Artemis High Income Fund
Q2 2026 update
Source for all information: Artemis as at 29 June 2026, 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 provide a combination of a high level of income and capital growth, before fees, over a rolling five-year period. The manager defines a high level of income as equal to, or in excess of, the average yield of the IA £ Strategic Bond sector.
About the fund
The managers of the Artemis High Income Fund search for attractive sources of income across the bond market. They also invest in the shares (equities) of a small number of companies that return a portion of their profits to their shareholders through regular cash payments ('dividends').
High-yield bonds – Holdings in high-yield bonds are at the heart of this fund. These are issued by companies that ratings agencies (such as S&P and Moody’s) deem to be at greater risk of defaulting on their debts. As their name suggests, they offer a higher ‘yield’ (rate of interest) to compensate for the higher level of risk.
Investment-grade corporate bonds – These are issued by companies with higher credit ratings. These are businesses that independent agencies consider to be at relatively low risk of defaulting on their debts.
Government bonds – These are widely viewed as being among the safest bonds (governments in developed economies rarely default on their debts). The interest rate, or ‘yield’, available here is lower than it is on high-yield and investment-grade corporate bonds – but they can provide a useful counterweight to the fund’s holdings in more economically sensitive bonds and shares.
Overview
It was a positive quarter for every market this fund invests in. High-yield and investment-grade corporate bonds responded positively to the slight de-escalation of the conflict between Iran and the US. Share prices rallied. And government bond prices rose as investors began to hope that the war's impact on inflation would be less severe than initially feared.
Performance
The fund returned 3.9% during the quarter versus 2.6% for its benchmark and peer group, the IA £ Strategic Bond sector1.
Discrete calendar-year performance
| 2025 | 2024 | 2023 | 2022 | 2021 | |
| Artemis High Income I Inc GBP | 10.1% | 10.0% | 10.9% | -10.1% | 5.9% |
| IA £ Strategic Bond average | 7.2% | 4.4% | 7.9% | -12.0% | 0.9% |
Past performance is not a guide to the future.
Source: Lipper Limited, class I income units, 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.
Positives
The share prices of UK-focused banks Barclays, Lloyds and NatWest recovered sharply as fears the Iran war could lead to an unpleasant combination of recession and inflation ('stagflation') began to ease. Their results, meanwhile, demonstrated the resilience of their loan books and ability to continue returning cash to shareholders.2
High-yield bonds issued by ZipRecruiter, an online recruitment portal, rallied through the quarter. Although the number of job searches has been relatively subdued, the company took sensible steps to protect its financial position. This investment has caused us a few headaches over the past year, but we always felt it would be able to generate sufficient cash while it waited for an uptick in recruitment activity.
The bonds of specialty chemicals company Ineos Quattro rallied early in the quarter. Its results and the accompanying outlook statement indicated that a lack of imports into the European market due to the closure of the Strait of Hormuz could push its profit margins higher.3
Bonds issued by home healthcare provider Accendra, formerly Owens & Minor, rallied as it refinanced parts of its debt on attractive terms.4
Negatives
There were thankfully few negatives over the quarter, but we did see some underperformance from our holding in bonds issued by SIG, which distributes building products. Activity in the UK construction industry remains sluggish.5
Melrose Industries' share price fell as instability in a chemical storage vessel prompted the closure of a plant in California where it makes canopies for F-35 fighter jets.6
Shares in housebuilder Vistry fell in response to a weaker property market, a change in management and, more recently, concerns around the strength of its finances. We retain the holding in the belief its new management team is doing all the right things. In time, demand for affordable housing should improve as government funding finally reaches councils and housing associations.7
Activity
We added newly issued bonds from auction house Sotheby’s to the fund. We like the strength of its market position (it operates as part of a duopoly with Christie’s) and we recognise the power of its trusted brand.
We also added bonds issued by German footwear producer Birkenstock. It has a strong position in the niche market it created: making casual, orthopaedic open-toed sandals. Its brand is strong and it has been producing its core models for more than 40 years, reducing its exposure to the fickleness of fashion.
Elsewhere, we bought bonds from Paratus Energy, which provides pipe-laying services to offshore oil and gas producers.
We also added a new holding in the bonds of Oceaneering, which designs, manufactures and operates underwater remotely controlled vehicles and robots used by the energy and infrastructure industries.
Despite having a positive view on the oil & gas sector, we sold the fund's holding in Ithaca’s bonds. We have liked and owned Ithaca for a long time, but we believe its potential is now fully reflected in its valuation.
We sold US pet chain Petsmart to fund an addition to Petco, its rival. We also sold the fund's holding in hair and beauty supplier Sally Holdings. Its bonds have performed well and, in our view, there was little upside left.
Outlook
As we see it, inflation is still the primary threat to markets, but the recent fall in oil prices has eased the pressure on the world’s central bankers to increase interest rates. This, in turn, has the potential to lower borrowing costs and support consumer confidence through the rest of 2026. Despite the brighter outlook for investments that would respond well to lower interest rates, such as government bonds, we don't see the balance between risk and reward here as particularly attractive. Instead, we tend to prefer income-producing bonds and shares that are less dependent on changes in interest rates. Higher-quality high-yield bonds, for example, remain core holdings for the fund. We continue to believe this area of the bond market offers attractive income while being less sensitive to changes in interest rates than government bonds.
Notes and references
2. Morningstar DBRS 13 May 2026 UK Banks Q1 2026 Results: Solid Profitability Despite Higher Provisions
3. Trading Statement Q1 2026 - INEOS Quattro Holdings Ltd.`
4. S&P Global, 16 Junne 2026, Research Update: Accendra Health Outlook Revised To Stable From Negative On Completed Refinancing And Debt Exchange; 'B' Rating Affirmed
5. Bloomberg, 4 June 2026, UK Construction Sector Shrinks Most Since Pandemic, PMI Shows
6. Reuters, 27 May 2026, GKN Aerospace owner Melrose drops 7% after California plant incident
7. Vistry Results 8 July 2026
Risks specific to Artemis High 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.
- Bond liquidity risk The fund holds bonds which could prove difficult to sell. As a result, the fund may have to lower the selling price, sell other investments or forego more appealing investment opportunities.
- Higher-yielding bonds risk The fund may invest in higher-yielding bonds, which may increase the risk to capital. Investing in these types of assets (which are also known as sub-investment grade bonds) can produce a higher yield but also brings an increased risk of default, which would affect the capital value of the fund.
- Credit risk Investments in bonds are affected by interest rates, inflation and credit ratings. It is possible that bond issuers will not pay interest or return the capital. All of these events can reduce the value of bonds held by the fund.
- 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.
- Emerging markets risk Compared to more established economies, investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles, less governed standards or from economic or political instability. Under certain market conditions assets may be difficult to sell.
- 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.
