Artemis Global Income Fund
Q3 2025 update

Review of the quarter to 30 September 2025

Equity markets posted strong returns in the third quarter and continued to recover after a sharp selloff in April. Artificial intelligence (AI) and mega-cap US technology companies continued to draw the majority of investor attention. 

Capex and various investment commitments have accelerated to such an extent that OpenAI has now signed more than $1trn worth of AI-related deals in 2025 thus far. Several hundred billion of this figure is related to Oracle, which saw its best day of share price performance since the late 1990s (up 35% on 10 September) as the announcement of $450bn of future contract revenues caught investors totally off-guard.

It follows that technology was the best performing sector over the quarter (the MSCI ACWI Technology Index climbed 15%). 

Away from the limelight, however, it was Chinese equities that posted the strongest returns, with the CSI 300 gaining more than 22% in sterling terms. Like in the US, it was the technology sector that led – with the Hang Seng Technology index gaining 25%. China is finally shaking the long-held tag of being ‘uninvestable’ and optimism around AI is beginning to feed into the shares of Chinese technology giants too.

Longer-dated bond yields continued to break out in the third quarter, supported by government debt continuing to swell and uncomfortable signs that inflation is beginning to tick up once more. This has helped to fuel a strong rally in gold, which gained 17% versus the dollar in the third quarter and in early October breached $4,000/oz for the first time.

Performance

The fund continues to deliver, returning 36.2% year-to-date versus 10.2% for its benchmark and 8.2% for its peer group. It is the best performing fund within the IA Global Equity Income sector over one, three and five years to 30 September 2025. 

This run of outperformance persisted during the third quarter, when the fund returned 13.4% and beat its benchmark by 3.9 percentage points – no mean feat during a period when the average peer trailed the benchmark by a similar margin.

Past performance is not a guide to the future. Source: Lipper Limited to 30 September 2025 for class I Acc 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.

Positives

Our stock picks within the banks, electrical equipment and metals & mining sectors made the largest contribution to performance over the quarter, while our best regions were Europe and emerging markets.

Kinross Gold (a 2.2% position) was our highest contributing stock, with share price gains of 61.8%. The company released a robust Q2 earnings report with record free cashflow of $650m (an 87% year-on-year increase) and its earnings per share beat street estimates by more than 30%. 

Gold has soared this year and could well be due a shorter-term pullback, but longer term looks well underpinned given continued central bank buying, as well as concerns around fiscal spending and government debt levels. The extraction of gold is a very energy-intensive process, so the lower oil price was another tailwind for Kinross and fellow gold producer Agnico Eagle (1.1% position, shares up 44.9%). 

China’s Contemporary Amperex Technology (CATL), whose IPO we participated in earlier this year, posted share price gains of 66.3%. CATL is the world’s largest battery producer, with a near 40% market share in electric vehicle (EV) batteries globally. It is an increasingly significant supplier to Western auto manufacturers and is also the global leader in ESS (long-duration energy storage) batteries.

Hon Hai, which assembles iPhone and server racks for AI data centres, gained 35.2% during the quarter. The market reacted positively to Hon Hai’s new partnership with TECO, which makes electrical components for data centres. Worth 2.5% of our fund, Hon Hai is a means by which we can access the ‘AI trade’ at a more palatable valuation (14x P/E) and yield (3.2%) than Nvidia and the US hyperscalers.

Another ‘AI capex’ play, cable company Prysmian (1.6% position, +43%) enjoyed a buoyant quarter as investor enthusiasm in all things AI continued to intensify.

Elsewhere, Korea’s Hanwha Aerospace (3.5% position, +27.9%) reported impressive results, with operating profit beating consensus estimates by 30%. Hanwha has more capacity than European peers and offers a lower price point on many of the systems it produces. Its exports are about three times more profitable than domestic sales, so large orders from Poland and the Baltic states are driving margins higher. 

US shopping mall REIT Simon Property Group (3.2% position, +19.8%) benefited from improving sentiment around interest rate cuts. Its portfolio of high-quality ‘class A’ retail space in the most desirable areas in the US is allowing the company to drive rental growth thanks to robust demand (despite tariffs) and constrained supply. A 4.7% dividend yield that has grown at a three-year compound annual growth rate (CAGR) of 9% continues to offer value.

Italy’s Banco BPM and Spain’s Banco de Sabadell were also among our top 10 contributors. Like several of our European banks, Sabadell (1.5% position, +26.5%) reported good results in July, beating profit forecasts by 11%. At Sabadell’s capital markets day, a new strategic plan for 2025-27 was released. Potential shareholder returns (through dividends and buybacks) of €6.3bn were outlined, which is equivalent to almost 40% of the bank’s current market capitalisation. Though Sabadell shares have re-rated over the past 12 months to about 1.2x price to book, the magnitude of capital returns on offer mean it is still an attractive proposition. European banks account for approximately 11% of the portfolio. 

Negatives

The portfolio’s large (about 30%) underweight to technology was the most meaningful detractor. The likes of Nvidia and Microsoft are difficult for us to own, given their high valuations, skinny yields and our preference for less well-owned ideas, but we are able to access the AI trade through the likes of Hon Hai, Siemens Energy and Mitsubishi Heavy Industries. 

Among the stocks we do own, Freeport-McMoRan (1.9%, shares down 13.3%) was the biggest detractor after a mudflow at its Grasberg copper mine in Indonesia resulted in the declaration of force majeure and near-term cuts to copper production. Our investment thesis here was based on Freeport’s exposure to gold and copper but the negative news around Grasberg has resulted in its gold exposure being overlooked. We sold out of the shares in mid-September.

Hess Midstream (1.6%, -7.3%), which owns and operates the pipelines that Hess uses, cut volume guidance in the wake of Chevron’s plans to reduce its gas rig count from four to three in the fourth quarter of 2025. EBITDA will now likely be flat in FY26 versus prior expectations of about 10% growth year on year. However, free cashflow (FCF) generation should still support 5% dividend per share growth and with the shares trading on FCF and dividend yields of 18% and 9%, respectively, the risk/reward trade-off looks compelling. Following Chevron’s recent acquisition of Hess, it is logical in our view to think that Chevron could at some point bid for Hess Midstream. 

Activity

We had been anticipating monetary loosening ahead of the US Federal Reserve’s September cut and we expect to see further easing next year. Given the abnormal circumstances surrounding this loosening – inflation that has been ticking up, stock markets at all-time highs and a resilient US economy – its effects could be difficult to predict. 

This is why we have taken some risk off the table and introduced more balance, bringing the core/growth/risk split to roughly 30/40/30. Core income accounted for less than 20% of portfolio capital in late 2024 but it is now back above 30% for the first time in several months.

As part of this move, we reduced our underweight to healthcare – the worst performing sector year-to-date until very recently. Softer rhetoric from the Trump administration around tariffs and drug pricing sparked a rally in pharma shares that are as inexpensive (on a relative basis) as they have been in decades. Pfizer, for example, trades on a price-to-earnings (P/E) ratio of 8x, with FCF and dividend yields of 11% and 7%, respectively. 

We have been adding to emerging markets (EM), which tend to benefit from falling US rates and a weaker dollar. Generally speaking, demographics are more favourable in EM, as is economic growth, and the fiscal backdrop is also much more supportive than in developed markets where deficits continue to rise. 

South Korea, which now accounts for about 10% of the fund, is pursuing a ‘value up’ programme of corporate governance reforms. Similarly to Japan, regulators are providing incentives and tax breaks for companies that prioritise shareholder returns. South Korea is among the best performing equity markets globally year-to-date. 

Elsewhere, we added US oil major Chevron to the fund as its acquisition of Hess (which we concurrently sold out of) was allowed to proceed. Purchasing Hess gives Chevron access to the Stabroek oil field off the coast of Guyana which holds some 11 billion discovered barrels.

Outlook

Rate cuts should accelerate in the US and while short-term yields will likely fall, long-dated yields will probably remain higher, given the ill health of government balance sheets and out-of-control fiscal spending. This will probably result in a steeper yield curve that should – absent a recession – benefit banks, as well as some of the rate-sensitive sectors (for example REITs) that have underperformed in recent years.

We also feel there is a degree of exuberance and perhaps even complacency in a market that is becoming reliant on and correlated with a single theme (AI), which is why we have taken steps to reduce risk in recent months.

We believe our approach – of being nimble and flexible, and not wedded to a single style of investing or type of stock – can really prove its worth in times like these when there is so much upheaval and uncertainty in markets. We remain positioned in under-owned areas, with a portfolio that trades at about a 33% valuation discount to our benchmark yet continues to deliver earnings and dividend growth superior to that of the market. 

Portfolio characteristics

Source: Artemis as at 7 October 2025