Artemis SmartGARP Global Equity Fund
Q1 2025 update

• Fund outperforms market returning -1.4% vs -4.3% MSCI ACWI.
• Strength in Europe and China drives performance.
• Fund continues to have strong value bias (45% discount).
• …with market level quality and growth.  

Source: Artemis, Bloomberg, MSCI as at 11 April 2025. ROE is a blend of 3-year trailing and 2-year forward.

Overview

“There are two types of forecasters: those that don’t know, and those that don’t know they don’t know” - John Kenneth Galbriath.

Leading into 2025, it is common practice for the investment community to release their outlooks for the year, covering off different asset classes, geographies, and sectors and (with mountains of data) making their case for what they believe will be the state of the world as we move through the year. Artemis is not free from this habit although perhaps we take a more measured approach to our predictions than many.

A common theme throughout the 'outlook season' was a continuation of US exceptionalism, European stagnation, and a structurally challenged China. On the surface very sensible, and not incorrect, predictions based on a belief that the incoming President Trump was likely to be supportive to domestic businesses in the US, and hostile to China and Europe.

What Q1 2025 has shown is that the market can be directionally right on an outcome - that is, tariffs were expected - but horribly wrong on the quantum and therefore the impact. We are now in the midst of growth fears in the US, a Europe that is stimulating (underpinned by a seismic shift in German fiscal policy), and emerging markets where there is likely to be an acceleration of independence away from the US. These are historic changes and have forced (I would imagine) all market participants to scrap their prior assumptions.

While on a personal level these events have also come as a shock, the SmartGARP process has been signalling areas of over exuberance and areas of undue pessimism in global equity markets for some time. We are therefore positioned away from areas of high valuation (US) and towards those where there is pessimism already incorporated into the share price (Europe and emerging markets).

Fund performance

it is pleasing to see that over the quarter, our positioning was protective in what was a very weak market environment. At a regional level, it was our exposure within Europe and emerging markets that helped relative returns, with exposure in UK, Spain, and China leading the pack. At a sector level, our exposure within financials, in particular in banks helped, while our large underweight to the technology sector proved additive. Stocks of note were Indra Sistemas (IT services), Babcock (Aerospace), BBVA (Banks) and underweights to Tesla and Apple.

On the detracting side, not a huge amount to note from a region, country or sector perspective. At a stock level, Synchrony Financial (consumer finance) was our largest detractor, impacted by growth concerns in the US.

Activity

Changes over the quarter have largely taken place within our US holdings given the cadence of news flow. Despite valuations at an aggregate level, we are still able to find discounted businesses delivering attractive fundamental news.

New positions

Molson Coors Beverage: discounted with positive analyst sentiment

Citigroup: discounted, under owned, defensive profile.

Sales

Unum Insurance: degrading analyst sentiment, widely owned.

The minor changes over the month have left the fund’s high-level characteristics largely unchanged - we continue to trade at a significant valuation discount to the market while maintaining attractive growth and income characteristics. At a regional level, little has changed. We remain heavily overweight to emerging markets and Europe, with a substantial underweight to the US (49% Fund vs 67% Index). At a sector level we are overweight banks, and less so basic resources and autos. Our main underweights are to technology and financial services.

Where we stand

As the global order comes under strain, so do the markets that have benefitted most from that free movement of capital and goods that has been a mainstay of the last 70 – 80 years. While impossible to forecast what the next few years might hold, in our view it is perhaps a good time to look at other areas of the equity universe that have fallen by the wayside. There you will find companies trading at a discount, paying you a healthy dividend yield, buying in shares, and growing their earnings.

Given ‘Liberation Day’ occurred post quarter end we thought it worth providing a short thought. The extent of the tariffs announced (even after the pause) will likely impact economic growth and consumer confidence, it stands to reason that markets with self-sufficiency and stronger domestic consumption will be more insulated from trade worries. Complacency in markets and over valuation could present significant risks, we believe a margin of safety is preferred, which leads us to more EM, UK, Europe and Japan.