. 

Finally, banks have once again played their part in a quarter of healthy outperformance. Commerzbank – like our other European banks – posted a strong recovery post ‘Liberation Day’ and healthy profits¹³. We recently exited the position on valuation grounds.

KB Kookmin Bank in South Korea rallied along with Korean shares more broadly (Korea’s Kospi was the best performing stockmarket in the first half of the year), as falling political uncertainty in the wake of the martial law saga and growing optimism around corporate governance reforms drove share prices higher¹⁴.

Negatives

The most significant detractor from relative performance during the quarter was our underweight (below average position) in technology. Nvidia, Microsoft and Broadcom, none of which we hold, all rose strongly. Generally speaking, dividend yields are low and valuations are high in the technology sector, so it is a challenging one for us to find appropriate investments in.

(A dividend is the amount, usually expressed on a per-share basis, that a company pays to its shareholders – or a fund pays to its investors – from after-tax earnings. The dividend yield is the annual dividend paid by a company or a fund on a per-share basis, divided by the current share price, expressed as a percentage.)

Purchases

We added some ‘core income’ names to the portfolio, including Hess Midstream and Plains (US pipelines with long-term inflation-linked cashflows) and a US shopping mall real estate investment trust (REIT) called Simon Property Group (SPG). The latter fell sharply in the wake of Liberation Day¹⁵. We have held SPG in the past so know the company well and have seen how much its balance sheet has improved in recent years.

Sales

In banks, we have exited some of the names that have performed well and now look expensive (such as Commerzbank). This capital has been recycled into regional banks – particularly in the US and Japan – which also benefit from higher interest rates, but by and large trade on lower valuations.

Outlook

The speed with which US shares recovered their sharp Liberation Day losses was surprising. Risk-on sentiment has returned, accompanied by robust economic data and positive profit announcements from several of the multi-trillion-dollar behemoths that sit atop US indices.

Despite this rally, however, we think something is afoot across financial markets. The dollar has had its worst six months in more than 50 years¹⁶ and South Korea is the best performing stockmarket in 2025 thus far¹⁷. 

Long-dated bonds (those with more than 10 years until maturity) have sold off around the world¹⁸ as governments increase spending. Germany has released the ‘debt brake’ to finance a huge programme of fiscal expansion (when governments aim to increase economic activity via increased spending or tax cuts)¹⁹.

We believe all of this is evidence we find ourselves in a new regime that is entirely different to the post-Global Financial Crisis (GFC) era, characterised by uncertainty and volatility. Yet we continue to believe that the portfolio is appropriately positioned for this new world. We are highly contrarian and our portfolio looks very different from both our benchmark and our peers²⁰. The portfolio is cheaper than the benchmark, with almost double the dividend yield²¹. These value characteristics – combined with a dividend that has grown 8% per year since the fund’s inception in June 2010²² – give us a degree of comfort.