Artemis Income Fund
Q4 2025 update
Source for all information: Artemis as at 31 December 2025, unless otherwise stated.
This is a marketing communication. Before making any final investment decisions, and to understand the investment risks involved, refer to the fund prospectus (or in the case of investment trusts, Investor Disclosure Document and Articles of Association), available in English, and KIID/KID, available in English and in your local language depending on local country registration, available in the literature library.
The fund’s objective is to grow both income and capital over a five-year period.
Performance
UK shares performed well in Q4, with the FTSE All-Share1 gaining 6.4%2. This takes 2025 total returns for the index to 24.0%3, its best annual performance since the 2009 recovery from the Global Financial Crisis4. The cheap valuations5 of UK-listed companies, together with the ‘global not local’ nature of many of its constituents (with the majority of revenues derived from overseas6), led to attractive returns.
The Artemis Income Fund returned a healthy 5.8% in the fourth quarter but lagged behind its first benchmark, the FTSE All-Share index – although it beat its second benchmark, the UK Equity Income sector average7, which made 5.7%.
This brings the fund’s 2025 returns to 21.7%. It is unusual to be disappointed by a portfolio return of this magnitude – the fund’s best annual performance since 20198 – but our aspiration is to outperform the fund’s benchmark.
For full five-year discrete performance, please see below.
| 2025 | 2024 | 2023 | 2022 | 2021 | |
| Artemis Income | 21.7% | 15.1% | 9.8% | 0.4% | 16.2% |
| FTSE All-Share TR | 24.0% | 9.5% | 7.9% | 0.3% | 18.3% |
| IA UK Equity Income average | 18.4% | 8.7% | 7.0% | -2.0% | 18.4% |
Past performance is not a guide to the future.
Source: Lipper Limited/Artemis to 31 December 2025 for class I distribution units, GBP. 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. This class may have charges or a hedging approach different from those in the IA sector benchmark.
Positives
The UK domestic banks capped off a strong year of performance9 in the fourth quarter. Lloyds, Barclays and NatWest all continue to benefit from a step-change to profitability from higher interest rates10. Although their share prices have become more expensive, we believe they look well placed to continue grinding out decent returns through a combination of dividends11 and share buybacks12.
Online trading provider, IG Group reported good progress in its December trading update, with double-digit customer growth and 46% year-over-year revenue growth at IG’s US business Tastytrade13. The company, like many in the UK, has also been buying back its own shares in a significant fashion14.
Negatives
Whitbread shares – like many UK domestic businesses – were weak going into the Budget, then sold off sharply15 as the company estimated an 8 to 10% hit to profit before tax from the 2027 financial year onwards16, given an increase in the rateable value17 of its hotels.
We have added to the position and still believe the risk/reward trade-off to be attractive: we believe the shares are fairly cheap and the company possesses the ability to grow its profits. Whitbread’s scale is a significant competitive advantage, in our view, and we think uncertainty and a more challenging tax regime will pose a larger threat to independent hotel brands in the UK.
Private equity investment company 3i's shares sold off sharply18 in response to slower growth in France for discount retailer Action, in which it holds a majority stake. Action’s French business accounts for around a third of its sales19 and we do not believe the business to be facing any material issues outside France.
Significant activity
We sold out of Spectris before it was acquired by US private equity giant KKR20.
In recent months, we have been building a position in industrials business IMI, which we believe is well equipped for growth. IMI’s products are being digitalised21 and can therefore provide a continuous and valuable stream of data that can be used to reduce downtime and improve efficiency, in our view.
Outlook
Even after such strong returns from the UK stockmarket in 2025, we believe there are plenty of reasons to be optimistic in 2026. Share buybacks continue apace22, which we believe to be a more significant driver of dividend and profit growth than the market gives them credit for. We also saw some tentative signs of a revival in the initial public offering (IPO) market towards the end of last year23.
Many of the companies we hold continue to deliver robust fundamental performance, in our view, and we have observed them taking market share and equipping themselves to raise cashflows24 and dividends.
Notes and references
2, 3, & 4. Source: Lipper Limited to 31 December 2025
5. Source: https://moneyweek.com/investments/uk-stock-markets/invest-in-uk-stocks
6. Source: https://www.bbc.co.uk/news/articles/c87r05143dzo
7. The IA UK Equity Income sector is a group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. It acts as the fund’s second ‘’comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark.
8. Source: Lipper Limited to 31 December 2025
9. & 10. Source: https://www.ii.co.uk/analysis-commentary/new-price-targets-lloyds-bank-barclays-natwest-and-others-ii537727
11. A dividend is the amount, usually expressed on a per-share basis, that a company pays to its shareholders (or that a fund pays to its investors) from after-tax earnings.
12. Share buybacks refer to the reacquisition by a company of its own shares. Instead of paying dividends, it is an alternative way for a company to return money to shareholders. In most countries, a company is able to repurchase its shares by paying cash to existing shareholders in exchange for a reduction in the number of shares outstanding.
15. Source: Google Finance as at 26 January 2025
16. Source: https://polaris.brighterir.com/public/whitbread/news/rns/story/x400opw
17. The rateable value of a commercial property consists of how much it cost to rent that property for a year on 1 April 2021. The next revaluation will come into effect in England and Wales on 1 April 2026 – based on the cost to rent a property for a year on 1 April 2024. The rateable value is used to determine how much a company pays for business rates (a tax charged on most non-domestic properties).
18. & 19. Source: https://www.theaic.co.uk/aic/news/industry-news/3i-group-shares-slide-on-warning-that-action-sales-growth-may-miss
20. Source: https://www.spectris.com/assets/Announcement-of-publication-of-Scheme-Document.pdf
22. Source: https://www.fca.org.uk/publication/multi-firm-reviews/share-buybacks-uk-listed-equities.pdf
24. Cashflow is the net amount of cash moving into and out of a business.
Risks specific to Artemis Income Fund
- Market volatility risk The value of the fund and any income from it can fall or rise because of movements in stockmarkets, currencies and interest rates, each of which can move irrationally and be affected unpredictably by diverse factors, including political and economic events.
- Currency risk The fund’s assets may be priced in currencies other than the fund base currency. Changes in currency exchange rates can therefore affect the fund's value.
- Charges from capital risk Where charges are taken wholly or partly out of a fund's capital, distributable income may be increased at the expense of capital, which may constrain or erode capital growth.
- Income risk The payment of income and its level is not guaranteed.
The intention of Artemis’ ‘investment insights’ articles is to present objective news, information, data and guidance on finance topics drawn from a diverse collection of sources. Content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or investment by Artemis or any third-party. Potential investors should consider the need for independent financial advice. Any research or analysis has been procured by Artemis for its own use and may be acted on in that connection. The contents of articles are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. Any forward-looking statements are based on Artemis’ current opinions, expectations and projections. Articles are provided to you only incidentally, and any opinions expressed are subject to change without notice. The source for all data is Artemis, unless stated otherwise. The value of an investment, and any income from it, can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested.
