Artemis US Extended Alpha Fund
Q4 2025 update
Source for all information: Artemis as at 31 December 2025, unless otherwise stated.
Review of the quarter to 31 December 2025
US macro conditions softened modestly through Q4, though activity remained resilient enough to avoid a disorderly slowdown. Labour market data continued to cool, with employment growth stalling and unemployment rising to 4.6% by November, reinforcing evidence that the economy is moving later-cycle rather than tipping into recession.
Against this backdrop, the Federal Reserve delivered a third rate cut in quick succession in December, taking cumulative easing to 75bps since September. The decision was finely balanced given inflation remained above target, but the Fed ultimately prioritised emerging labour market slack, allowing financial conditions to ease into year-end.
Markets responded constructively to this combination of slowing growth and policy support. US equities finished the quarter higher, with the S&P 500 up 2.7% in Q4, led by more cyclical and economically sensitive sectors such as financials, industrials and materials following the December rate cut, while bond-proxies lagged behind.
Treasury yields drifted lower over the quarter, contributing to positive total returns in fixed income, while the dollar weakened further, ending the year down sharply and providing an additional tailwind to risk assets. Trade and fiscal risks provided intermittent sources of volatility, particularly around renewed tariff rhetoric and ongoing deficit concerns, but Q4 ultimately reinforced the market’s confidence that a slowing US economy, easing monetary policy and broadly supportive financial conditions remain a workable backdrop for equities heading into 2026.
Performance
The fund made 5.8% during the quarter, beating its S&P 500 benchmark's return of 2.7%.
| Three months | Six months | One year | Three years | Five years | |
| Artemis US Extended Alpha Fund | 5.8% | 13.9% | 5.9% | 58.5% | 80.6% |
| S&P 500 TR | 2.7% | 13.1% | 9.8% | 66.4% | 99.4% |
| North America sector average | 2.4% | 11.0% | 7.0% | 54.8% | 74.6% |
Past performance is not a guide to the future. Source: Lipper Limited/Artemis for class I accumulation GBP to 31 December 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.
Contributors
From a sector perspective, the principal positive contributors were technology (Sandisk, Lam Research, AMD and Western Digital and not owning Oracle), industrials (Parker Hannifin) and healthcare (Cardinal Health, Thermo Fisher and Danaher), most of which followed through from encouraging results or conference comments.
Detractors
One of the key detractors was Micron Technology, a producer of computer memory and data storage, as it did well but we don't own it. Of those we do own, bookmaker Flutter Entertainment and ticketing operator Live Nation underperformed.
Purchases
Over the quarter, we added a diverse mix of names to the portfolio. Our largest purchases were in nVent Electric (which provides equipment for data centres), IQVIA (data and analytics for the life sciences industry), JLL (Jones Lang LaSalle – property), Newmont (miner) and GE Vernova (energy equipment manufacturer).
Sales
To fund these purchases, we reduced exposure to mega-cap tech including positions in Microsoft, Meta and Nvidia. We also sold power management company Eaton.
Outlook
Our outlook for 2026 is constructive, particularly for the first half of the year, with the balance of risks skewed towards supportive tailwinds. Financial conditions remain accommodative, credit spreads are tight and M&A activity is improving. Inflation pressures continue to ease, shelter inflation is tracking rents lower and tariff-related price pressures appear to be peaking. Combined with a pro-growth policy agenda and recent tax measures, this backdrop should support consumption and give the Fed scope to further ease monetary policy.
Beneath the headline data, economic divergence continues to widen. The well-documented K-shaped economy is becoming more pronounced, but this pattern extends across sectors. Traditional cyclicals tied to housing, autos and manufacturing remain under pressure, with the ISM Manufacturing PMI (Purchasing Managers' Index) still in contraction, while areas linked to data-centre infrastructure, aerospace and selected technology hardware continue to show strong demand and earnings visibility. Markets are becoming driven by company-specific fundamentals rather than broad cyclical beta.
The macro drivers influencing equity markets have also evolved. Fiscal policy, AI investment and wealth effects now play a more important role than traditional indicators such as the ISM or monetary policy alone. While consensus remains bullish, we are mindful of several risks. AI-related earnings and returns have become concentrated, hyperscaler capex intensity has risen sharply and any shift in spending priorities or competitive dynamics could challenge market leadership. Geopolitical risks also remain elevated, with the potential for sudden policy or trade disruptions. Finally, despite strong equity performance, much of the real economy remains subdued, leaving markets vulnerable to a reversal in confidence should leadership falter.
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.
