Artemis UK Select Fund
Q4 2025 update

Fund objective  

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

Review

Despite what we felt were unhelpful government policies, 2025 turned out to be a strong year for the UK stockmarket, which did better than many of its global peers¹. We believe two forces in particular helped:

• The dollar weakened against the pound², making UK assets look more attractive for overseas investors.
• Investors, we believe, wanted to diversify away from the big US tech giants.

UK companies also benefited from solid profit growth and low starting valuations³. 

However, most of the FTSE All-Share’s gains came from just a handful of the largest companies⁴ and there was a continued shift away from fast‑growing companies towards ‘value’ shares⁵ (the shares of companies that are cheaper than the stockmarket average). 

Our fund, which focuses on companies that generate strong free cashflows (the money left over after all liabilities have been met), benefited from this shift. Being overweight (an above-average position) in sectors such as financials and aerospace, and underweight (a below-average position) in areas such as consumer staples (everyday goods) and AI (artificial intelligence), also helped performance.

Performance 

During the final quarter of the year, the Artemis UK Select fund gained 5.1%. This was slightly behind its first benchmark, the FTSE All‑Share index⁶ (up 6.4%), but ahead of its second benchmark, the IA UK All Companies peer group average⁷ (up 3.8%). Over the full year, the fund comfortably beat both measures.

Discrete calendar-year performance  

Past performance is not a guide to the future.  

Source: Artemis/Lipper Limited, class I accumulation GBP to 31 December 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. This class may have charges or a hedging approach different from those in the IA sector benchmark.

Detractors

Private equity group 3i’s share price fell following slower sales at Action, one of its key businesses, during October and November⁸. This slowdown happened only in France (which accounts for about one‑third of Action’s sales), due to weaker consumer confidence, unusually warm weather and heavy discounting from a competitor that has since collapsed⁹.

The rest of Action’s business continues to perform well¹⁰. After reducing our holding over the past 18 months because of valuation concerns, we’ve now added to our position because we still believe in Action’s strong long‑term growth potential.

Marks & Spencer had a difficult year following a high-profile cyberattack¹¹. We used this weakness to increase our position, as we believe the company’s long‑term prospects remain strong.

Bookmakers Flutter and Evoke were hit by higher‑than‑expected tax increases in the Budget¹². We believe this is likely to shrink the UK market and push smaller operators out, which could help larger firms gain market share, yet the overall profit pool for the industry will still be negatively affected.

Whitbread also suffered from taxes announced in the Budget, following a major increase in business rates which will affect its hotels¹³. The company and others are expected to challenge the ruling, but until there is clarity, we’ve decided not to add to our holding.

From a relative point of view, we suffered from not holding pharmaceuticals AstraZeneca and GSK as their share prices rose¹⁴.

Contributors

Our bank holdings (Standard Chartered, Barclays, NatWest and Lloyds) rallied strongly, especially late in the year¹⁵. Investors had feared the Budget might trigger turbulence in UK government bonds (debt issued by the UK government) or see further taxes applied to banks, but neither happened¹⁶.

The Bank of England also reduced capital requirements (the amount of spare money banks must hold on their balance sheets),¹⁷ meaning the banks have more money to return to shareholders.

Airline Ryanair delivered better‑than‑expected results accompanied by an optimistic forecast¹⁸. 

Not owning RELX, BAE Systems, and Experian helped relative performance as these companies underperformed the stockmarket¹⁹. 

Activity  

We took profits from Standard Chartered and Barclays after strong performance to keep positions at sensible sizes.

We reinvested the proceeds into 3i, Marks & Spencer and Smurfit Westrock, where we see attractive opportunities despite recent weakness.

Outlook  

For the first time since the pandemic, we’re no more optimistic about UK consumer spending than the general market view. Tax rises and slowing wage growth mean we expect consumer spending to be dependent on people saving less. This is possible, though, especially if lower inflation allows the Bank of England to cut interest rates soon. 

We’re not pessimistic. We just think the consensus forecasts look about right. In our opinion, political uncertainty is likely to remain elevated, especially if there’s a leadership challenge after the May local elections.

When it comes to the global economy, we expect high government spending to support economic growth. In our opinion, global political risks are harder to predict under US president Donald Trump, but we would point out that he does pay close attention to financial markets and public opinion, which may limit extreme actions.

We expect it to be harder for stockmarkets to rise by becoming more expensive, so we think most returns will probably come from profit growth and dividends²⁰. 

In our view, our portfolio companies continue to offer a strong pipeline of opportunities, and we believe they can increase profits faster than expected. 

After three years in which our fund has delivered annual average returns of close to 25%²¹, and with valuations now less cheap than previously, we think it’s sensible to expect more modest – though still positive – returns in 2026.