Artemis Monthly Distribution Fund
Q2 2026 update

To generate monthly income, combined with some capital growth, over a five-year period. 

About the fund 

The Artemis Monthly Distribution Fund gives investors access to the income-generating potential of a blend of bonds and shares. It is actively managed. 

Dividend-paying company shares – These are shares in companies worldwide that return a portion of their profits to their shareholders through regular cash payments (‘dividends’). 

High-yield bonds – High-yield bonds 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 ratings 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

Positive data on the US economy, one of the strongest results seasons for corporate profits in recent memory and a tentative ceasefire between the US and Iran eased inflation concerns and supported a strong recovery in share prices. By the end of June, US and global stockmarket indices were setting new all-time highs.¹

The quarter's defining feature, however, was investors' continued enthusiasm for companies that benefit from the enormous sums being invested in building AI infrastructure, such as manufacturers of semiconductors. It is uncertain what long-term returns this investment will produce. For now, however, it is a powerful driver of corporate profits, economic activity and investor sentiment.

Performance

The fund returned 5.7% over the quarter while the average fund in its peer group, the Investment Association’s Mixed Investment 20-60% Shares sector, returned 6.6%.²

The fund's longer-term performance record speaks for itself. It is the best performing fund in its sector over one year, three years, five years and 10 years, as well as since its launch in 2012.³

Five-year discrete calendar-year performance

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.

Key positives and negatives

The fund invests in the shares of several companies that supply the equipment and components needed to expand AI infrastructure. These include Cisco Systems, which provides much of the connectivity infrastructure for data centres, and Prysmian, which makes high-voltage and fibre-optic cables. It also owns shares in semiconductor giant Samsung Electronics and in SK Inc, which holds a significant stake in SK Hynix, another leading chip maker⁴. These holdings all performed well over the quarter.

Overall, however, the fund tends to have less invested in large US technology companies than its peers⁵. In part, that is because many technology companies pay little (or no) dividends and their share prices often look high compared with their profits. And, if we look at some of the best performing multi-asset funds over the quarter, the unifying theme seems to be that they had a significantly higher exposure to technology⁶. Over the quarter, the fund's modest allocation to technology held back its performance as the share prices of a number of companies that it did not own, such as Micron Technology, AMD and Intel, more than doubled.⁷

One notable characteristic of our fund in recent years has been its investments in European banks. These holdings performed well as the European Central Bank raised interest rates, which increased the gap between the interest banks such as Raiffeisen and Banca MPS receive on loans and the interest they pay on deposits. Banca MPS also benefited when Banco BPM and Intesa Sanpaolo made rival takeover offers.⁸

Activity

Although the overall shape of the fund has not changed materially, we have continued to rebalance it by taking profits in holdings that had performed particularly well and reinvesting the proceeds in more attractively valued opportunities. At the end of June, shares in dividend-paying companies (shares) represented approximately 53% of the portfolio, with bonds accounting for the remaining 47%.

Our investments in energy companies were weak given the re-opening of the Strait of Hormuz (high oil prices tend to be good for the profits of energy companies). But given the evident fragility of peace in the Middle East and the need for the world to restore its depleted reserves of crude oil, we think it made sense to top up the fund's exposure to this sector.

The positioning of the fund’s bond portfolio, meanwhile, is largely unchanged. Shorter-dated, higher-quality high-yield bonds remain core holdings for the fund, accounting for around 70% of its allocation to fixed income. 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. 

Outlook 

Predicting the outlook remains challenging. On the one hand, growth in corporate profits remains strong across multiple sectors and regions. The extraordinary surge of investment in building AI infrastructure continues to support economic activity and create attractive opportunities for the businesses supplying it. At the same time, however, markets must contend with significant geopolitical uncertainty, volatile energy prices and changing inflation dynamics. Long-term borrowing costs have risen meaningfully, particularly in Japan. Markets are also adjusting to changing expectations around interest rates in the US. 

Meanwhile, after a prolonged bull market, retail investors – who tend to hop rapidly between popular stocks and investment themes – have become more influential, particularly in the US and Korea. That, along with the growing popularity of investment products that amplify gains and losses (‘leveraged ETFs’) is contributing to greater volatility in many of the market's most popular trades.⁹

In this volatile and unpredictable environment, we believe a focus on delivering income by investing in attractively valued bonds and shares remains the sensible approach. Our fund has little in common with many of its peers. But it is not different simply for the sake of being different. At a time when returns from global stockmarkets – and from many investors’ portfolios – have come to be dominated by a handful of shares and investment themes, we believe looking beyond the most crowded areas of the stockmarket is the best way to identify opportunities for income generation and long-term total returns.