Artemis US Extended Alpha Fund
Q3 2025 update
Source for all information: Artemis as at 30 September 2025, unless otherwise stated.
Review of the quarter to 30 September 2025
The third quarter was shaped by renewed trade frictions, signs of cooling in the US labour market and a long-awaited shift in monetary policy as the Federal Reserve delivered its first rate cut of the year. Despite this mixed backdrop, US equities delivered robust gains as investors refocused on the prospect of policy easing and resilient corporate earnings.
After several months of tariff uncertainty, the US finalised new agreements with the EU and Japan, maintaining headline rates at 15%, while tariffs on Canadian imports (outside the United States-Mexico-Canada Agreement [USMCA]) rose to 35%. Further sectoral tariffs followed, including a 50% duty on copper and a 100% tariff on branded pharmaceuticals, effective in October. While these actions raised concerns over inflation, markets looked through the noise as supply chains adjusted and fiscal stimulus underpinned growth.
The labour market, however, showed its first signs of fatigue since 2021. Revisions to mid-year data reduced job gains by more than 250,000, while August payrolls increased by just 22,000 and unemployment rose to 4.3%. With wage growth moderating and leading indicators pointing to a slowdown in hiring, the Fed cut rates by 25bps in September to 4.00-4.25% and signalled further easing ahead.
In terms of stock markets, the S&P 500 gained 10.1% on continued strength in AI-linked technology and select industrials. Meanwhile, the NASDAQ rose 11.4%, the dollar stabilised after its sharp first-half decline and gold surged by nearly 17% to record highs, driven by dovish Fed rhetoric and ongoing geopolitical caution. Although market sentiment improved, the breadth of performance remained narrow and valuations in high-growth technology sectors continued to stretch well above historical norms.
Performance
The fund made a positive return of 7.6% during the quarter, but this was behind that of its S&P 500 benchmark. Underperformance was largely driven by our consumer discretionary names, although some of our technology positions also lagged behind. Consumer staples made a marginal positive contribution.
| Three months | Six months | One year | Three years | Five years | |
| Artemis US Extended Alpha Fund | 7.6% | 15.0% | 10.2% | 48.9% | 81.2% |
| S&P 500 NR | 10.1% | 15.0% | 17.2% | 61.7% | 105.8% |
| IA North America average | 8.3% | 13.7% | 14.4% | 48.2% | 83.8% |
Past performance is not a guide to the future. Source: Lipper Limited/Artemis for class I accumulation GBP to 30 September 2025. All figures show total returns with dividends and/or income reinvested, net of all charges and performance fees. 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. Classes may have charges or a hedging approach different from those in the IA sector benchmark
Detractors
S&P Global suffered as concerns about competition from AI weighed on data-service peers despite resilient underlying fundamentals.
Advanced Micro Devices (AMD) saw margins pressured by export-related inventory adjustments, although management reiterated confidence in AI GPU growth in the second half of the year.
Shares in Texas Instruments declined amid mixed guidance for analogue semiconductors and short-term destocking effects.
Corteva Agriscience fell on weaker near-term pricing in crop protection, although long-term fundamentals remain intact.
From a relative point of view, we suffered from our underweight in Tesla which rallied sharply on renewed optimism over AI-driven vehicle automation.
Contributors
Storage hardware group Western Digital rallied on evidence of a cyclical recovery in data-centre demand and stabilising pricing within NAND markets.
Lam Research saw demand for its semiconductor equipment underpinned by hyperscaler (providers of data centres and cloud computing services) investment.
Shares rose in Bank of New York Mellon following steady progress on management’s cost-efficiency programme and improved organic growth across custody and clearing businesses.
Pharmaceutical AbbVie recovered as investors reassessed political risk in the biotech sector, while stable product sales underpinned earnings momentum.
Netflix delivered strong subscriber growth and pricing traction as advertising revenue accelerated.
Activity
Portfolio activity during the quarter reflected our ongoing shift from AI spenders to AI providers, alongside new positions in selective cyclical recovery names.
The fund closed the period with a net exposure of 97%, maintaining its balanced structure across discounted compounders, cyclical recovery stocks and well-defined short positions in value traps and overvalued 'AI halo' names.
Purchases
As we rotated further away from Nvidia, we increased our position in AMD. The latter continues to gain traction in AI GPUs and full-system offerings, with a significant long-term opportunity from hyperscaler demand.
We also bought building materials supplier CRH. Not only is it attractively valued, but non-residential indicators are beginning to improve.
Valuation consolidation and product-cycle strength led us to build our position in Apple, although we remain underweight.
Sales
We reduced our position in Nvidia to manage concentration risk after strong performance and elevated valuation levels.
Profit taking was also behind our decision to trim exposure to insurer Progressive Corporation. In addition, we noticed moderating pricing tailwinds in US personal lines.
Our new position in CRH was funded by our sale of Vulcan Materials, where we saw lower cyclical upside.
Outlook
Equity markets advanced through the period as investors embraced monetary easing and robust corporate earnings. Yet with leadership still concentrated in a handful of technology names, we remain cautious of overextended valuations.
The fund’s relative gains were driven by sound stock selection and disciplined position management. Our bias remains towards high-quality undervalued compounders and cyclical franchises with identifiable recovery potential, while the short book retains exposure to legacy retail, telecoms, staples, asset managers and structurally challenged growth stories.
Overall, the fund remains well balanced with a net position of 0.97. It has exposure to a range of exciting longs and shorts that we see as incremental sources of alpha.
Notes and references
Benchmarks: S&P 500 NR; A widely-used indicator of the performance of 500 large publicly-traded US companies, some of which the fund invests in. IA North America; A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. These act as ’comparator benchmarks’ against which the fund’s performance can be compared. Management of the fund is not restricted by these benchmarks.
FOR PROFESSIONAL INVESTORS AND/OR QUALIFIED INVESTORS AND/OR FINANCIAL INTERMEDIARIES ONLY. NOT FOR USE WITH OR BY PRIVATE INVESTORS.
CAPITAL AT RISK. All financial investments involve taking risk and the value of your investment may go down as well as up. This means your investment is not guaranteed and you may not get back as much as you put in. Any income from the investment is also likely to vary and cannot be guaranteed.
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.
Risks specific to Artemis US Extended Alpha 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.
- Derivatives risk The fund may invest in derivatives with the aim of profiting from falling (‘shorting’) as well as rising prices. Should the asset’s value vary in an unexpected way, the fund value could reduce.
- Leverage risk The fund may operate with a significant amount of leverage. Leverage occurs when the economic exposure created by the use of derivatives is greater than the amount invested. A leveraged portfolio may result in large fluctuations in its value and therefore entails a high degree of risk including the risk that losses may be substantial.
- Counterparty risk Investments such as derivatives are made using financial contracts with third parties. Those third parties may fail to meet their obligations to the fund due to events beyond the fund's control. The fund's value could fall because of loss of monies owed by the counterparty and/or the cost of replacement financial contracts.
Important information
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.
