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Artemis Global Income Fund

All data as at 28 February 2017 except where specified
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The fund’s aims

The fund aims to achieve a rising income combined with capital growth from a wide range of investments. The fund will mainly invest in global equities but may have exposures to fixed interest securities. We will not be restricted in our choice of investments, regardless of size of the company, the industry it trades in or the geographical split of the portfolio.

Current prices and yield
(class I)

As at noon, 22 March 2017
Bid price (acc units)128.17p
Bid price (dist units)98.80p
Offer price (acc units)129.90p
Offer price (dist units)100.13p
Historic yield (acc units)2.88%
Historic yield (dist units)2.96%

Investment information
(class I)

Minimum lump sum investment£250,000
Ongoing charge (acc units)0.81%
Ongoing charge (dist units)0.81%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 0.75% and is shown as at the date of the Key Investor Information Document (KIID), where a full explanation of the fund's charges can be found.

Fund managers’ update

The powerful rally in cyclical ‘value’ stocks and financials seen in the second half of last year - and which carried over into January - paused for breath in February. Although global equity indices crept higher, the gains tended to be led by more defensive areas. In this, the equity market seemed to be following the more cautious mood evident in the bond market. Having risen sharply since the summer, yields on safe-haven government bonds, including 10-year US Treasuries, fell slightly on the month. Yields on two-year German government bunds, meanwhile, hit new lows. On first view, that seems counter-intuitive: economic data from around the world remains strong and there are signs of inflation after a decade’s absence. In Europe, for instance, the composite PMI hit its highest level since 2011 and inflation in Germany picked up. Yet despite this, bond investors aren’t fully buying into the vision of a world of stronger, more consistent economic growth and higher inflation.

The unpredictability of President Trump’s administration caused political risk premia to increase.

How to account for this fall in yields? More importantly, should equity investors worry? All the structural factors that support bond prices, such as the regulations enacted in the wake of the financial crisis obliging financial institutions to buy them - and the fear of investing in volatile assets - remain. At the same time, there is a sense that the balance of political risks has changed. The unpredictability of President Trump’s administration caused political risk premia to increase. A similar dynamic was also at work in Europe. Although the prospect of Marine Le Pen becoming the next president of France (and endangering the future of the eurozone) remains somewhat remote, the struggles of her opponents have added to that risk, even if only at the margin. So we don’t necessarily interpret lower bond yields as a sign of a slowdown in the economy. Instead we see them as a function of a shortage of ‘safe’ assets. German government bunds, for instance, are not traded on valuation but being held as insurance against negative ‘tail risk’ outcomes in Europe.

Paradoxically, it could also be the case that strong data on the US economy is contributing to fears of a slowdown. Might the US economy be in danger of overheating when (or if) Trump’s fiscal stimulus is applied? Strong data releases on the US economy - the number of Americans applying for first-time unemployment benefits recently touched a 44-year low - meant the market has increasingly come to accept not only that the Federal Reserve (Fed) would likely increase base rates in March but that another two increases are possible this year. Has the risk of the Fed making a policy mistake - encouraging it to act too aggressively to pre-empt inflation - increased? While a 50 basis point increase still seems rather unlikely, it is no longer beyond the realms of possibility. The mood has changed.

From the fund’s perspective, that economically sensitive ‘value’ stocks fell slightly out favour meant that it lagged the market’s rise in February, snapping a strong run of outperformance reaching back to last summer. On a stock level, however, news from many of our holdings was excellent. For example, mining companies tended to report sharp increases in earnings. BHP Billiton, one of our top-10 holdings, reported a 65% increase in underlying earnings and, signalling management’s confidence, increased its dividend. Yet the market greeted this news - and news like it - with little more than a shrug. In part, this may be a case of reality belatedly catching up with the transformation in expectations that took place in the second half of last year. At the same time, there does seem to be a feeling in some quarters that this might be ‘as good as it gets’ for the global economy. Lower bond yields are helping to reinforce that notion and making some investors pause before committing more capital to more cyclical areas.

Our response has been measured. We acknowledge that the synchronised expansion across all regions of the global economy won’t last forever. We also see a risk the Fed moves too fast on rates - and we admit we have no idea what President Trump might do next. A technical term for being afraid of politicians’ actions is ‘policy risk’. We now have monetary policy risk (that the Fed tightens too much or too quickly), fiscal policy risk (that Trump’s fiscal irresponsibility leads to higher bond yields) and geopolitical risks (as Trump changes US military imperatives, dangerous situations are emerging in Asia and in the Middle East). At the same time, data shows strong growth continuing while news from our (still somewhat cheap) cyclical stocks remains extremely positive. So we are seeking to manage the balance of risks in the portfolio. It seems wise not to be positioned too narrowly for any one particular outcome. At the time of writing, some of the fund’s largest holdings are stocks geared into stronger global growth such as General Motors, Western Digital and BHP Billiton. Offsetting that, however, we do own a number of less economically sensitive European infrastructure assets such as Euskaltel, INWIT, Rai Way and EI Towers. Meanwhile, after a strong run higher in late 2016 we have lowered the fund’s exposure to financials a little. So while we acknowledge that political and economic conditions remain uncertain, we think the fund - with its below-market p/e and above-average dividend yield - is still well-placed to prosper.

04 November 2016

Jacob de Tusch-Lec: Macro matters …

As politics and central bankers’ actions continue to drive global markets, Jacob de Tusch-Lec, manager of the Artemis Global Income Fund, discusses some of the risks and opportunities.

Value of £1,000 invested at launch to 28 February 2017

Value of £1,000 invested at launch to 28 February 2017

Data from 19 July 2010. Source Lipper Limited,distribution units, bid to bid in sterling to 28 February 2017. All figures show total returns with dividends reinvested.

Asset allocation

Asset allocation

Source: Artemis as at 28 February 2017. Please note figures may not add up to 100% due to rounding.

Percentage growth (class I)

12 months to 31 December22.5%6.5%12.9%33.7%15.6%
12 months to 28 February30.9%-2.3%18.9%15.6%26.2%
Please remember that past performance is not a guide to the future. Source: Lipper Limited, distribution units, bid to bid in sterling. All figures show total returns with dividends reinvested.

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Jacob de Tusch-Lec: Macro matters …

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Risk warnings

THIS INFORMATION IS FOR PROFESSIONAL ADVISERS ONLY and should not be relied upon by retail investors.
The fund's annual management charge is taken from capital. The fund may invest in emerging markets. The fund may invest in the shares of small and medium sized companies.
Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.
Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.

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