Artemis Funds (Lux) – Short-Dated Global High Yield Bond
Q1 2026 update

Objective

The fund is actively managed. It aims to generate a return greater than the benchmark, after the deduction of costs and charges, over rolling three-year periods, through a combination of income and capital growth.

Review of the quarter to 31 March 2026

Geopolitical events took centre stage as this year began. The US capture of Venezuelan leader Nicolás Maduro served to make the Trump administration’s rhetoric towards Greenland look even more alarming. This caused risk assets to sell off as President Trump threatened Europe with tariffs, should it not acquiesce to a US takeover of the country. However, the rally resumed as his comments were walked back and the ‘TACO trade’ (Trump always chickens out) was reinstated.

Markets were disrupted in February by AI obsolescence fears. Citrini Research published a memo speculating about a range of disruptive scenarios that could unfold if AI fulfilled its potential. The timing of the piece was exquisite in its ability to nudge already-fraught investors over the edge.

The main story for March was the rapid escalation in the Iranian conflict. The surge in oil prices – triggered by some 20% of the world’s energy supply being locked in the Gulf – hit markets hard. Government bonds sold off as the market digested the inflationary impact of higher energy prices.

In our part of the global high-yield market (one-to-five-year, BB-B rated bonds), yields increased by 0.86 percentage points to 7.36% during March. The move higher was split evenly between spreads widening and an increase in underlying government bond yields. Inflation concerns were captured by the government bond yield jump, while the widening of credit spreads reflected the impact of tighter monetary policy on economic growth.

Performance

The fund underperformed in the first quarter, returning -1.3% versus -0.9% for its peer group and 0.9% for its benchmark, the Secured Overnight Financing Rate (SOFR). 

Our relatively higher exposure to B-rated securities versus BB was a headwind in February. This was moderated by our minimal exposure to CCC-rated bonds, which underperformed single-B rated ones. 

Then in March, CCC-rated assets outperformed both BB and B-rated credit, somewhat perversely. This was a minor headwind to our relative performance, given our dearth of CCC holdings, but one we were happy to face.

Past performance is not a guide to the future. Source: Lipper Limited for class I Acc USD to 31 March 2026. As this class is in a different currency to the fund’s base currency, a local-currency equivalent benchmark has been used. 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.

Detractors

French games producer Ubisoft Entertainment delivered a profit warning and announced a major restructuring of its operating model. Culling the number of titles it produces will simplify the company, freeing up more resources for its blockbusters, such as Assassin's Creed. However, restructuring expenses will eat into this year's cashflow and longer-term growth could be dampened by ditching some titles. Ubisoft also got caught up in the market’s ‘shoot first’ attitude towards software names that could be disrupted by AI. Yet it has been using AI for years to reduce development costs and enhance in-game play, and we view the technology as being unambiguously positive for the company.

In a similar vein, US jobsite ZipRecruiter and European recruitment agency House of HR were both weak on AI disintermediation fears. We think AI could be transformative for many businesses, not least Zip, which has been integrating AI agents into its services for years. For instance, its B2B offering uses AI to help employers screen and even approach potential candidates. Meanwhile, Zip is free-cashflow generative and modestly levered with strong liquidity.

Finally, in-home healthcare provider Accendra Health reported solid results in February but the market was underwhelmed by its 2026 outlook. The results flagged ongoing headwinds from exiting certain high-volume but low-value contracts.

Contributors

Our energy holdings, including W&T Offshore (Gulf of Mexico) and BlueNord (North Sea), were among our best performers for Q1 after a strong showing in March.

Bonds issued by European specialty chemical companies Ineos and SNF also performed well. In March, Ineos’ customers changed their behaviour from running down inventory (in the hope of lower prices) to grabbing supply (lest costs increase). SNF was upgraded to investment grade in March and executed a refinancing of its outstanding March 2027 bond at a premium to the market price.

Fund 10-year discrete performance

Past performance is not a guide to the future. Source: Lipper Limited for class I Acc USD to 31 December 2025. As this class is in a different currency to the fund’s base currency, a local-currency equivalent benchmark has been used. 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.

Purchases

The fund bought two new positions in January:

• German pharmaceutical company Cheplapharm, where we see a clear deleveraging path. 

• US propane and heating-oil distribution business Ferrellgas, which has a strong market position and trades at a significant discount to others in the space.

In February, we added the following positions:

• Diabetes injection equipment-provider Embecta, which has a dominant market position and substantial growth opportunities.

• Lottery operator Allwyn, which plans to fully acquire Greek lottery operator OPAP; we expect the transaction to improve its earnings quality. 

• Norwegian oil & gas producer Panoro Energy, whose tap issuance was fortunately timed, prior to the Iran conflict.

• Internet service provider Ancestry.com, whose 2028 bonds have a high chance of being taken out in the next 12 months, representing a 10% yield.

• French games producer, Ubisoft Entertainment, where we added on weakness.

In March, we participated in a new five-year bond issued by SNF.

Having reduced our position in Swedish residential landlord Heimstaden’s 2031 bonds in early March (on valuation grounds) at a yield of €6.42%/£8.24%, we subsequently added to the position at €7.67%/£9.37%. We jumped at the chance to lock in attractive yields for a high-quality apartment owner with effectively 100% occupancy and inflation-linked rental income. 

Finally, we added to our position in UK partnership homebuilder Keepmoat throughout March. It recently completed a refinancing and, as such, its newly minted bonds came under pressure. Often in high-yield markets, recently issued bonds (which are liquid) are used as a risk management tool and can underperform in weakness as their higher liquidity becomes a vice. We were happy to take the other side of the trade.

Sales

We exited our holdings in the following companies during the quarter:

• Coty, the cosmetics manufacturing giant. 

• LSB Industries, a chemicals producer. 

• Ineos, another chemicals producer. 

• Cvent, an event planning SaaS provider.

• DeepOcean, an energy producer.

• Synthomer, a supplier of highly specialised polymers.

Outlook

The Iranian conflict looks certain to dominate market narratives for some time yet. While a degree of damage has been done to the global economy, which will show up in corporate earnings over the next few months, we do not believe it will plunge the world into a recession. Further, we strongly suspect that in the event of a cessation of hostilities in the next month or so, any macro or corporate weakness will be looked through by investors, who will come to see such ructions as a buying opportunity. 

Our strategy generates a high degree of cashflow. We have been busy putting this to work where we see opportunities to profit from any rebound. We will continue to invest in companies that have sold off (this bit is easy: they all have) but would not be fundamentally endangered if the conflict lasts longer than feared.

Looking further ahead, we believe our low-duration exposure and desire to forgo the most marginal parts of credit markets (CCC-rated bonds and emerging market debt) will serve us well in 2026. Yields have backed up nicely and we are already active in exploiting these.