Artemis Strategic Bond 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
Credit markets maintained their positive momentum through the third quarter, with spreads tightening further and extending the post-Liberation Day recovery. The period began with a robust summer rally in July, supported by limited new issuance, before stabilising in August and ending with an unusually strong September, despite the seasonal increase in supply.
Against this backdrop, the fund remained active and disciplined, continuing to recycle capital from positions where further upside appeared limited into bonds offering better relative value.
Performance
The fund delivered returns of 1.7% during the third quarter, versus a sector average of 1.6%.
| Three months | Six months | One year | Three years | Five years | |
| Artemis Strategic Bond Fund | 1.7% | 4.9% | 5.5% | 27.4% | 12.1% |
| IA Strategic Bond | 1.6% | 3.9% | 4.8% | 23.7% | 9.5% |
Past performance is not a guide to the future. Source: Lipper Limited, class I quarterly accumulation units in GBP to 30 September 2025. Sector is IA £ Strategic Bond NR. 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. This class may have charges or a hedging approach different from those in the IA sector benchmark
Credit activity
In July, the fund participated in new issues from Next and Supermarket Income REIT. These were funded largely by sales in Bunzl, the international distributor, which had performed strongly. We continued to reduce our exposure to subordinated financials, such as Belgian bank KBC and insurer Legal & General, in favour of more senior instruments, including a switch between two TP ICAP bonds.
August saw credit spreads remain broadly stable, an atypical outcome for what is usually a seasonally strong month. Despite muted market activity, the fund stayed nimble, trimming subordinated financial holdings including Legal & General, KBC and Progressive Impact Corporation Berhad (PICORP), an environmental solution provider in Malaysia. We tactically switched from a sterling Barclays HoldCo bond into a legacy US dollar Barclays bond, which offered an attractive entry point following clarity that it would not be tendered.
September, typically a weaker month, instead saw spreads tighten further as issuance remained constrained, reflecting continued deleveraging among corporates. The fund remained active, adding new issues from Reckitt Benckiser (the health and hygiene consumer brands company), GA Global Funding (which issues bonds on behalf of insurer Global Atlantic Financial Group), Athene (the annuity and retirement services provider), LSEG (the financial markets infrastructure and data provider) and insurer MetLife. These positions were financed by reducing more cyclical holdings such as Next and subordinated financials.
In response to a steepening yield curve, the fund also extended duration selectively, favouring longer-dated opportunities where incremental yield for modest maturity extension was attractive, notably in Athene, MetLife and Heathrow bonds.
Overall, the quarter was characterised by steady credit tightening, subdued but improving primary market activity and a disciplined approach to rotation and duration management, leaving the fund well positioned amid a constructive but selective credit environment.
High-yield bonds
Within high yield, we added DeepOcean bonds through the new issuance process. This company operates a fleet of remote undersea vehicles that service oil and gas fields and offshore wind farms. The bonds carry an average rating of BB- but the spread on offer at new issuance was 150bps wide of the Euro BB- universe. The majority of its revenues come from non-cyclical repair and maintenance, yet there is clearly still quite a premium within the energy space (particularly in Europe) – one that we are happy to benefit from in this lower-risk exposure to the space.
We also bought new 5.5-year euro bonds from Swedish residential landlord Heimstaden and added a new 5.5-year euro bond issued by European lottery operator Allwyn.
In the secondary market, we added US dollar bonds of global jeans icon Levi’s as consumer trends improved in the US. We also topped up a number of positions, including copper miner First Quantum, specialty chemicals maker SNF and a recent addition to the strategy, conventional weapons manufacturer for NATO militaries, Czechoslovak Group.
On the sales side, we exited a few positions on the back of stretched valuations. These included US hospitality industry payments specialist Shift4 and North American waste manager GFL.
Outlook
Global headline inflation across G10 regions (the US, EU, UK, Canada, Australia, New Zealand, Switzerland, Norway, Sweden and Japan) moved above 2% in April 2021 and peaked back in October 2022. Although considerable progress has been made, it still hasn’t returned to target and the post-Covid higher inflation period has stretched to four and a half years. This has obviously had significant consequences for consumer behaviour and wage demands and it will continue to impact price setting in the future.
If we look at core inflation, the picture arguably becomes even more concerning. On average across the G10 it has traded sideways for the past 12 months so it looks like we have settled into a higher inflation regime, which ultimately means the interest rate cutting cycle has not got much further to run.
But it’s not all bad news. A higher-for-longer environment brings with it higher bond yields and investors are now being compensated with decent real yields. Going forward, our strategic view involves looking for income opportunities, rather than expecting a significant rally in duration.
Fiscal policy levers are turning in response to increased geopolitical threats and tariff shocks, as governments rush to insulate domestic demand. The global fiscal impulse is becoming more of a tailwind to growth than we were expecting heading into this year. This should exert upward pressure on prices, in addition to easier monetary policy, which continues to support domestic economies.
Donald Trump in his second term is proving to be even more unpredictable and bold in policy announcements than during his first and global leaders are turning to more extraordinary actions (think Germany’s fiscal package or Canadian protectionism) to grab a foothold in the new world order. The geopolitical/fiscal landscape has rarely been in such a state of flux.
Since the start of the year, the fund has been reducing duration as yields have rallied. We believe fiscal policy is set to remain broadly supportive for growth and we also observe that consumers and corporates are in a good place, with high savings rates and strong balance sheets. Reducing overall portfolio duration (selling duration in markets where we feel central bank paths are most fairly priced) means the fund’s headline duration now lies in the 5- to 5.5-year range, having entered 2025 closer to six years.
The overall outlook for credit spreads remains extremely supportive given the strong technical backdrop (lower corporate bond supply given post-Covid deleveraging). At the same time, we are mindful of outright spread levels and most recently have been de-risking, freeing up firepower to take advantage of any spread decompression should risk markets wobble into year-end. It’s difficult to point to the catalyst for such an event, however a more prudent approach feels appropriate.
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 Strategic Bond 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.
- 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.
- 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.
- 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.
- 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.
