Artemis Strategic Assets Fund
Q1 2026 update

Fund objective  

To grow the value of your investment by greater than 3% above the Consumer Price Index (CPI) per annum after fees over a minimum five-year period, by strategically allocating the fund’s assets within a diversified range of asset classes in markets around the world. 

There is no guarantee that the fund will achieve a positive return over a five-year period or any other time period and your capital is at risk. 

Summary

The Artemis Strategic Assets Fund contains two ‘buckets’: a Directional (Trends) Strategy, which aims to take advantage of trends (such as rising stockmarkets or sectors); and a Non-Directional Strategy, whose goal is to generate returns that are uncorrelated to market movements by taking long positions (aiming to profit from a rise in asset prices) and short positions (aiming to profit from a fall in asset prices) whose exposures offset one another. In both strategies, the fund invests in financial derivatives¹ that give it exposure to a diversified range of asset classes, including equities, bonds and currencies.

Global stockmarkets moved higher in the first part of the quarter but relinquished those gains when the US attacked Iran². Bond markets also came under pressure as energy prices rose³, prompting fears of higher inflation.

Against this difficult backdrop, the Artemis Strategic Assets Fund made 7.8% during the quarter, compared with gains of 1.4% from its CPI +3% benchmark⁴ and a decline of 1.7% in its second benchmark, the IA Flexible Investment sector⁵.

It was helped by robust performance in January and its ability to hold on to gains when the stockmarket fell in March.

Annual returns for the past five years are shown below. 

Discrete calendar-year performance

Past performance is not a guide to the future.  

Source: Lipper Limited to 31 December 2025 for class I accumulation units in 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.

Positioning

Directional (Trends) Strategy

Shares – We reduced our exposure to shares from 32% to 8%. Within that, higher energy prices influenced our decision to go overweight (a higher-than-average position compared with the benchmark) in US oil & gas companies. We also have significant exposure to the Chinese stockmarket. 

Government bonds – We increased duration (sensitivity to movements in interest rates), but still remain short overall. Our largest short positions are in Australia and Japan, reflecting the strength of the Australian economy⁶ and the result of the Japanese election, both of which we felt made rises in interest rates look possible. Later in the quarter, we initiated short positions across a wider range of government bond markets when the Iran war postponed the interest-rate cuts investors had expected⁷.

Currencies – We are short in the dollar against the Chinese renminbi. This position delivered positive returns with low volatility. We are also short in the dollar against the Mexican peso. Our short position in the euro against the Norwegian krone reflects our belief that the eurozone looks weak relative to Norway's energy-exporting economy.  

Non-Directional Strategy

Shares – Our relative preference for US and emerging-market shares is based on what we feel are low valuations relative to their growing profits. We took relative short positions in Swiss and European shares as we believe they are expensive while profit forecasts look weak.

Government bonds – We remained relatively short in Australia's government-bond market as expectations for economic growth look strong⁸. Conversely, our relative long position in Swiss government bonds reflects the country's muted inflation⁹ and comparatively slow economic growth¹⁰.

Currencies – We remained long in the Australian dollar and Norwegian krone for most of the quarter due to the relative strength of those economies¹¹ and higher interest rates¹². We are relatively short the Canadian dollar and also feel the euro appears unattractive.

Outlook

Iran and the oil price: From risk to reality

The biggest driver of stockmarkets this quarter was the conflict in Iran. What had initially seemed like a manageable risk became a more serious and lasting concern. Investors are now pricing in the possibility that disruption could continue for some time.

The most immediate impact has been on energy markets. Oil prices have surged because of fears over supply disruption, including risks to important shipping routes such as the Strait of Hormuz. For investors, this matters because energy is one of the main forces influencing inflation, interest rates and market sentiment.

Although a ceasefire may provide some short-term relief, we believe the economic effects of the conflict are unlikely to disappear quickly. Restoring energy production to previous levels could take at least six months¹³, and the knock-on effects on inflation and growth may last longer.

US interest rates: Fewer rate cuts expected

The jump in energy prices has made life more difficult for the US’s central bank, the Federal Reserve. Before the US attacked Iran in late February, it had been expected to cut interest rates in 2026 (this tends to be positive for riskier assets such as shares as it makes ‘safer’ assets such as government bonds and cash look less appealing in comparison). Since then, those expectations have been scaled back¹⁴.

Europe: A more difficult balancing act

With higher energy prices feeding directly into inflation and so squeezing 'real' incomes (after inflation is taken into account), we think Europe’s economic recovery is under threat. 

Bond yields have moved higher¹⁵, with expectations shifting away from rate cuts and, in some cases, towards further tightening¹⁶. We believe this presents a challenging backdrop for the European Central Bank (ECB), which must balance weak consumer demand against rising headline inflation¹⁷. 

UK outlook: Stagflation risk returns

The UK faces a similar problem, and in some respects the challenge may be even greater. Higher energy prices are likely to feed through into household bills, even if the full impact is delayed by regulation such as the energy price cap.

At the same time, government borrowing costs have risen¹⁸. A combination of weak economic growth and rising inflation raises the possibility of stagflation, the unpleasant scenario in which prices continue to rise despite stagnating economic growth. This means there may be limited scope for the Bank of England to cut interest rates in the near term. 

China and emerging markets: A mixed picture

Overall, we believe the balance of risks for emerging markets has become less favourable since late February. The threat of higher interest rates and the possibility of a stronger US dollar could reduce investor appetite for riskier assets and slow investment in the developing world. 

But the impact seems likely to be uneven. Higher energy prices tend to hurt countries that import oil & gas, while benefiting exporters. In China, the outlook still appears to be one of stabilisation rather than strong acceleration¹⁹. Supportive government policies may help, but weaker global demand could limit their effectiveness.