Artemis Funds (Lux) – Global High Yield Opportunities
Q2 2026 update

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

On 28 April, Artemis Funds (Lux) – Global High Yield Bond changed its name to Artemis Funds (Lux) – Global High Yield Opportunities, reflecting a number of changes to its investment policy.

The first change allows the fund's net exposure to move away from 100% invested. It can now hold short-term hedges when we believe valuations and market conditions are not attractive. Equally, we can now increase its net exposure when valuations are compelling. This serves a purpose that we have discussed with clients for some time: allowing the strategy to lean into and away from markets as opportunities change. We believe this will enable us to offer a better 'through-the-cycle' exposure for investors looking to benefit from a long-term exposure to the high-yield market in a more efficient way than simply buying and selling a high-yield fund on a tactical basis.

The second change allows us to implement a long/short bucket within the fund. Since the fund's launch, we have often noted the inefficiencies that exist between different securities within the high yield market. This can provide active, long-only investors with opportunities to enhance total returns. We believe there are also relative value opportunities that we can exploit on a 'risk-neutral' long/short basis. One example is the discrepancies between the pricing of bonds in different currencies issued by identical companies, with identical maturities and at identical parts of the capital structure. Previously we could only exploit these discrepancies by buying the relatively undervalued bond (going long). Our new ability to express long/short views means we can simultaneously take a short position in the more 'expensive' bond, thereby removing the fundamental risk from the trade. It also means we can exploit these inefficiencies across the entire high-yield universe, rather than being limited to those issuers we fundamentally want to have long exposure to. 

It is important to note this is simply giving us more ways to express our investment views. This does not mean the fund’s fundamental aim – outperforming the global high yield index – has changed. It just allows us more room to exploit the credit views we are already generating.

Equally, we are not obliged to use these new tools. And in the same way that we will not invest in any bond simply because it is a large part of our benchmark, we will only use this new flexibility when it makes compelling sense to do so from an investment perspective. At the moment, spreads are reasonably tight but yields (particularly on a risk-adjusted basis at the front end of the curve) are relatively attractive. This justifies an exposure of roughly 100% and that is where the fund currently sits.

Performance

Past performance is not a guide for the future. Source: Lipper Limited to 30 June 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.

Contributors 

US online recruitment portal ZipRecruiter rallied as it announced a buy-back of around half of a $550m bond maturing in 2030. Although this position has caused us a few headaches over the past year, we always felt that, while the number of job searches has been relatively subdued, Zip’s highly discretionary cost structure allowed it to protect its cashflows. It can continue to generate cash while it waits for an uptick in recruitment activity.

Our holding in specialty chemicals company Ineos Quattro rallied early in the quarter amid a recovery in cyclical risk. Its preliminary results highlighted aggressive restocking by its customers. The accompanying outlook statement indicated that a lack of imports into the European market due to the closure of the Strait of Hormuz could push margins higher.

Home healthcare provider Accendra, formerly Owens & Minor, rallied as it took steps to shore up its balance sheet by extending the maturity profile of its debts at attractive terms.

Australian agrochemical producer Nufarm was buoyed by strong soft-commodity prices and positive interim results, which highlighted its strong profit growth and ongoing debt repayments.

Detractors

There were thankfully few negatives, but we did see some underperformance from our holding in SIG, which distributes building products. The recovery of the UK construction industry remains sluggish and expectations that interest rates could move higher did little to help sentiment.

Medical device company Embecta underperformed as its first-quarter results were weaker than expected. We had anticipated some weakness as it transitions away from its legacy injection-pen business towards providing injection technology for the upcoming launches of generic GLP-1 weight-loss drugs. We added to the position on weakness as we still see a cash-generative business with a dominant market position and clear growth opportunities.

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 bought a new issue from BASF Coatings, the imaginatively named coatings business that is being spun out of BASF, which continues to own 40% of the business. It is the global market leader in coatings and its largest end market is automotive production – half of all cars produced in the world have at least one coat of BASF paint. Importantly, the business has a bias to production by Chinese auto makers. So, unlike many other western auto parts makers, it stands to benefit if the Chinese producers succeed in growing their international market share. This, combined with an experienced management team with a record of success, a cashflow-generative business model and some near-term easy wins on improving both top and bottom lines, makes us bullish on this business.

Having previously held the bonds of leading auction house Sotheby’s, we took part in a new issue during the quarter. We like the strength of its market position (it operates as part of a duopoly with Christie’s) and we recognise the power of its trusted brand, which is vital in a market where establishing provenance is part of the service. Sales in the art market have rebounded strongly, increasing by 20% on last year. 

Elsewhere in the new issue market, we bought a bond from IHO, the holding company for the Schaeffler family's automotive interests. IHO is the modestly levered vehicle through which the family holds large stakes in tyre giant Continental, the eponymous Schaeffler AG – which supplies drive trains and electronics to the auto industry – and in Aumovio (an auto technology company). The loan-to-value against these stakes is 27%, so the bonds are (very) well covered.

Capsugel, the clear market leader in drug capsules, was a new addition to the portfolio. Capsules make up a tiny portion of the overall cost of producing a drug but are central to a customer’s experience of taking it. Because the process of gaining regulatory approval for a new drug includes the capsule in which it is delivered, the cost to pharmaceutical companies of switching to a different provider is high. We are big fans of businesses like this, which have dominant positions in their chosen market niches, high free cashflows and strong barriers to entry.

We also bought three new issues in the oil & gas space: Neo Next, a significant producer in the North Sea; Borr Drilling, a provider of drilling rigs; and Paratus Energy, which provides pipe-laying services to offshore oil & gas producers. Even if the Strait of Hormuz were to fully reopen tomorrow, the significant disruption that has already occurred to the infrastructure around the Strait and the need to rebuild both operational and strategic commodity reserves should see the oil market well supported for a number of years. 

We participated in the new issue from footwear company Birkenstock, funding the position through a sale of Sally Beauty, the US beauty products retailer. It has low levels of leverage, a dedicated customer following, strong revenue momentum and generates a lot of free cashflow. 

Sales 

We sold or trimmed a number of positions that simply didn’t have much room to run in terms of valuations. These included bonds issued by Copeland, a manufacturer of compressors used in HVAC systems; Levi Strauss, the denim goods manufacturer; and Mineral Resources, the Australian mining company (we flipped these 2028 bonds into the company’s new 2032 bonds).

After selling our position in pet supplies retailer Petsmart, we switched into its rival, Petco. We believe Petsmart is struggling competitively and we see significant pressure on its margins. Petco, on the other hand, is well placed to benefit from Petsmart’s pain and it pays us (slightly) more.

We exited US supermarket giant Albertsons. We worry about margins in the US food retail sector given inflationary pressures and thought the bond’s premium pricing was no longer justified.

Despite having a positive view on the oil & gas sector, we sold our holding in Ithaca. The high-yield market often has quite different dynamics going on at an individual issuer level to the story for the wider sector. We have liked and owned Ithaca for a long time. In recent years, it has obtained a listing, massively de-levered its balance sheet and derisked its operating model through some outstanding M&A and operational execution. Unfortunately, this is now fully reflected in its valuations. Rumours recently emerged that BP could seek to sell its assets in the North Sea. If that happens, Ithaca may well be tempted to bid for them. If it does, that would likely result in some sizeable issuance and the postponement of its international expansion (and so delay a potential upgrade to investment grade status). Neither of these are positive for the bonds, so we decided to move on. 

Outlook

The most likely path for the global economy from here is that inflation remains stubbornly elevated and growth continues to be underpinned by the ongoing surge of AI-related capital expenditure. It is easy to be cynical about what returns the current wave of investment in AI will eventually produce. And although we share that cynicism, the facts on the ground are that the investment is happening today; worries about what returns (if any) it produces are (from a high yield market perspective) a problem for the future.

We also note there has never been a group of companies with a greater ability to invest enormous quantities of capital and that they embarked on this capital investment cycle with low leverage and prodigious cashflows. Our portfolio's lack of exposure to the AI hyperscalers and its low (and declining) exposure to the companies directly benefiting from this investment boom mean we are comfortable. 

More broadly, we feel the inflationary backdrop is less ominous than feared. Labour markets look far looser than they did in 2022, when workers had unusually high levels of bargaining power in the recently re-opened post-Covid global economy.

If worries about oil prices and Iran continue to ease, investors will look further into the future and focus on company-level business fundamentals rather than simply being buffeted by macro news. We would welcome this. The core of our strategy is stock selection rather than top-down asset allocation, so it suits us when bond prices move in response to more idiosyncratic factors. A market in which bonds issued by good companies are rallying and those issued by bad companies are selling off is fundamentally healthy. In our view, indiscriminate rallies are just as noxious as across-the-board sell-offs.

We will continue to rely on stock selection to drive returns. We do not feel the balance between risk and reward supports an outright grab for yield; we will not lurch into emerging market or CCC-rated bonds. Instead, we will stick to investing in bonds issued by resilient, cash-generative businesses. We are fortunate that the all-in yields available in our part of the market remain attractive and should underpin returns over the rest of 2026 and beyond.