Artemis Monthly Distribution Fund
Q3 2025 update
Source for all information: Artemis as at 29 September 2025, unless otherwise stated.
Review of the quarter
Equity markets posted strong returns in the third quarter and continued to recover after a sharp sell-off in April. Artificial intelligence (AI) and mega-cap US technology companies drew 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 in September saw its best day of share price performance since the late 1990s.
It follows that technology was the best performing sector over the quarter (the MSCI ACWI Technology index climbed 15% in sterling terms).
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 government bond yields continued to break out in the third quarter, supported by escalating government debt 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.
Meanwhile, credit markets maintained their positive momentum through the third quarter, with spreads tightening further and extending the post-Liberation Day recovery.
Performance
The fund returned 7.7% net of fees during the third quarter, well ahead of its peer group average. Its performance is top quartile within its sector during all the time periods in the table below.
| Three months | Six months | One year | Three years | Five years | |
|---|---|---|---|---|---|
| Artemis Monthly Distribution Fund | 7.7% | 14.5% | 21.3% | 52.7% | 69.0% |
| IA Mixed Investment 20-60% Shares | 3.8% | 7.1% | 7.3% | 25.6% | 26.2% |
Past performance is not a guide to the future. Source: Lipper Limited to 30 September 2025 for class I Inc 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.
Contributors
Kinross Gold 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) while its earnings per share beat street estimates by more than 30%. Gold has soared this year and could well be due a shorter-term pull-back, 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.
Our best-performing sector was financials, with Italy’s Banco BPM and Spain’s Banco de Sabadell among our equity portfolio’s top 10 contributors. Like several of our European banks, Sabadell 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.
US shopping mall REIT Simon Property Group 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.
Top-performing bonds included: Dick’s Sporting Goods, which announced in May that it will acquire Foot Locker; Arqiva, which provides broadcasting and transmission services, as well as smart networks for energy and water; and Norwegian oil & gas producer DNO ASA.
DNO’s bonds performed well following an announcement that its assets in Kurdistan can export oil to the Turkish coast. For the avoidance of doubt, we bought these bonds because of recently acquired Norwegian assets that offer low lifting (post-drilling extraction) costs in long-life fields with a predictable regulatory regime. The Kurdistan assets were always an aside to the investment case – but it’s good to see them helping, nonetheless.
Detractors
Freeport-McMoRan was the biggest stock-specific detractor after a mudflow at its Grasberg copper mine in Indonesia resulted in 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, 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 the 2026 financial year versus prior expectations of about 10% growth year on year. However, free cashflow (FCF) generation should still support mid-single digit dividend per share (DPS) growth this year. With the shares on a 9% dividend yield, the risk/reward 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.
Bonds that detracted from performance included healthcare logistics company Owens & Minor and employment marketplace ZipRecruiter.
Activity and positioning
We took profits in some of our defence names. We continue to like the long-term theme, but yields have compressed significantly after a strong rally in the sector this year, so we have taken profits and recycled the capital elsewhere.
We have also ‘shuffled the chairs’ in our bank holdings, taking profits in UniCredit, Wells Fargo and Mitsubishi UFJ Financial Group and re-allocating the proceeds to regional banks in Japan and the US. Though the theses are slightly different here, valuations are lower than in their global peers and M&A is likely to increase in both regions, in our view. Bank equities remain a significant allocation in the portfolio thanks to attractive cash return credentials in the form of dividends and share buybacks.
In addition, we have added to what we call ‘core income’ equities, in particular in the healthcare sector. Being under exposed to these areas in recent years has been additive to performance, with many of these companies coming into a higher interest rate environment with too much leverage. Nevertheless, valuations in the healthcare sector are now such that they once again look interesting (Pfizer and Bristol Myers Squibb offer 6% and 7% dividend yields respectively) and we were happy to take a little bit of risk out of the portfolio.
Within high-yield bonds, we have been focusing on shorter-dated credit for some time and over recent months – following the strong post-April recovery – we have been trimming some of our positions to ensure we have dry powder to take advantage of any volatility. We continue to favour corporate bonds over government bonds, with the balance sheets of the latter remaining in ill health.
Outlook
The market believes rate cuts will continue in the US, which has been reflected in a yield curve that has steepened over the last few months. Though shorter dated yields have compressed, longer yields will probably remain higher, given the ill health of government balance sheets and out-of-control fiscal spending.
As above, the opportunity in fixed income lies in the short end of the curve, specifically in higher-quality high-yield bonds. The high – and consistent – level of income we can generate here is an attractive proposition for a portfolio that pays investors on a monthly basis. Another point to make is that the higher bond yields on offer since the hiking cycle began a few years ago give us more freedom in equities to buy companies that may offer a slightly lower yield that can grow more quickly.
Looking to the future, we believe our approach – of a small, nimble team building a focused and simple portfolio of bonds and equities in relatively under-owned areas that offer good value and income – to be well suited to a less predictable investment backdrop.
This gives us comfort that, despite the fund’s strong recent run of performance, we are well placed to keep delivering attractive monthly income and total returns to our investors.
Notes and references
Benchmark: IA Mixed Investment 20-60% Shares NR; A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark.
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 Monthly Distribution 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.
- Higher-yielding bonds risk The fund may invest in higher-yielding bonds, which may increase the risk to capital. Investing in these types of assets (which are also known as sub-investment grade bonds) can produce a higher yield but also brings an increased risk of default, which would affect the capital value of the fund.
- 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.
- Charges from capital risk Because one of the key objectives of the fund is to provide income, the fund charges are taken from capital. This may constrain capital growth or erode capital.
- 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.
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.
