Artemis High Income Fund
Q1 2026 update
Source for all information: Artemis as at 31 March 2026, unless otherwise stated.
Review of the quarter to 31 March 2026
Performance
The first quarter of 2026 was, in many ways, a tale of two halves. Risk assets were strong in January and, broadly speaking, in February – notwithstanding a sell-off in software and tech-adjacent names. Equity and bond markets subsequently reversed course in March. Conflict in the Middle East pushed up oil prices, triggering a dramatic U-turn in interest-rate expectations and an aggressive sell-off in short-dated gilts. Within equities, gains for the oil majors were offset by weakness in consumer discretionary stocks, real estate companies and banks.
Our exposure to dividend-paying stocks in the UK and Europe enhanced performance at the start of the year but had the opposite effect in March. On the fixed income side, the fund’s lower duration compared with its peer group detracted in February as government bonds rallied, but was helpful in March.
Overall, the fund returned -1.7% during the first quarter versus -0.9% for its peer group. Performance remains top-decile within the IA Strategic Bond sector over one, three and five years.
| Three months | Six months | One year | Three years | Five years | |
|---|---|---|---|---|---|
| Artemis High Income Fund | -1.7% | 0.3% | 6.5% | 28.2% | 22.5% |
| IA Strategic Bond | -0.9% | 0.8% | 4.7% | 17.7% | 7.5% |
Past performance is not a guide to the future. Source: Artemis/Lipper Limited, class I Inc GBP to 31 March 2026. 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.
Detractors
Private equity group 3i detracted the most from performance during the quarter. Its shares fell in response to discount retailer Action’s disappointing sales in France and the costs of its expansion into the US. Other underperforming stocks included Entain (sports betting), Vistry (construction), Melrose Industries (aerospace) and Aviva (insurance).
Our holdings in longer-duration government and investment-grade bonds – while a small part of the fund – hurt performance in March as yields rose.
Within our high-yield bond portfolio, 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, although restructuring expenses will eat into this year's cashflow. Ubisoft also got caught up in the market’s ‘shoot first’ attitude towards software names. However, we view AI as an unambiguous positive for the company. Ubisoft has been using AI for years to reduce development costs and enhance in-game play.
In a similar vein, US jobsite ZipRecruiter was weak on AI disintermediation fears. We think AI could be transformative for Zip, which has been integrating AI agents into its services. Zip is free-cashflow generative and modestly levered with strong liquidity.
Contributors
Our oil & gas exposure – across equities (TotalEnergies) and bonds (W&T Offshore and BlueNord) – boosted returns as commodity prices rose in March.
French fashion house Isabel Marant announced a transaction to pay investors for permission to extend its bonds’ maturity, along with increased contractual protections. The market reacted positively.
Meanwhile, chemical company Ineos continued to recover. Its customers changed their behaviour in March from running down inventory (in the hope of lower prices) to grabbing supply, lest costs increase further.
Activity
We participated in new issues from Cheplapharm (pharma), Keepmoat (housebuilder) and Allwyn (lotteries), where we felt pricing was attractive and the underlying credit stories were compelling.
We initiated new positions in Ancestry.com, the genealogy website; Michaels, a North American arts-and-crafts retailer; and RR Donnelley, a global leader in custom packaging, printing and marketing services.
Amid volatile conditions in March, we made three types of trade. The first involved buying short-dated BB-rated bonds issued by high-quality companies. These bonds will provide a reasonable income stream, plus upside potential if the issuers redeem them early.
Second, we increased the fund’s duration to 3.6 years by purchasing 10- and 20-year Treasuries, as well as long-dated dollar bonds issued by Royal Dutch Shell. Although we still have lower duration than most of our peers, we made these moves because we felt the level of interest rate hikes being priced in was extreme.
Finally, we embarked on ‘dislocation trades’ – selling bonds that had performed well and whose resilience surprised us and adding to underperformers. We sold bonds issued by Ineos, Gatwick Airport, Ford and Millrose Properties but added to Keepmoat, Panoro Energy (a West African oil & gas producer that was unchanged in March) and Heimstaden (a Swedish residential real estate company).
Outlook
During times of uncertainty, having an income focus provides a useful anchor. Income acts as a concrete, objective measure of the future value of an investment. Although the performance of our fund in Q1 is nothing to celebrate, its yield jumped from 6% to 7% during March, which represents a measurable injection of value.
Generating high levels of current income (and not, for example, making long-term technological bets) means we have a natural bias towards ‘HALO’ companies – those with ‘heavy assets, low obsolescence’ that are less likely to be disrupted by AI. Across bonds and equities, our return profile is near term – in contrast with growth-focused, longer-duration funds – and we think this gives our investors something tangible to hang onto when markets are choppy.
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 High Income 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.
- 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 Where charges are taken wholly or partly out of a fund's capital, distributable income may be increased at the expense of capital, which may constrain or erode capital growth.
- 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.
