Artemis UK Select Fund
Q2 2026 update

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

Review

For much of the second quarter, the headlines were dominated by news around the conflict in the Middle East and the reopening of the Strait of Hormuz. In response to the initial announcement of a ceasefire, the price of oil fell from a peak of over $130 per barrel to less than $100¹. Energy prices then continued to fall, albeit fitfully, through the quarter. This eased fears of a recurrence of the inflation we saw in 2022 and pushed stockmarket indices higher². It also prompted investors to move out of energy shares and into those of companies that should benefit if interest rates don’t rise in the way that was feared when the war first broke out.

The quarter's other theme was the sharp rise in the share prices of companies that make essential components to support the rollout of AI³. In this environment, the UK stockmarket's bias away from technology and towards mining and energy companies was unhelpful for its relative returns: it lagged some way behind global indices. 

Performance 

During the quarter, the Artemis UK Select Fund returned 13.8%^4. Over the same period its first benchmark, the FTSE All‑Share index⁵, rose by 4.7% while its second benchmark, the IA UK All Companies⁶ peer group average, rose by 7.2%. 

The fund's strong performance reflected a combination of good news from a number of the companies it invests in (described below) and having relatively little invested in energy companies.

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.

Contributors

Standard Chartered 

The fragile ceasefire between the US and Iran eased fears around the bank's exposure to the Middle East. While results for the first quarter were extremely positive across all parts of the business, the standout was its wealth division⁷. The ongoing success of this high-returning unit is one of the key reasons for our investment.

International Consolidated Airlines Group (IAG)

The higher jet-fuel prices that resulted from the closure of the Strait of Hormuz weighed heavily on the share price of IAG and other airlines in March. As the Strait tentatively reopened and fuel prices declined, however, IAG's shares rallied. Demand for premium seats and long-haul flights remains resilient⁸.

Barclays, Lloyds and NatWest 

The share prices of the fund's UK-focused banks recovered sharply as investors assessed that the economic impact of the Iran war should be less severe than feared. Their results, meanwhile, demonstrated the resilience of their loan books and lending margins and highlighted their capacity to continue returning cash to shareholders⁹.

Oxford Instruments 

We think Oxford Instruments is one of the most exciting companies in the UK. Its equipment for manufacturing compound semiconductors is gaining commercial traction. These advanced chips are being used in AI data centres and other applications that require high speeds coupled with low power consumption, such as the uLEDs found in smart glasses¹⁰.

Shell and BP 

As oil prices began to fall, having relatively little invested in Shell and BP helped the fund’s performance relative to the FTSE All-Share index.

Detractors

WH Smith 

The conflict in the Middle East, which briefly interrupted international travel, has not been helpful for WH Smith given its focus on airports. To improve its financial position and so improve its negotiating position with airports and suppliers, it issued new shares during the quarter¹¹. This means its existing shares have been diluted (resulting in current shareholders owning a smaller percentage of the total company) but it gives the company breathing space should higher jet fuel prices and higher airfares lead to a fall in air passenger volumes in the US. 

Melrose Industries 

Instability in a chemical storage vessel prompted the closure of a plant in California that makes canopies for F-35 fighter jets¹².

Vistry 

Housebuilder Vistry suffered from a weaker housing market, a change in management and, more recently, from worries around the strength of its finances. We reduced our holding at the start of the year, ahead of the management change. With the benefit of hindsight, we should have sold more. More recently, however, we have started to add to this holding again as we believe its new management team is taking the right steps. In time, demand for the affordable housing that Vistry builds should improve as government funding finally reaches councils and housing associations¹³. 

Activity 

Bridgepoint

We added a new holding in private capital group Bridgepoint. Its funds are performing exceptionally well¹⁴ but this did not appear to be reflected in the performance of its shares. Fortunately, this addition came before it announced its acquisition of Kayne Anderson Real Estate in a deal that we believe will boost its future profits.   

RELX

We added repeatedly to the fund's holding in RELX when its share price fell. We think fears that AI will displace this company's specialist information and analytics products are misplaced.

HSBC 

We added to HSBC. The possibility of higher interest rates in the US along with the continued growth of the wealth management industry in Asia play well to HSBC’s strengths.

International Personal Finance

We sold the fund's holding in International Personal Finance, which agreed to be bought by BasePoint Capital of the US¹⁵.

Lloyds, Barclays and NatWest

Although we remain enthusiastic about their potential, we sold part of our holdings in these banks following a powerful recovery in their share prices, thereby locking in some profits. 

National Grid

We reduced the position through April and May and sold the last of the small residual holding in June.

Outlook

The focus for investors remains on the Middle East and whether shipping passes through the Strait of Hormuz. In the short term, a further escalation of the conflict seems possible. Longer term, however, we think both sides will eventually bow to domestic and international pressure to get oil flowing again. How they get there remains uncertain, but the existing memorandum of understanding gives both sides a framework for their future negotiations. 

Away from the Middle East, the AI story continues to dominate returns from global stockmarkets. If and when this story loses its power, we are confident that global investors will look to diversify their holdings into other sectors of the economy and a greater number of regions. The UK stockmarket has relatively few technology companies, so it could be a potential home for any profits taken on the AI trade.

We have spent a lot of time meeting companies over the last couple of months and are encouraged that these have either reinforced our conviction in our existing holdings or highlighted new opportunities. We believe the outlook for both energy prices and for UK government policy will become clearer over the coming months, allowing investors' time horizons to lengthen and appetite for UK shares to increase.