Artemis Funds (Lux) – Global High Yield Opportunities
Q1 2026 update

Objective

The fund is actively managed. It aims to increase the value of shareholders’ investments through a combination of income and capital growth.

Note to investors

Artemis Funds (Lux) – Global High Yield Bond changed its name to Artemis Funds (Lux) – Global High Yield Opportunities on 28 April 2026, reflecting three changes to its investment policy. It now has the flexibility to: increase net exposure beyond 100%; express relative single-name views in a long/short bucket; and use credit options and credit total return swaps to express investment views.

Review of the quarter to 31 March 2026

Unsurprisingly, the war in Iran had the biggest influence on high-yield markets over the quarter. The fund fell 1.3% during the three-month period compared with losses of 0.6% from its ICE BofA Merrill Lynch Global High Yield Constrained USD Hedged index benchmark and 0.9% from its peer group.

The main cause of our underperformance was our greater weighting to European credit, which lagged behind the market as investors worried about a rerun of 2022. While we have some sympathy with this view – the US’s position as a net energy exporter gives it a significant advantage at present – we think it lacks nuance, just as it did in 2022. 

There are two reasons for our position. First, European cyclicals have been pinning their hopes on the German fiscal bill which, while approved last summer, has yet to result in a major increase in spending. Fortunately, there were signs the money was finally beginning to flow before the Iran conflict. The incentive to go ahead is now stronger, given growth concerns in Europe. 

Second, the companies in the European high-yield market are now – by definition – companies that have survived the pressures and shortages of 2022. They have been stress-tested and found to be resilient.

Past performance is not a guide for the future. Source: Lipper Limited to 31 March 2026 for class I Acc USD. 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 

We had some weakness in some of our software-related names, including ZipRecruiter and games publisher Ubisoft, due to fears about the threat posed by AI. 

For ZipRecruiter, we feel the concerns overlook the durability provided by network effects.

When it comes to Ubisoft, we see AI as being an unambiguous positive. Ubisoft’s ‘moat’ is its creative intellectual property (through titles such as Assassin’s Creed, Far Cry and Rainbow Six) and accompanying fanbases and communities. The company has been open about its use of AI in the past and the role it can play in reducing development costs and enhancing in-game play.

Synthomer was pressured by concerns around potential refinancing risk. There were rumours it would sell one of its divisions to help solve its balance sheet issue, a move we doubted would turn out as hoped. We halved the position size in February, then when the volatility of March made a sale less likely, we sold the position.

Elsewhere, bonds in telecommunications company Arqiva fell on rising concerns around UK TV distribution policy. 

Accendra Health lagged due to worries around its business model, but we believe delivery against operating targets over the year will help re-anchor market perceptions. 

Contributors

Our oil & gas holdings (including BlueNord and W&T Offshore) did well as crude prices rallied through March.

Other positive contributors included French fashion house Isabel Marant on a proposed modification to the bond terms, and SNF, the French chemicals company, on an early call as part of a refinancing.

Commodity chemicals company Ineos also did well as corporates frontloaded supply ahead of anticipated shortages. We used this as an opportunity to take profits via a complete sale. 

Fund 10-year discrete performance

Past performance is not a guide for the future. Source: Lipper Limited to 31 December 2025 for class I Acc USD. 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

We initiated several new positions during the quarter:

• Ancestry.com, whose bonds underperformed on software concerns we view as unwarranted, given its industry-leading proprietary database and significant network benefits. We also suspect these bonds will be refinanced over the next 12 months as the company attempts to perform a more holistic refinancing operation. If this happens, the yield will rise to about 10%. If it doesn’t, we have a bond yielding 250bps more than Treasuries with a rock-solid business model that AI strengthens rather than weakens.
• Cheplapharm, a German pharmaceutical, whose bonds came to market at attractive levels. While the company has faced challenges in the past – particularly around inventory management and manufacturing – these issues appear to be improving. We expect meaningful operational improvement and deleveraging over the next year, which should support a strengthening credit profile.
• Electronic Arts, the games publisher. We like its focus on recurring revenue streams (as opposed to its competitors’ reliance on large-ticket releases) and strong set of franchised sports products. 
• Embecta, a producer of diabetes medication monitoring-and-delivery equipment. We view the business as being well-run and having a strong foundation to deliver free cashflow and de-lever. 
• Michaels, one of the largest arts and crafts retailers in North America. The recent exit of two of its largest competitors from the market has strengthened its position and we believe the sector should continue to expand as people look for satisfying, non-screen-based entertainment.
• RR Donnelley, a global leader in custom packaging, printing and marketing services. RR Donnelley was a classic example of an unwieldy and illogical conglomerate, but following its acquisition by Chatham in 2022 it has been streamlined while its customer offering has been refocused. Businesses that had been in persistent decline are now growing and margins are expanding. One-off expenses are rolling off and we believe the entire capital structure will be refinanced into a more ‘vanilla’ form over the next 24 months as the market sees the new strategy delivering.

We also participated in the Keepmoat and Allwyn new issues, where we felt pricing was attractive and the underlying credit stories were compelling. Keepmoat represents another example of a bond being issued to refinance a prior release well ahead of maturity, a growing trend we continue to benefit from. 

Sales 

We exited our position in Coty following its re-rating to investment grade. With spreads having tightened significantly, we felt there was limited remaining upside. We also sold our holding in LSB Industries, where the bonds had moved close to their imminent call price, again limiting further return potential.

Elsewhere, we sold DeepOcean (subsea oil & gas maintenance) and Insulet (the manufacturer of diabetes delivery systems) and trimmed Clarivate (a provider of technical data to the medical and education industries). 

Outlook

We will refrain from second guessing what the outcome of the conflict in the Middle East will be. The world could look completely different come next week.

What we can talk about is the significant revaluation that has occurred in high-yield markets. High yield is an inherently high-income and low-duration asset class. As such, while market prices can (and do) move around on events and uncertainties, these moves create comparatively large movements in the measure of forward value – yields. 

As duration shortens, yield becomes an ever more powerful predictor of forward total returns. The fund’s USD-hedged yield is 8.4% – squarely in the 8 to 9% range that, in the past, has tended to produce forward returns of more than 10% over the following 12 months. 

We cannot predict what the next month or two will hold – but what we can do is gather up opportunities to deliver high single-digit yields to investors over a relatively near-term timeframe, while doing our best to minimise default risk. While we don’t know how this will affect month-to-month performance, we firmly believe it will result in superior long-term returns.