Artemis Strategic Assets Fund update
David Hollis, manager of the Artemis Strategic Assets Fund, reports on the fund over the month to 31 August 2025.
Source for all information: Artemis as at 31 August 2025, unless otherwise stated.
Review of the month to 31 August 2025
The expiry of the 1 August tariff deadline led risk assets to sell off initially. However, the recovery was swift, with the S&P 500 soon hitting record highs as the US reached trade deals with several large economies, such as the EU and Japan.
The tariff deadline coincided with a much weaker-than-expected July jobs report which included downward revisions for May and June. This meant job growth was barely in positive territory over the two-month period, prompting risk assets to drop sharply on the day.
July CPI was broadly as expected and, surprisingly, didn't show any major impact from tariffs. This helped markets to recover, as too did the dovish speech from Chair of the Federal Reserve Jerome Powell at the Jackson Hole Symposium, with references to the labour market facing downside risks.
The collapse of François Bayrou’s government in France led to fears over the debt trajectory, prompting borrowing costs to rise relative to other European countries.
In fixed income markets we are seeing an emerging trend of longer-maturity bond yields trending higher in recent years as governments such as Japan, the US and UK are failing to rein in spending and/or increase taxes.
| One month | Three months | One year | Three years | Five years | |
|---|---|---|---|---|---|
| Artemis Strategic Assets | 1.2% | 1.7% | -3.1% | 10.7% | 27.9% |
| CPI +3% | 0.5% | 1.4% | 6.8% | 23.2% | 47.7% |
| IA Flexible Investment sector | 0.5% | 5.8% | 9.0% | 23.5% | 39.3% |
Positives/negatives
Artemis Strategic Assets contains two ‘buckets’: a Directional (Trends) Strategy that aims to take advantage of market trends; and a Non-Directional Strategy, which endeavours to generate returns that are uncorrelated to market movements by taking long and short positions whose exposures offset each other. For both strategies, the fund invests in financial derivatives that provide exposure to a diversified range of asset classes, including equities, bonds and currencies.
The Directional (Trends) Strategy appreciated during the month, driven largely by long positions in equity markets. Directional appreciation in shorter-maturity bonds also added value. The longs in New Zealand rates (government bonds) were standout performers, although the contribution to returns was partially offset by shorts in US rates.
The Non-Directional Strategy also performed well, especially in currencies. We benefited from a short in the US and Canadian dollars and longs in Japanese yen and Czech koruna. Rates marginally hindered returns due to relative shorts in the US against the backdrop of a dovish Federal Reserve.
Since the change in fund manager, the fund has shown a low correlation to equities, bonds and commodities, whilst delivering a high correlation to the cross-asset trend peer group index (BTOP50) which we are trying to capture.
Portfolio activity
Directional (Trends) Strategy
- Equities: Exposure was little changed in equities during August, as momentum in some stock indices peaked. The portfolio retained a preference for long positions in emerging Asian equity markets, which were beneficiaries from a cooling trade war, and US utilities, an indirect beneficiary of technology spend on data centres.
- Bonds: Duration was similarly little changed over the month. While the preference to be relatively long Swiss rates remained, elsewhere longs in shorter-dated maturities broadly offset shorts in longer-dated bonds where debt sustainability fears affected the cost of long-term borrowing.
- FTSE China & Hang Seng long: The pause in retaliatory tariffs and resumption of negotiations between China and the US supported emerging Asia. Moreover, macro data is evidencing signs Chinese activity is improving.
- US utilities long: This US equity sector has been a beneficiary of the technology boom, with additional energy requirements and spending on data centres supporting earnings. Equally, during risk-off periods, the sector can act as a bond proxy.
Non-Directional Strategy
- Short the Canadian dollar: Outflows in the Canadian dollar and weak macro fundamentals were the key reasons for this position.
- Long the Australian dollar: Carry was attractive, we observed inflows, fundamental macro was supportive and positioning was light.
- Short the US dollar: Relative to other G10 currencies, the dollar looks unattractive due to stretched overweight long positions, some weaker economic data and expensive valuations.
Outlook
Agreed tariffs broadly lower than anticipated
We are in the early phase of absorbing a wholesale change in trading relationships between the US and its partners. Now that the extended deadline for reciprocal tariffs has expired, we have a clearer picture. Ultimately, tariffs have ended up below the levels initially announced but they are still the highest seen for many years and will act as barriers to trade.
US labour market data revised down, inflation rising
The uncertainty surrounding the tariff announcements, deadlines and potential trade deals is beginning to be reflected in economic data. The US labour market appears to have been much softer than originally thought during June and July as historical data was substantially revised down. Recent sentiment suggests further weakness to come.
Additionally, inflation has surprised on the upside; most notably the Federal Reserve's preferred measure of core personal consumption expenditures (PCE) is at 2.9% year on year. Market expectations of future inflation five years out peaked at 2.75% in August, up from a low of 2.3% in April. With prices already creeping higher and uncertainty causing payroll growth to stall, the Federal Reserve has a fine line to tread in setting interest rates.
Unclear if interest rates will be cut in Europe
Sentiment in Europe has been buoyed by the commitment to increase defence and security spending to 5% of GDP by all NATO country members by 2035. In addition, the EU has successfully negotiated a relatively low tariff rate of 15%. While the ECB may hope the current rate of 2% represents the bottom of the cycle, a meaningful slowdown in US activity will also affect Europe and likely lead to rate cuts on the continent. Fiscal concerns and debt sustainability in France have recently re-emerged, with the collapse of François Bayrou’s government in September following a vote of no confidence. Yields, particularly at the long end, are vulnerable to further rises, making public sector finances generally more precarious.