Artemis Global Income Fund
Q4 2025 update

Review of the quarter to 31 December 2025

Equity returns were robust almost everywhere in 2025, with indices around the world hitting new all-time highs. This strong performance was – of course – not without periods of significant volatility, most notably in the wake of ‘Liberation Day’ and apparent efforts from the Trump administration to reshape global trade favourably to the US. Nevertheless, the retreat from the worst-case tariff scenario, resilient global growth (led by the US), rate cuts and persistent excitement around artificial intelligence (AI) helped to sustain a broad rally.  

The S&P 500, Nasdaq and Russell 2000 all rose to record highs in 2025. US mega-cap technology companies sold off early on but mounted a remarkable recovery post-Liberation Day, with the Magnificent Seven gaining 69% in local currency terms from the 8 April low to the end of the year, as enthusiasm around AI reached fever pitch and capex commitments accelerated.  

Perhaps more interesting, however, was the strength outside the US: the IBEX 35 (Spain) and FTSE MIB (Italy) punched through previous highs from 2007 and a wide range of emerging markets delivered healthy gains. The KOSPI (South Korean index) was 2025’s best performing equity market, posting total local currency returns of just under 80%.  

We have been talking of ‘regime change’ in the global economy for a number of years and in 2025, this theme played out forcefully. Donald Trump’s clear messaging around NATO countries taking more responsibility for their own defence and security resulted in a raft of governmental pledges to increase defence spending. The health of government balance sheets continued to deteriorate: the US national debt has reached $38.5tn at the time of writing while Germany abandoned the world’s strictest fiscal rules to unlock €800bn to finance a huge program of spending on infrastructure and military modernisation. 

Concerns over government debt manifested in the best year of returns for precious metals since the late 1970s, with gold and silver prices rising by about 65% and 150% respectively versus the dollar last year. Although Treasury yields were largely flat over 2025, longer-dated bond yields look to have ended a multi-decade era of decline. This is most poignant in Japanese bonds – the floor in global interest rates for 30 years – with the 10-year yield rising above 2% for the first time since 1997.  

Performance

The fund’s strong run of outperformance persisted into the fourth quarter, with a 6.6% return – well ahead of our benchmark (3.4%) and sector (3.9%). This brings returns for 2025 up to 45.2%. It was the fund’s best calendar year of returns since inception, both on an absolute and relative basis. 

Past performance is not a guide to the future. Source: Lipper Limited to 31 December 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

The strongest relative contributors to returns in the fourth quarter were Samsung Electronics, General Motors and Siemens Energy. 

Samsung is benefiting from a strong cycle in memory chips, as an AI-related surge in demand meets a shortage of supply, resulting in pricing power and healthy free cashflow (FCF) generation. Given Samsung’s policy of returning 50% of FCF to shareholders, this should result in higher cash returns.  

The case for General Motors (GM) is based on strong economic growth, lower interest rates, a very cheap valuation (7x) and a near 20% FCF yield. GM is also a relative winner from tariffs. Parts of its supply chain are based in Canada and Mexico, but it is still a largely domestic US business and one that the Trump administration is likely to champion. In addition, GM has bought back a massive amount of equity, with the share count falling by a third since 2021. 

Siemens Energy has initiated a 70c per share dividend to be paid out in 2026. The insatiable energy needs of AI have driven strong order growth in its gas turbines division (orders doubled in its 2025 financial year) and the company plans to increase capacity by 20% after FY27. Aftermarket revenues from servicing these turbines are also highly profitable and have caused group profit margins to double over the past two years, with further progress expected. The shares now trade on a 29x P/E and a mid-single digit FCF yield, but such is the growth trajectory of the company (the total order backlog is worth about €140bn) we think it is reasonable to expect this multiple to compress a few years out.  

In terms of the best performing sector for the fund, banks stood out in Q4, with European institutions making the largest contribution thanks to continued strong profitability, better-than-expected growth in the eurozone and scaled back rate-cut expectations. These factors helped many European banks to deliver significant cash returns to shareholders last year (in many cases above 10% of their market cap) through dividends and share buybacks.  

Negatives

The biggest detractor in Q4 was defence, which sold off as details emerged of renewed diplomatic efforts to negotiate peace in Ukraine. We have taken profits this year after strong returns from Rheinmetall (172.0% total return in 2025) and Hanwha Aerospace (182.7%) in particular. Rheinmetall has re-rated from a price-to-earnings (P/E) ratio of 20x to 40x over the past 12 months, so from a risk-management perspective it made sense to reduce the position. Hanwha is our largest defence holding (currently around 2.5% of the portfolio) and is also the cheapest, on a P/E of 19x. It underperformed the KOSPI by 25 percentage points in the second half of 2025.

Both companies reported strong earnings and profit growth versus estimates for the 2025 financial year, as well as large order backlogs (at a November capital markets day, Rheinmetall estimated its backlog will reach €80bn, more than eight times FY24’s revenues). Such is the underinvestment in defence over the past three decades – as well as a more volatile geopolitical environment in recent years – that we believe government spending in this area will increase from here. 

In 2025, defence, banks and the gold miners all made strong contributions to relative returns. The link between these areas – we believe – is that they are all beneficiaries of regime change, and a global economy characterised by higher interest rates, heavily indebted governments, deglobalisation and more geopolitical conflict. We have been positioned for this regime change for a number of years and have continually stress tested our top-down view. As discussed above, there is evidence of regime change everywhere, be it rising defence spending, the breaking out of precious metals or the independence of the Federal Reserve being challenged. It is logical – we think – to suggest that the sorts of companies that outperform in this new regime will be different to those that outperformed in the post-Global Financial Crisis era of globalisation and low rates. The contributors to the Global Income strategy’s strong performance outlined above – many of which were passed over by investors for the best part of a decade – would support this view.  

Activity

We continued to add to Asia, which including Japan now accounts for more than a third of the portfolio. This is our highest allocation to the continent since inception. We have found plenty of companies there that benefit from our roadmap of regime change, are growing earnings and dividends and offer good value: the median P/E multiple of the companies we own in Asia is less than 10x.  

Elsewhere we have been adding to US regional banks, which have modest loan-to-deposit ratios (and have therefore not grown their loan book for more than 10 years in many cases), offer more reasonable valuations than larger peers and should benefit from rate cuts in the US, as well as M&A.  

Deal activity is already accelerating thanks to deregulation in the US. Fifth Third’s $11bn acquisition of our former holding Comerica has just been approved by shareholders; the shares were up 15% after the deal was announced last year and we took profits thereafter. 

Despite these moves, the shape of the portfolio has not changed significantly. The split between core income, growth and risk (our three stock-classification buckets) is roughly 25%/40%/35% today: we are still light on core income versus our average since inception (38%) as we continue to find more interesting investment ideas elsewhere.   

Our portfolio remains genuinely global, with exposure to more than 10 currencies and 20 countries. This is worth emphasising, given a market and benchmark that remains heavily skewed to the US and the dollar.  

Outlook

The shorter-term outlook – what we might call the ‘cyclical’ one – is a challenge. We can make a bullish case for equities, given strong global growth, the potential for rate cuts in the US and a reprieve on tariffs from the Supreme Court.

Equally, we could argue that ballooning government debt, geopolitical conflicts and valuations offer reasons to be bearish. The MSCI ACWI is on a P/E ratio of 23x as at 31 December 2025, which is certainly not cheap, and markets are at all-time highs almost everywhere. 

Nonetheless, we are confident in our longer term, more ‘structural’ outlook. The extraordinary scenes in Venezuela’s capital Caracas in the early days of January 2026 would suggest that geopolitical tensions are here to stay. Three decades of globalisation since the fall of the Berlin Wall have given way to a new era of fragmentation and self-sufficiency, from which our portfolio is positioned to benefit.  

With all of this in mind, we can continue to take comfort in a portfolio that is 40% cheaper than the index, with twice the dividend yield, which is well covered by free cashflow. We also remain highly differentiated versus both the index and our peers: our active share is 95% and on average our portfolio has a 5% overlap with peer funds. With such pronounced ongoing shifts in the global economy and investment zeitgeist, we think the case for a fund with a flexible and pragmatic approach that looks so different to peers is as strong as ever.   

Portfolio characteristics

Source: Artemis as at 5 December 2025