Artemis SmartGARP Global Equity Fund
Q1 2026 update

Summary

• The Artemis SmartGARP Global Equity Fund outperformed the wider global market, returning 3.0% compared with a fall of 1.3% in the MSCI AC World index.
• The biggest contributors to returns included our holdings in Valero Energy, Samsung Electronics and Elite Material (electronic components).
• Key detractors included consumer finance business Synchrony Financial and real estate company Emaar Development. At the same time, not holding Exxon Mobil also weighed on relative returns as oil prices spiked higher in response to the war in Iran.

Review of the quarter to 31 March 2026

The quarter can be broken down into two distinct parts. January and February saw investors expressing their optimism on the outlook for the global economy and showing increased interest in markets beyond the US, particularly emerging markets. In March, however, the sudden eruption of war in the Middle East triggered a sharp reversal, with the sell-off focusing on areas that had hitherto been performing well, such as emerging market equities and precious metals. Beyond the volatility provoked by the war in Iran, the software sector came under pressure on fears that a new generation of AI tools could threaten sales.

The net result was that global equity indices ended the quarter slightly lower, with the consumer discretionary and technology sectors being the biggest negatives, and with energy, utilities and materials performing significantly better. At a regional level, meanwhile, the US and Europe were weak while Japan and emerging markets were relatively strong.

Performance

The fund returned 3.0% over the quarter, some way ahead of the MSCI AC World index, which fell by 1.3%. That return put it firmly in the top quartile of its peer group.

Past performance is not a guide to the future. Source: Lipper Limited/Artemis 31 March 2026 for class I accumulation 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. Classes may have charges or a hedging approach different from those in the IA sector benchmark.

In part, the fund's outperformance reflected both its underweight stance in technology and positive security selection within that sector. Our overweight position in energy also helped.

On a company level, some of the biggest contributors to returns were companies situated in the AI supply chain, such as Samsung Electronics (memory), Elite Material (copper laminates), Asia Vital Components (cooling systems), Dell (servers) and TSMC (semiconductors). Notable detractors included Synchrony Financial (a US consumer lender), CMOC (a Chinese mining company) and Korea Electric (a utility).

Activity: Using SmartGARP to build robust portfolios

Our clients sometimes ask how SmartGARP responds to episodes of geopolitical market turmoil. Those questions raise a number of interesting observations about a model that has been in existence (albeit in a gradually improving form) for more than 25 years.

By design, we favour resilience over perfection and the eight factors SmartGARP incorporates are somewhat uncorrelated. By looking at all of these factors, we construct robust portfolios that are attractive for a variety of reasons and whose returns have different drivers.

For example, our 'investor sentiment' component, which looks at crowding in individual stocks, may be a hindrance to returns in those months – or even years – when markets are led higher by a narrow group of companies. Equally, however, it offers useful protection during sharp sell-offs. Meanwhile, focusing solely on 'revisions' (where analysts are upgrading their profit forecasts) may lead investors towards areas of the market where valuations offer little-to-no safety net. But we are protected by also considering 'value' – a factor that was out of favour in the world of ultra-low interest rates (which prevailed for much of the 2010s) but that has more recently started to perform well. So when markets fell in March, the fund's exposure to 'momentum' and 'revisions' hurt on a relative basis, but our attention to 'value' and 'yield' offered some protection.

The conflict in Iran presents investors with a challenge. It is clearly of huge importance to the global economy and to companies. It is a natural human instinct to try to react to it. At the same time, however, wars are hard to model, particularly when one of the main actors is as changeable as President Trump. So our response was to trust to the underlying robustness of the SmartGARP process while using our own qualitative judgment to understand which of its components might be out of favour and adjusting portfolio risk accordingly.

The net result was that we increased the fund's exposure to the energy sector and to more defensive areas of the market, while reducing its holdings in those areas that our judgment suggested were most at risk. On a regional basis, we took a conscious decision to add to the US, reducing our underweight to that market.

In terms of individual companies, we added to Dell and initiated new positions in Phillips 66 (oil & gas), FedEx (logistics), and Avnet (electronic equipment). Our only reduction was Chinese social media company Weibo, whose fundamentals had deteriorated relative to the wider market.

Outlook

In terms of positioning, the fund at an aggregate level looks much the same. We continue to favour emerging markets (which account for 32% of our fund versus 12% of the index) over the US (which represents 45% of our fund versus 66% of the index). At a sector level, our largest overweight position is in basic resources, followed by banks and automobiles. Our main underweights are in technology, retail and financial services.

We often talk about the way in which SmartGARP offers a 'valuation safety net'. This is not something typically associated with many pure ‘value’ strategies, where returns can be compromised by value traps. We believe that investing in companies with discounted valuations that also have improving fundamentals and low debt is likely to provide some protection during periods of volatility.